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Insurance Coverage: A Glimpse Forward and a Glance Back


By Edward J. Markarian, Esq.

Written for a presentation at the NYSBA Continuing Legal Education Program


Insurance Law §3420 is vast in both what it covers and in its importance.Among other things, Section 3420 addresses: continuation of coverage despite an insured's insolvency or bankruptcy; notice to an insurer and the effect, if any, of late notice; direct actions against the insurer; disclosure of coverage and policy limits directly to an injured party; disclaimer requirements, deadlines for insurers and preclusion for non-compliance; mandatory permissive use requirements; coverage minimum, uninsured motorist and SUM requirements for motor vehicle policies; and mandatory household employee coverage under homeowner's policies.

The existence or non-existence of insurance coverage is very often controlled by Section 3420.The statute is the subject of frequent legislative amendment and judicial interpretation.It was enacted in 1984, has been amended nine times since then, and is derived from a frequently amended statute dating back to 1939.The McKinney's annotations to Section 3420 discuss 5,625 cases, and that is just the tip of the iceberg.Comprehensive discussion of the statute would require a treatise.This article addresses select developments only.


The 2008 Amendment to the statue and cases arising from it.

1. Forfeiture/no-prejudice rule is repealed.

Significant amendments to Section 3420 were made in 2008.One of the amendments addressed the 2005 Court of Appeals decision in Argo Corp. v Greater N.Y. Mut. Ins. Co.[1]

Argo revisited the question whether a liability insurer is entitled to disclaim coverage on the ground of late notice by the insured without a showing that the insurer was prejudiced.The insurance policy in Argo contained the familiar provision requiring the insured to notify the insurer of an occurrence "as soon as practicable." The insured delayed giving notice to its insurer for at least 6 months (and probably longer).Argo reiterated the rule from the 1972 case of Security Mut. Ins. Co. of NY v Acker-Fitzsimons Corp.,[2] which held that an insured's failure to give timely notice voids the insurance contract regardless of whether the insurer suffered prejudice as a result of the delay.The Argo-Security Mutual rule was commonly known as the "forfeiture rule" or the "no-prejudice" rule.

The forfeiture/no-prejudice rule was addressed by the 2008 amendment to Section 3420.As a result of the 2008 amendment, Section 3420 now mandates that policies "issued or delivered in this state" (important language, as discussed later in this article) contain the following language:

A provision that failure to give any notice required to be given by such policy within the time prescribed therein shall not invalidate any claim made by the insured, injured person or any other claimant, unless the failure to provide timely notice has prejudiced the insurer, except as provided in paragraph four of this subsection. With respect to a claims-made policy, however, the policy may provide that the claim shall be made during the policy period, any renewal thereof, or any extended reporting period, except as provided in paragraph four of this subsection. As used in this paragraph, the terms “claims-made policy” and “extended reporting period” shall have their respective meanings as provided in a regulation promulgated by the superintendent. [3](Emphasis added).

In any action in which an insurer alleges that it was prejudiced as a result of a failure to provide timely notice, the burden of proof shall be on: (i) the insurer to prove that it has been prejudiced, if the notice was provided within two years of the time required under the policy; or (ii) the insured, injured person or other claimant to prove that the insurer has not been prejudiced, if the notice was provided more than two years after the time required under the policy.

. . .[A]n irrebuttable presumption of prejudice shall apply if, prior to notice, the insured's liability has been determined by a court of competent jurisdiction or by binding arbitration; or if the insured has resolved the claim or suit by settlement or other compromise.

. . .The insurer's rights shall not be deemed prejudiced unless the failure to timely provide notice materially impairs the ability of the insurer to investigate or defend the claim.[4](Emphasis added).

