How important is it that timely notice of an environmental claim be given to your insurance carrier? And just what is “timely”?
A federal appeals court in New York recently answered, “it’s very important,” and “timely” means as soon as practicable (but more than 2-and-a-half months is too late!).
Just about all environmental insurance policies contain a “Notice” provision requiring notice to the carrier immediately (or as soon as practicable) when the insured knows or suspects that a claim might be made under that policy. As such, unreasonably late notice to insurance carriers will bar claims under the applicable insurance policy it’s not a difficult concept, but we’ll repeat this one more time for the people in the back: unreasonably late notice to insurance carriers of claims will (likely) bar claims under the applicable insurance policy!
The case at hand reaffirming that policy. There’s a good reason for the notice requirement, namely to provide insurance carriers an opportunity to investigate claims as soon as possible, not lose the opportunity to seek potential contribution from other sources and set proper reserves covering the anticipated losses. New York law even allows for some flexibility, since “notice requirements [are supposed to be] liberally construed in favor of the insured, with substantial, rather than strict, compliance being adequate.” Therefore, it’s always surprising to come across “Late Notice” cases where courts bar insurance claims concerning environmental releases.
Claims under Northrup Grumman’s (“Grumman”) historical 600-acre naval aircraft manufacturing and testing facility in Bethpage, New York (Suffolk County), which has been the subject of countless environmental law suits for decades, were the subject of this case. Here, a federal appeals court agreed with the trial court in Manhattan that Grumman failed to provide “effective notice” to one of its insurance carriers, Travelers Indemnity Company (“Travelers”) and upheld the District Court’s ruling that Grumman’s notice was time-barred.
The Second Circuit reiterated that “in New York, the duty to provide notice is not satisfied merely by placing the notice in the mail; rather the specific insurer to whom notice is due must actually or presumptively received such notice.” Travelers Indemnity Co. v. Northrop Grumman Corp., 2017 U.S. App. LEXIS 1471, *9 (2d Cir. Jan. 27, 2017) (emphasis supplied). Grumman unsuccessfully argued that a package with information allegedly sent to Traveler’s in 1984, which Traveler’s apparently never received, constituted effective notice; the court disagreed.
The appeals court also agreed with the trial court that Grumman’s notice to Travelers of another claim stemming from the Facility was similarly defective. The court held “the notice Grumman provided to Travelers on October 10, 2002 – 77 days after the July 26, 2002 NYSDEC letter asserting Grumman’s responsibility for remediation of ‘this newly identified area,’ App’x 1451 – was untimely as a matter of law.”
Clearly, the idiom “better late than never” is not always applicable…specially in the insurance claims context.