Second Department Holds That New Jersey Law Applies To Insurance Policy For Purposes of Determining Validity of Late Notice Disclaimer

In Jimenez v. Monadock Constr., Inc., the Second Department applied New Jersey law to determine that an insurer was obligated to prove that it was prejudiced by its insured’s late notice.  The policy was issued to the insured, Bedroc Contracting, LLC in New Jersey through a New Jersey broker prior to January 17, 2009, the date on which the New York Insurance Law was amended to require insurers to prove prejudice when relying upon late notice as the basis for a disclaimer.  As such, the insurer argued that New York law applied because the underlying accident had occurred in New York and that the insurer was not obligated to prove that it was prejudiced by Bedroc’s late notice.  The Second Department held to the contrary.  The Court indicated that the “center of gravity” or “grouping of contacts” analysis would ordinarily be applied liability insurance contracts to hold that the policy is governed by the law of the jurisdiction “with the most significant relationship to the transaction... which the parties understood was to be the principal location of the insured risk”.  Where, however, the risk is spread across multiple states, the insured’s domicile is deemed to be the proxy for the principal location of the insured risk.  Here, the insurer understood that Bedroc was insured over multiple states and therefore Bedroc’s domicile, New Jersey, was deemed to be the proxy location and New Jersey law applied to the insurer’s late notice disclaimer.