The legislative history of the 2008 amendment indicates that Georgia, Arkansas, Colorado, Idaho, Illinois and Mississippi were the only other States which had a forfeiture/no-prejudice rule like the New York rule.[5]Advocates in favor of the amendment contended:

This bill would mitigate the extreme results of the forfeiture rule by allowing an insurer to deny coverage for a claim based on an insured's failure to give timely notice only where the insurer can demonstrate that it has suffered material prejudice as a result of the delay and the injured person did not give notice as soon as was reasonably possible.[6]

The policy reasons for the statutory repeal of the forfeiture/no-prejudice rule were recently recognized by the Court of Appeals in Carlson v AIG,[7] which explained:

In 2008, the legislature amended Insurance Law §3420 to expand its reach in several respects. The 2008 amendments were made to “restore fairness to the process and protect individuals who suffer personal injuries and families whose loved ones have died as a result of the tortious conduct of another” (Letter from John A. DeFrancisco, July 14, 2008, Bill Jacket, L. 2008, ch. 388 at 5; see Senate Introducer’s Mem. in Support, Bill Jacket, L. 2008, ch. 388 at 8, 2008 N.Y. Legis. Ann. at 261–262; see also Letter from Helene E. Weinstein, July 16, 2008, Bill Jacket, L. 2008, ch. 388 at 6 [“(T)his progressive, forward thinking legislation will benefit insureds, injured parties, and the administration of justice”]; Letter from Robert Brenna Jr., President, New York State Academy of Trial Lawyers, July 11, 2008, Bill Jacket, L. 2008, ch. 388 at 18 [“This legislation advances the cause of justice and will improve New Yorkers’ access to the courts, and their ability to seek relief for injuries and wrongful death”] ).

The 2008 statutory repeal of the forfeiture/no-prejudice rule also addressed who has the burden of proving or disproving prejudice.The amendment provides that if the insurer received notice within 2 years of the occurrence, the insurer has the burden of proving prejudice, but if the notice was received more than 2 years after the occurrence, the insured has the burden of disproving it.Whether the insurer or insured have met their burden of proving or disproving prejudice may become fertile ground for litigation.Castillo v Prince Plaza, LLC,[8] which applied the amended statute, may be an example of things to come.

Castillo involved a construction accident occurring in August 2009.The injured worker commenced a personal injury action in August 2011.The summons and complaint were served on the Secretary of State, as agent for the defendant/insured, but the defendant/insured never received notice from the Secretary of State because its address had changed.The defendant/insured first received notice of the occurrence in February 2012 when it received a copy of a default judgment entered against it.The defendant/insured notified its insurer four days later and, three-and-a-half months later, the default judgment was vacated.Vacatur of the default was critical because the new provisions of Section 3420 state that "an irrebuttable presumption of prejudice shall apply if, prior to notice, the insured's liability has been determined by a court . . . or binding arbitration . . . or . . . settlement."[9]

The motion court in Castillo, affirmed by the Second Department, thoroughly addressed the history of the 2008 repeal of the forfeiture/no prejudice rule and found that the insurer had not met its burden of proving prejudice.The insurer contended that it had in fact been prejudiced because a default judgment had been entered, but the courts disagreed because the judgment had been vacated.The insurer alternatively argued that it was the insured's burden to disprove prejudice, because notice was not provided until more than 3 years after the accident, and the insured's failure to maintain a correct address with the Secretary of State was not a basis for excusing late notice.However, the motion court and Second Department found that the defendant/insured did not know about the accident because it was not present at, and did not control, the jobsite where the accident occurred, and because, if the insured had advised the Secretary of State of its correct address as of the date the Secretary of State was served in August 2011, the insured's notice to the insurer would have been provided within 2 years of that date.The courts concluded that the burden of proving prejudice was thus on the insurer, and that it did not meet its burden.Both the motion court and the Appellate Division in Castillo quoted portions of the legislative history of the 2008 amendment, emphasizing that the intent of the amendment was to "prevent insurers which have continuously collected premiums to disclaim coverage based upon an inconsequential technicality."[10]

2. Injured party's right to obtain coverage information directly from the insurer.

The repeal of the forfeiture/no-prejudice rule was just one of the significant revisions embodied in the 2008 amendments to Section 3420.Another amendment applies to property and casualty policies (but not excess liability or umbrella policies), and grants injured parties the right to directly obtain information from the insurer confirming the existence and limits of coverage.The amended statute provides:

(B) Upon an insurer's receipt of a written request by an injured person who has filed a claim or by another claimant, an insurer shall, within sixty days of receipt of the written request: (i) confirm to the injured person or other claimant in writing whether the insured had a liability insurance policy of the type specified in subparagraph (A) of this paragraph in effect with the insurer on the date of the alleged occurrence; and (ii) specify the liability insurance limits of the coverage provided under the policy.

