New York Insurance Law Does Not Preclude Enforcement of Claims-Made-and-Reported Policy’s Notice Requirements
The New York Supreme Court, Appellate Division has held that, under New York Insurance Law § 3420(a)(5), an insurer had no duty to defend or indemnify a personal injury action where the insured failed to provide notice of the claim during the policy period or extended reporting period, as required by the claims-made-and-reported policy. Certain Underwriters at Lloyd’s London Subscribing to Policy No. PGIARK01449-05 v. Advance Transit Co., 2020 WL 6731791 (N.Y. App. Div. Nov. 17, 2020).
An insurer issued a claims-made-and-reported policy to a transit company for the policy period of October 30, 2016 to October 30, 2017. The insured was sued in a personal injury action on May 30, 2017. The policy afforded coverage for certain claims made and reported to the insurer during the policy period or the extended reporting period, which was 60 days after expiration of the policy period. The transit company failed to notify the insurer of the personal injury action until January 8, 2018. The insurer denied coverage for the claim on the basis that it was not timely reported.
In the ensuing coverage litigation, the insured argued that the claim was covered under the policy because it was reported during the policy period of the renewal policy. The insured argued that, under New York Insurance Law § 3420(a)(5), claims-made policies that are issued or delivered in New York must include a provision that claims arising during the policy period may be reported during the renewal policy period. (Section 3420(a)(5) provides that “[w]ith 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[.]”) The trial court disagreed with the insured and granted summary judgment for the insurer on the basis of untimely notice. According to the trial court, “[b]y using ‘or’ rather than ‘and’, the statute appears, on its face, to give insurers the option of requiring notice to be made during any or all of these three time periods.” Thus, the court explained, “a claims-made policy can set a definite time frame for reporting claims, irrespective of prejudice, which can include ‘the policy period, any renewal thereof, or any extended reporting period.’”
On appeal, the New York Supreme Court, Appellate Division agreed with the trial court, holding that “[b]ased upon the plain and ordinary meaning of the term ‘however’ within Insurance Law § 3420(a)(5), a claims-made policy can set a definite time frame for reporting claims, irrespective of prejudice, which can include ‘the policy period, any renewal thereof, or any extended reporting period.” The court held that the insurer was not required to provide a defense or indemnification and was entitled to reimbursement from the transit company for defense fees, costs, and expenses incurred in the defense, as the insurer had defended under a reservation of the right to recoup such amounts.