First Department Suggests It is an Insurance Carrier's Obligation to Notify Potential Claimants of its Change of Address

American Transit Ins. Co. v. Brown
--- N.Y.S.2d ----, 2009 WL 3199800
N.Y.A.D. 1 Dept.,2009.

ANDRIAS, J.P., CATTERSON, RENWICK, DeGRASSE, FREEDMAN, JJ.

In a stunning decision, the First Department seems to have held that it is the insurance carrier’s burden to notify potential claimants of a change in its address, not the claimant’s burden to verify the carrier’s current location. The decision contains a stinging dissent from Justices Catterson and Andrias.

This declaratory judgment action arose out of an automobile accident between Arthur Brown (“Brown”) and Albertano Batista (“Batista”) in November 2002. Batista’s insurance carrier, American Transit Insurance Company (“ATIC”) sent a written acknowledgement of Brown’s property damage claim in January 2003 which it subsequently settled (date not supplied).

In November 2005 Brown commenced a personal injury action against Batista. Brown forwarded the summons and complaint to ATIC in January 2006, using the address on ATIC’s acknowledgement letter from three years before. Unbeknownst to Brown, ATIC had moved its offices in November 2003. Upon Batista's failure to appear in the action, Brown obtained a default judgment for $81,830 and served a copy of the unsatisfied judgment with notice of entry upon ATIC at its current offices. ATIC promptly issued a letter of disclaimer and commenced this declaratory judgment action on the ground that neither Batista nor Brown gave it timely notice of the underlying lawsuit as required by the policy. The Supreme Court denied the parties' motions for summary judgment to allow for further discovery.

On appeal, the majority acknowledged that the failure to satisfy a notice requirement “may allow an insurer to disclaim its duty to provide coverage” (see American Tr. Ins. Co. v. Sartor, 3 NY3d 71, 76 [2004]), but also observed that “a failure to satisfy an insurance policy's notice requirement does not vitiate coverage where there is a valid excuse (cf. Matter of Allcity Ins. Co. [Jimenez], 78 N.Y.2d 1054, 1055 [1991]).

Brown claimed a valid excuse, arguing that ATIC had never notified him of its change of address. The Court was not swayed by the fact that the carrier’s new address was printed on the check forwarded to Brown's counsel in settlement of the property damage matter and that ATIC had taken all normal and customary actions to announce and document its current address.

Judge Catterson in dissent, flatly denied that there is a legal obligation for a defendant's insurer to notify a potential plaintiff or plaintiff's counsel of the insurer's change of address. In addition, he harshly criticized the majority’s justification for Brown’s failure to notify ATIC of the pending litigation. He noted that it had been years since ATIC had settled the property damage case with Brown. Moreover, ATIC had sent a mass mailing announcing its change of address at the time of the move, notified the State Insurance Department and the post office of its change of address, and had changed its address on its web site and all phone listings. His withering dissent concludes by stating that “the majority is willing to accept an attorney's lack of diligence in failing to spend three-tenths of a second to verify an address on the Internet as a valid excuse for the failure to satisfy an insurer's notice requirement.”

This reporter wonders whether this case will have the effect of watering down the concept of due diligence in other scenarios. Hopefully, ATIC will take advance of the split decision to appeal the case to the Court of Appeals. I will of course, report on any further developments.