(C) If the injured person or other claimant fails to provide sufficient identifying information to allow the insurer, in the exercise of reasonable diligence, to identify a liability insurance policy that may be relevant to the claim, the insurer shall within forty-five days of receipt of the written request, so advise the injured person or other claimant in writing and identify for the injured person or other claimant the additional information needed. Within forty-five days of receipt of the additional information, the insurer shall provide the information required under subparagraph (B) of this paragraph.[11]

3. Injured party's right to bring declaratory judgment action to determine coverage.

Another revision included among the 2008 amendments to Section 3420, as well as an amendment to CPLR 3001, enables injured parties -- not just insureds -- to commence a declaratory judgment action directly against an insurer to determine whether coverage exists where the insurer has disclaimed coverage.The legislative history to the amendments explains that this will "remedy an existing inefficiency in the law, by promoting judicial economy and saving the time and costs involved in pursuing a judgment that may not be recoverable."[12]The language of this amendment provides:

. . . .with respect to a claim arising out of death or personal injury of any person, if the insurer disclaims liability or denies coverage based upon the failure to provide timely notice, then the injured person or other claimant may maintain an action directly against such insurer, in which the sole question is the insurer's disclaimer or denial based on the failure to provide timely notice, unless within sixty days following such disclaimer or denial, the insured or the insurer: (A) initiates an action to declare the rights of the parties under the insurance policy; and (B) names the injured person or other claimant as a party to the action.

4."Issued or delivered."

Other amendments made to the statute in 2008 appear at first glance to be cosmetic and non-substantive, but the question whether they were became significant in the Court of Appeals' recent decision in Carlson v AIG.[13]

Undeniable non-substantive amendments to Section 3420 included replacing the word "hereof" with the words "of this section" (twice), replacing the word "which" with the word "that" (twice), and replacing the word "his" with the words "the insured's" (four times).In addition, in subdivision (j)(1) of the statute, the words "issued or renewed" were replaced with the words "issued or delivered," and in subdivision (d)(2) of the statute, the words "delivered or issued for delivery" were replaced with the words "issued or delivered."This last revision -- substituting "issued or delivered" for "delivered or issued for delivery," became relevant in Carlson.Was that a non-substantive amendment too?Carlson answered the question.

Before the 2008 amendment to Section 3420, the terms "issued or delivered in this state" appeared in the Section at four places, and the terms "delivered or issued for delivery in this state" appeared only once.These are critical terms, because they describe the policies which are subject to the requirements of Section 3420.

Prior to the 2008 amendment, subdivision (d)(2) of the statute was the one place where the terms "delivered or issued for delivery" appeared.Subdivision (d)(2) is tremendously important.It imposes significant burdens on insurers and their attorneys by requiring insurers who wish to disclaim coverage to do so "as soon as is reasonably possible."

Except for the substitution of "issued or delivered" for "delivered or issued for delivery" in subdivision (d)(2), the 2008 amendment made no other change to that subdivision.As a result of the amendment, subdivision (d)(2) now states:

If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.

An insurer's burden under subdivision (d) to disclaim promptly is a heavy one, and the insurer shoulders the burden of proving that its disclaimer was indeed issued as "soon as reasonably possible."If the insurer's disclaimer is late, it is precluded from disclaiming coverage.On the facts of First Financial Insurance Co. v Jetco Contracting Corp.,[14] the Court of Appeals found that a delay of 48 days was unreasonable as a matter of law, and did not disagree with Appellate Division determinations finding unreasonable delay in cases involving shorter time periods.

