Appellate Division Strikes Down Claim of Good Faith Belief in NonLiability Defense

Tower Ins. Co. of New York v. Christopher Court Housing
71 A.D.3d 500, 897 N.Y.S.2d 63
N.Y.A.D. 1 Dept.,2010.

Although it is generally known that an insured may assert the good-faith belief in nonliability as a defense to a carrier's claim of late notice, there are few good decisions determining what constitutes "good faith." Here, the First Department reversed Judge Louis York’s denial of summary judgment, rejecting as a matter of law, the insured’s claim of good-faith belief in nonliability.

The case involved the claim by a residential tenant in defendant's building that she was assaulted in the hallway outside her apartment. A security guard generated an incident report which was submitted to the defendant property manager. The report indicated that the tenant claimed she was “grabbed” by the assailant and that police and emergency medical personnel were called to the scene, with “no evidence” of the assailant.

There also was a police report, which the property manager did not obtain, which reported that the assailant grabbed the tenant, pulled her hair, knocked off her glasses and scratched her arm leading her to have an “anxiety attack,” for which she was taken to the hospital.

The Court noted that in order to excuse a failure to give timely notice, a good-faith belief in nonliability “must be reasonable under all circumstances, and it may be relevant on the issue of reasonableness, whether and to what extent, the insured has inquired into the circumstances of the accident or occurrence” *65 (Security Mut. Ins. Co. of N.Y. v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 441, 340 N.Y.S.2d 902, 293 N.E.2d 76 [1972], see White v. City of New York, 81 N.Y.2d 955, 958, 598 N.Y.S.2d 759, 615 N.E.2d 216 [1993] ).

The insured argued that its delay in giving notice was reasonable given the absence of evidence she was knocked down. It also relied on the fact that security told the property manager that a problematic rear door was closed at the time of the incident, and the property manager observed the tenant to be uninjured and was rebuffed by the tenant when she attempted to talk to her about the incident.

Notwithstanding, the Court found this was unreasonable as a matter of law since had the property manager inquired whether a police report had been filed, she would have learned that the tenant was in distress and had been taken from the building by ambulance. She would have also learned of her knowledge of a fire exit door that was sometimes found propped open. Thus, the Court found that a proper investigation would have have alerted the property manager to the possibility of a claim (see SSBSS Realty Corp. v. Public Serv. Mut. Ins. Co., 253 A.D.2d 583, 677 N.Y.S.2d 136 [1998]).

This case highlights the difficulty with this defense - that the insured cannot hide behind his own incuriousity and ignorance.