It is widely accepted that insurers should provide a written disclaimer of coverage “as soon as is reasonably possible” after the insurer has actual or constructive knowledge of the grounds to do so. There are many factors considered in assessing what is “reasonable” in this context. However, typically, New York courts have rejected an insurer’s disclaimer of coverage if it occurs more than 30 days after notification of the claim. Accordingly, on its face, it was concerning that the Appellate Division, First Department, recently voided a disclaimer of coverage issued just eight days after the insurer received a demand for coverage. As explained below, however, the First Department found that prior notice of the accident and of facts providing a basis to disclaim (without an express demand by the insured for coverage under the policy) was sufficient to trigger the carrier’s duty to timely disclaim pursuant to Insurance Law§ 3420(d)(2). Therefore the “30-day rule” lives to fight another day, but great care should be exercised in determining precisely when the 30-day clock begins ticking.
Appellate Court Decision
On March 16, 2021, in Plumbing v. Burlington Ins. Co., 2021 NY Slip Op 01498 (1st Dep’t March 16, 2021), New York’s Appellate Division, First Department, overturned the trial court decision granting summary judgment finding that the insurer was not obligated to defend or indemnify the insured or putative additional insured. The First Department found against the insurer as a result of an untimely disclaimer. It was found that eight days after receiving a demand for coverage was deemed too late for the disclaimer when the carrier had prior notice of the underlying claim and facts that were the basis for the disclaimer but had failed to disclaim earlier.