The "delivered or issued for delivery" language of the pre-2008-amendment provisions of subdivision (d)(2) was construed by the Court of Appeals in Preserver Insurance Co. v Ryba,[15] where the insurer contended that the insurance policy at issue was not "delivered or issued for delivery" in New York, and as a consequence, the prompt disclaimer rule of the New York statute did not apply.Preserver announced the standard for determining whether a policy is "delivered or issued for delivery" in this state, concluding that it is "if it covers both insureds and risks located in this state."[16]Because the insured in Preserver was "a New Jersey company, with its only office in that state," Preserver concluded that "it cannot be said that the insured is located in New York."[17]The insured in Preserver thus was not entitled to the timely disclaimer protections of the New York statute.However, the importance of Preserver is not its outcome, but the rule it announced for determining in future cases whether a policy was "delivered or issued for delivery" in New York.

Preserver was decided June 10, 2008.Amendment of Section 3420 had been under consideration long before Preserver and for reasons unrelated to the issue considered in Preserver.The 2008 amendments were approved by both the Senate and Assembly on June 23, 2008, just 13 days after Preserver was decided.The Governor signed the amendments into law on July 21, 2008.Among the many amendments, the words "delivered or issued for delivery" as construed in Preserver were replaced with the words "issued or delivered."Remember that the terms "issued or delivered" had appeared at four other places of Section 3420 before it was amended.Substitution of the words "issued or delivered" for "delivered or issued for delivery" in subdivision (d)(2) brought the language of that subdivision into conformity with the other subdivisions of Section 3420.Did this change the meaning of subdivision (d)(2), which had been interpreted by the Court in Preserver just days earlier?Carlson v AIG answered that question.Carlson did so even though the subdivision at issue in Carlson was subdivision (a)(2) of Section 3420, not subdivision (d)(2), which was the subdivision construed in Preserver and changed by the 2008 amendments.

Subdivision (a)(2) of Section 3420 authorizes a direct action against an insurer by an injured party who has obtained a judgment against the insured which has not been satisfied for 30 days.Carlson arose after an underlying tort action where personal injury and wrongful death damages were awarded to the Estate and distributees of a mother of very young children who was killed after a van owned by a local delivery company which made deliveries for international shipper DHL Express crossed the center line and struck the mother's vehicle, killing her.A multi-million dollar judgment was awarded to the Carlson family in the underlying tort action, and the issue in Carlson was whether coverage existed under DHL's policies to pay it.Carlson was a direct action against DHL's insurers seeking payment under Section 3420(a)(2).

In Carlson, DHL had coverage under three policies.Two of the policies were issued by the same insurer in New York.That insurer was subject to direct suit in New York under Section 3420(a)(2).However, the third policy was issued by insurer AAIC -- from its New Jersey office -- and was mailed to DHL's offices in Seattle and Florida. AAIC argued that it was not subject to direct suit in New York under Section 3420(a)(2) because its policy was not issued or delivered in New York.

In making its "issued or delivered" argument at the Appellate Division, AAIC acknowledged that the applicable standard was the Preserver standard.In other words, AAIC's position at the Appellate Division recognized that it would be subject to direct suit if its policy "covers both [an] insured and risks located in this state."[18]The plaintiff agreed at the Appellate Division that the Preserver standard controlled.The parties disagreed only on how to apply Preserver, with the insurer contending that under conflict of law rules DHL was not located in New York, and the plaintiff contending that DHL's presence and business operations in New York established that it was located here.The Appellate Division disagreed with both parties, concluding:

Here, plaintiff may not recover against AAIC pursuant to section 3420(a)(2) because the policy was not “issued or delivered in this state” (id.).The parties and the court have improperly conflated the phrase “issued or delivered” with “issued for delivery,” which was used in the former version of Insurance Law § 3420(d), and therefore the definition of “issued for delivery” is not relevant here (see Preserver Ins. Co. v. Ryba, 10 NY3d 635, 642).The policy here was issued in New Jersey and delivered in Seattle, Washington, and then in Florida. It was not issued or delivered in New York, and therefore the first cause of action of the complaint against AAIC must be.[19](Emphasis added).

