George Campbell Painting v. National Union Fire Ins. Co. of Pittsburgh, P.A., 2012 NY Slip Op. 00254 (1st Dept. January 17, 2012)
January 19, 2011

In a groundbreaking unanimous decision, the First Department Appellate Division agreed with TLS&S attorneys Meryl Lieberman, Robert Nobel and Lisa Black and overturned its own precedent holding that under N.Y. Ins. Law §3420(d), an umbrella insurer must notify its insured once it has grounds to disclaim coverage even if it is continuing to "investigate" other grounds to disclaim.  The Campbell court overturned its prior decision in DiGuglielmo v. Travelers Property and Casualty, 6 A.D.3d 344 (2004), where it held that an insurance company could postpone denying a claim on timeliness grounds while it conducted further "investigation into other possible grounds for disclaimer."  Instead, it followed the Second Department precedent noting that it was more consistent with the Court of Appeals' interpretation and the plain language of the statute, bringing the First Department in line with other established New York precedent.  The court held that "[O]ur determination of this appeal is dictated by fidelity to the plain language chosen by the legislature, the teachings of our state's highest court, and the policy considerations embodied in the law."

In Campbell, the umbrella insurer's disclaimer, issued approximately seven months after notice was provided, was found by the court to be untimely, and therefore, it was estopped from denying coverage pursuant to §3420 (d).  In this regard the court rejected the umbrella insurer's argument that its delay was justified because it had to "investigate" the underlying claim.  The Appellate Division agreed with TLSS, noting that the basis for the denial was evident from the original notice, and therefore, there was no need for "exploration of other possible grounds for rejecting the claim - an inquiry manifestly undertaken by [National Union] for its own benefit, not that of the parties seeking coverage."   The court further held that "any uncertainty as to the existence of coverage is irrelevant to the insurer's ability to issue a timely disclaimer based on the insured's breach of a condition precedent to coverage, such as late notice of claim, that is known to the insurer. . . such a disclaimer will not prejudice the insurer's ability later to take the position that no coverage exists, should that prove to be the case."

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