In George Campbell Painting v. National Union Fire Ins. Co. Of Pittsburgh, PA, the First Department overruled its prior decision in DiGuglielmo v. Travelers Prop. Cas. (6 A.D.3d 344, 346 [2004]), in which it had held that notwithstanding the statutory language of Insurance Law § 3420, "[a]n insurer is not required to disclaim on timeliness grounds before conducting a prompt, reasonable investigation into other possible grounds for disclaimer" (6 AD3d at 346) (hereinafter, the DiGuglielmo rule). According to the Court, “we decline to follow, and expressly overrule, the DiGuglielmo rule, because we find it to be inconsistent with the text of § 3420(d) and with the decisions of the Court of Appeals interpreting that statute.”
In George Campbell Painting, an excess carrier learned that the insured waited approximately 16 months before giving notice of claim. Rather than disclaim right away, it investigated other grounds such as whether the insured was a covered additional insured and then filed its disclaimer on late notice four months later. The Court held that Insurance Law § 3420(d) requires an insurer to disclaim when it “has sufficient knowledge of facts entitling it to disclaim.” Accordingly, an insurer may no longer delay disclaimer, during a “prompt, reasonable investigation” into grounds other than late notice of claim, as was the case in DiGuglielmo and George Campbell Painting.
As a caution to all insurers, therefore, it is best to disclaim coverage on late notice grounds while reserving the right to disclaim on other grounds should the need arise after a prompt and reasonable investigation, and then, if necessary, issue a follow-up disclaimer on such other grounds at a later time.
In George Campbell Painting, an excess carrier learned that the insured waited approximately 16 months before giving notice of claim. Rather than disclaim right away, it investigated other grounds such as whether the insured was a covered additional insured and then filed its disclaimer on late notice four months later. The Court held that Insurance Law § 3420(d) requires an insurer to disclaim when it “has sufficient knowledge of facts entitling it to disclaim.” Accordingly, an insurer may no longer delay disclaimer, during a “prompt, reasonable investigation” into grounds other than late notice of claim, as was the case in DiGuglielmo and George Campbell Painting.
As a caution to all insurers, therefore, it is best to disclaim coverage on late notice grounds while reserving the right to disclaim on other grounds should the need arise after a prompt and reasonable investigation, and then, if necessary, issue a follow-up disclaimer on such other grounds at a later time.
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