The Court of Appeals granted leave to appeal to consider whether the Appellate Division's analysis was correct.[20]

The Appellate Division had focused on the fact that Preserver had interpreted the words "delivered or issued for delivery" as used in subdivision (d)(2) of Section 3420 before it was amended in 2008, whereas the subdivision at issue in Carlson was subdivision (a)(2), which used the words "issued or delivered."Plaintiff's argument at the Court of Appeals noted that amended subdivision (d)(2) now has the same language as subdivision (a)(2), i.e. “issued or delivered.”If, as the Appellate Division held, "issued or delivered" has a different meaning from "delivered or issued for delivery," then the definition of "issued or delivered" as now used in subdivision (d)(2) cannot be the one announced in Preserver.This would mean that the post-Preserver amendment to subdivision (d) was a substantive amendment, changing the meaning of that subdivision and overturning Preserver.Conversely, if the amendment of subdivision (d)(2) was not a substantive amendment, so that "issued or delivered" as now used in the statute has the same meaning as "delivered or issued for delivery," as construed in Preserver, then the Preserver definition of continues to apply for subdivision (d)(2).Because subdivision (a)(2) now contains the same language as subdivision (d)(2), the Preserver definition would thus apply for subdivision (a)(2) as well.

The Court of Appeals divided four votes to three in Carlson, with Judge Wilson writing for the majority and Judge Garcia for the dissenters.The majority concluded that the substitution of "issued or delivered" for "delivered or issued for delivery" in subdivision (d)(2) did not change the meaning of the subdivision.The Preserver definition continues to apply for subdivision (d)(2) and, because it does, the Preserver definition also applies for subdivision (a)(2), which contains the same language.Judge Wilson's opinion explains:

In Preserver, weinterpreted section 3420(d), which then required insurers to provide written notice when disclaiming coverage under policies “issued for delivery” in New York. We held that “[a] policy is ‘issued for delivery’ in New York if it covers both insureds and risks located in this state.” . . . Thus, under Preserver, “issued for delivery” was interpreted to mean where the risk to be insured was located—not where the policy document itself was actually handed over or mailed to the insured. We interpreted section 3420 to provide a benefit—deliberately in derogation of the common law—to New Yorkers whenever a policy covers “insureds and risks located in this state” (id.). Applying the Preserver standard to the facts of this case, it is clear that DHL is “located in” New York because it has a substantial business presence and creates risks in New York. It is even clearer that DHL purchased liability insurance covering vehicle-related risks arising from vehicles delivering its packages in New York, because its insurance agreements say so.

This interpretation of “issued or delivered” is consistent with the reasoning behind the legislature's enactment of Insurance Law § 3420. In 1917, the legislature created this statutory cause of action to remedy the inequity of the common-law rule that an injured person had no cause of action against the insurer of a tortfeasor and to protect the tort victims of New York. . . .“Generally, statutes designed to promote the public good will receive a liberal construction and be expounded in such a mannerthat they may, as far as possible, attain the end in view. . . .The overall legislative intent of Insurance Law § 3420 is to protect the tort victims of New York State, and the subsequent amendments to section 3420 were designed to expand the remedy, not to contract it.

* * *

The 2008 amendments . . . changed the “issued for delivery” language in subsection (d) to match the “issued or delivered” language elsewhere in the statute. Nothing in the bill jacket or other legislative history mentions that change, so that it appears to have been a stylistic change with no intended import. If anything, “issued or delivered” is facially broader than “issued for delivery.” Moreover, there is certainly no indication that the legislature's minor amendment to subsection (d) was intended to overturn this Court's holding in Preserver.

Interpreting “issued or delivered in this state” to apply exclusively to policies issued by an insurer located in New York or by an out-of-state insurer who mails a policy to a New York address would undermine the legislative intent of Insurance Law § 3420. It would require an assumption that the legislature intended to remove coverage benefitting injured New York residents if the policy was mailed from another state, but to increase coverage for foreign victims injured elsewhere so long as the policy was mailed to New York or underwritten by a New York-based insurer—hardly plausible in light of the express purposes of section 3420 and the 2008 amendments.

