Despite Custom in the Industy, Insured Who Gives Notice of an Occurrence to his Broker Does so at his Peril

American Safety Indem. Co. v. 612 Realty LLC,
Slip Copy, 2009 WL 2407822 (N.Y.Sup., J. Marcy Friedman 2009)

This declaratory judgment action dealt with the question whether an assured who provides first notice of occurrence and/or suit papers to his broker has fulfilled his obligation to provide the carrier with timely notice of the claim. In American Safety, the commercial umbrella carrier moved for summary judgment on its disclaimer for the insured’s failure to provide timely notice of the underlying action.

The infant plaintiff was first diagnosed with lead poisoning on August 27, 2003. The complaint was filed on or about September 25, 2003. The verified bill of particulars plead $40 million in damages. In opposition to the motion, the insured’s argued that its managing agent provided notice to their broker “with the expectation that he would ‘take whatever steps [were] necessary’.” The American Safety court however, held that “this assertion is insufficient to raise a triable issue of fact” based on Security Mut. Ins. Co., 31 N.Y.2d at 442 n 3. The court further commented:

Notwithstanding that it is a “common practice” for insureds to notify their brokers rather than their carriers of claims, an insured who notifies only its insurance broker does so at its own peril, as “the policy requirement that the notice must be provided to the carrier trumps any informal arrangement or practice” between the insured and its broker. (Gershow Recycling Corp. v. Transcontinental Ins. Co., 22 AD3d 460, 462 [2nd Dept 2005].)

Incredibly, I currently have a case with the identical facts. It even involves a lead case with the same insurance carrier. Can we depend on stare decisis? We shall find out.