The dissent suggests that, “[g]iven the sharp change in the meaning of ‘issued or delivered,’ and the frequency with which that phrase is used,” our holding today will “wreak havoc” in unspecified ways (dissenting op. at 322, 67 N.Y.S.3d at 123, 89 N.E.3d at 513). That is not the case. Today's interpretation of “issued or delivered” to include policies that cover both insureds and risks located in the state is not a “sharp change”; that interpretation is consistent with Preserver and the legislative history of section 3420 and the 2008 amendments. The fact that the phrase “issued or delivered” exists in other provisions of the Insurance Law does not affect the analysis, for a few reasons. First, although “issued or delivered” appears in other parts of the Insurance Law, we have yet to interpret the phrase in any of those other contexts. Thus, decrying our interpretation of “issued or delivered” because it might affect the interpretation of those same words in other provisions would apply equally to the adoption of the dissent's view: any interpretation would have that effect.

Second, we do not here purport to judge the meaning of the words “issued or delivered” in any context other than section 3420. Identical words may be used in different contexts with different meanings and different legislative histories, and we do not foreclose any such interpretations by our decision here.

Third, the dissent would restrict section 3420(a) to policies that were either issued in New York or delivered to New York, and would exclude, for example, an insurance policy issued by a national insurer located in Connecticut to a retailer operating in all 50 states, if the policy was delivered to the retailer's headquarters in Arkansas—even if the policy was specifically written to cover risks in New York created by the insured's extensive operations in this state. The same concerns that animate our consideration of section 3420 are also relevant to and consistent with the purpose of other provisions of the Insurance Law, which has as its overriding purpose the protection of New Yorkers and the coverage of injuries occurring in New York (see e.g. Insurance Law § 1213[a] [declaring the legislature's concern that out-of-state insurers present New York residents “the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under such policies,” and therefore providing that any transaction of business or solicitation thereof by a foreign insurer constitutes authorization for the Superintendent of Financial Services to accept process for that insurer] ). The dissent's interpretation of “issued or delivered” would allow an insurer to avoid compliance with many of the provisions of the Insurance Law simply by mailing the policy to the insured's secondary location, even though the risks contemplated by the policy existed entirely within New York. It is simply not plausible that the legislature intended the provisions of the Insurance Law to be so easily evaded by companies doing business in New York and purporting to cover risks in New York.

In light of the above, we conclude that the term “issued or delivered” does not alter our conclusion in Preserver, and that section 3420(a) encompasses situations where both insureds and risks are located in this state. [21]

Accordingly, under Carlson, a policy is "issued or delivered" in this state "if it covers both insureds and risks located in this state."That is the standard for determining whether an insurer is subject to direct action under subdivision (a)(2) of Section 3420, whether prejudice to the insurer must be shown in order for the insurer to avoid coverage due to late notice under subdivision (a)(5) of the statute, whether the insurer must disclaim "as soon as is reasonably possible" under subdivision (d)(2) of the statute, and whether the permissive use rules and mandatory coverage limits for motor vehicles under subdivisions (e) and (f) of the statute apply.

The terms "issued or delivered" also appear in other sections of the Insurance Law -- outside of Section 3420 -- as observed by Judge Garcia in his dissent in Carlson.However, the definitions applicable to those other sections has not been decided.[i]



The Court of Appeals has recently considered other issues arising under Section 3420, unrelated to the 2008 amendments to the statute.

In 2009, the Court of Appeals decided Central Mutual Insurance Co. v Bemiss,[22] addressing issues arising out of subdivision (f) of Section 3420, which establishes mandatory SUM insurance requirements and directs that the injured party exhaust tortfeasor coverage before seeking to collect his or her SUM coverage.If the exhaustion rules are not followed, the injured party forfeits his or her SUM coverage.The Court of Appeals had previously decided, in S'Dao v National Grange Mut. Ins. Co.,[23] that where a party is injured by multiple tortfeasors, the exhaustion requirement is satisfied "once the insured exhausts the bodily injury liability limits applicable to any single tortfeasor."[24]Central Mutual was the sequel to S'Dao.The issue was what happens if the injured party settled for the full policy limits of one tortfeasor's policy, but also settled with another tortfeasor for less than the limits of that tortfeasor's policy.Central Mutual concluded that the injured party forfeited her right to SUM coverage when, after settling with one tortfeasor for the full amount of that party's policy, she settled with a second tortfeasor for less that the full amount of that tortfeasor's policy.

In 2011, in Matter of Elrac,[25] the Court of Appeals interpreted subdivision (f) of Section 3420 again.The injured party in Elrac was injured while driving a vehicle which was self-insured by his employer.The tortfeasor was uninsured.Self-insured coverage must satisfy the uninsured motorists requirements of subdivision (f).However, in Elrac, the driver of the vehicle was the employee of the employer who was self insuring it.The employee was entitled to coverage under the employer's workers' compensation policy.Elrac considered whether the workers' compensation benefits were the employee's exclusive remedy, barring his entitlement to payment under the uninsured motorist coverage imputed to the self-insured employer.The Court concluded that it was not.[26]The employee was entitled to collect under the uninsuredmotorist coverage.

In 2013, subdivision (d) of Section 3420 -- the subdivision requiring disclaimers by an insurer "as soon as is reasonably possible" -- was interpreted by the Court of Appeals in Roman Catholic Diocese of Brooklyn v National Union Fire Insurance Co. of Pittsburgh.[27]"Failure to raise a ground for disclaimer 'as soon as is reasonably possible' precludes an insurer from later asserting it has a defense."[28]However, the prompt disclaimer requirement does not always apply.For example, "a notice of disclaimer is not required in the event there 'is no insurance at all and, therefore, no obligation to disclaim or deny.'"[29] The issue in Roman Catholic was whether the claims against the Diocese were separate or could be aggregated as a single claim for the purpose of determining how many times the Diocese's Self-Insured Retention (SIR) had to be paid.The Court concluded that the SIR issue did not trigger the prompt notice requirement under subdivision (f) because it did "not bar coverage or implicate policy exclusions.[30]

In February 2014, the Court of Appeals interpreted the prompt disclaimer requirements of subdivision (d) again in Country-Wide Insurance Co. v Preferred Trucking Services Corp.[31]Country-Wide addressed the interplay between an insured's duty to cooperate with the insurer and the insurer's obligation to disclaim promptly."A longer period for disclaimer" exists where it is based on non-cooperation because, before an insurer may disclaim on non-cooperation grounds, the insurer must show "that it acted diligently in seeking to bring about the insured's cooperation . . . and that the attitude of the insured, after his cooperation was sought, was one of willful and avowed obstruction."[32]In light of the insured's "punctuated periods of noncompliance with sporadic cooperation or promises to cooperate,"[33] the insurer's disclaimer was held to be timely in Country-Wide even though the insurer did not disclaim its duty to indemnify until 7 months after the accident, and did not disclaim its duty defend until 20 months after the accident.

In June 2014, the Court of Appeals interpreted subdivision (d) once again in Keyspan Gas East Corporation v Munich Reinsurance America, Inc.[34]The underlying claim in Keyspan was for environmental damages, and not for "death" or "bodily injury."The Appellate Division had concluded that the insurer's disclaimer was late, but the Court of Appeals reversed because the prompt disclaimer requirement of Section 3420(d)(2) applies only for death or bodily injury claims.

In November 2014, the Court of Appeals decided Sierra v 4401 Sunset Park, LLC,[35] interpreting subdivision (d)(2) yet again.In Sierra, the insured was a named insured under its own policy and an additional insured under a contractor's policy.The contractor's insurer attempted to disclaim by sending its written notice to the insured's own carrier.This was held insufficient because Section 3420(d)(2) requires notice to "the insured."The insurer's "substantial compliance" argument was rejected.



In 2012 and 2013, subdivision (f)(5) of the statute was amended to provide for SUM coverage for individuals employed by or members of fire companies or ambulance services who are injured in the line of duty.

In December 2017 -- effective June 16, 2018 and expiring June 30 2020 -- the Legislature amended subdivision (f) so that an insured's SUM coverage equals the amount of his or her bodily injury liability coverage up to a maximum of $250,000/500,000 unless the insured affirmatively waives the coverage or selects a lower amount after receiving explicit written notice in 12-point bold type explaining the purpose of SUM coverage and urging the insured to "carefully consider this decision."

* * *

In summary, Insurance Law § 3420 is of critical importance with respect to the requirements it imposes and the remedies and protections it provides.The frequency of its amendment by the Legislature and the regular attention it receives from our Court of Appeals underscores its significance, and the existence or non-existence of coverage in individual cases ensures that it will continue to be the basis for, or the subject matter of, frequent litigation.

[i]In addition to the Section 3420 issue considered in Carlson, it also addressed two additional insurance law questions arising from the fact that the driver of the delivery van was on a personal errand at the time of the accident.Because he was, DHL was not vicariously liable for the driver's actions.The local delivery company was liable as owner of the vehicle, but the coverage limits of its policy were insufficient to satisfy the judgment.DHL's policies provided coverage for "hired autos," covering not just DHL, but also "anyone else" using the vehicles DHL hired.The plaintiff contended that the local delivery trucks were covered as hired autos under DHL's polices.The Court of Appeals divided four votes to three, with the majority concluding that -- in the context of the insurers' CPLR 3211 motions -- the plaintiff's claim for hired auto coverage stated a cause of action entitled to survive the insurers' pleading-stage dismissal motions.The Carlson majority also rejected the insurers' attempt to avoid coverage on the ground that the delivery van had not been used with permission.

[1] Argo Corp v. Greater N.Y. Mut. Ins. Co, 4 NY3d 332 (2005).

[2] Security Mut. Ins. Co. of NY v Acker-Fitzsimons Corp., 31 NY2d 436 (1972).

[3] Section 3420(a)(5).

[4] Section 3420(c)(2)(A),(B),(C).

[5] Bill Jacket for 2008 amendment to Section 3420 (letter on behalf of NYS Trial Lawyer's Association).

[6] Id.

[7] Carlson v AIG, 30 NY3d 288, 307.

[8] Castillo v Prince Plaza, LLC, 142 AD3d 1127 (2d Dept 2014), affirming 43 Misc3d 335 (Kings Co. Supreme 2014).

[9]Section 3420(c)(2)(B).

[10]Id., 142 AD3d at 1129 (citing Bill Jacket 2008 SB 8610, ch 388; see also 43 Misc3d at 338-339 (quoting same).

[11]Section 3420(d)(1)(B),(C).

[12][12] Bill Jacket for 2008 amendment to Section 3420 (letter on behalf of NYS Trial Lawyer's Association), supra.

[13]30 NY3d 288, supra.

[14]1 NY3d 64 (2003).

[15]Preserver Insurance Co. v Ryba, 10 NY3d 635.


[17]Id. at 642.


[19]Carlson v AIG, 130 AD3d 1477, 1477-1478 (4th Dept 2015).

[20]26 NY3d 918.

[21]Carlson, 30 NY3d 288, 305-309.

[22]Central Mutual Insurance Co. v Bemiss 12 NY3d 648 (2009).

[23]S'Dao v National Grange Mut. Ins. Co., 87 NY2d 853.

[24]Central Mutual, supra at 654.

[25]Matter of Elrac, 18 NY3d 325 (2011).

[26]Id. at 328.

[27]Catholic Diocese of Brooklyn v National Union Fire Insurance Co. of Pittsburgh, 21 NY3d

139 (2013).

[28]Id. at 146.

[29]Id. at 147; quoting Zappone v Home Ins. Co., 55 NY2d 131, 139 (1982).

[30]Roman Catholic, supra, at 147; quoting Pav-Lak Indus., Inc. v Arch Ins. Co., 56 AD3d 287,

288 1st Dept 2008]).

[31]Country-Wide Insurance Co. v Preferred Trucking Services Corp., 22 NY3d 571 (2014).

[32]Id. at 576; quoting Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168.

[33]Id. at 577.

[34]Keyspan Gas East Corporation v Munich Reinsurance America, Inc., 23 NY3d 583 (2014).

[35]Sierra v 4401 Sunset Park, LLC, 24 NY3d 514 (2014).

Edward J. Markarian
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(f) (716) 856-3390

1100 Rand Building
14 Lafayette Square
Buffalo, New York 14203