(Article from Insurance Law Alert, May 2019)
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The Second Circuit affirmed a New York district court decision dismissing coverage claims based on late notice, finding that the insurers did not waive their right to disclaim coverage on that basis. New York State Electric & Gas Corp. v. Century Indem. Co., 2019 WL 1817781 (2d Cir. Apr. 25, 2019).
New York State Electric & Gas Corporation (“NYSEG”) sued Century and OneBeacon, seeking indemnity for expenses relating to the investigation and remediation of contamination at numerous gas plant sites. The insurers denied coverage based on late notice. NYSEG argued that the insurers had waived their right to do so. A New York district court granted the insurers’ summary judgment motion, and the Second Circuit affirmed.
As to waiver, the Second Circuit ruled that NYSEG failed to demonstrate a clear manifestation of intent to waive the late notice defense, as required by New York law. NYSEG based its waiver argument on the fact that a disclaimer letter that included late notice as a basis for denying coverage was never sent to NYSEG. Deeming this insufficient to establish waiver, the court noted that the letter was not sent because NYSEG had not, at that time, asked Century to take action and no coverage determination had been made. In any event, Century ultimately issued a general reservation of rights that listed “late notice” as a potential issue.
The court also rejected NYSEG’s assertion that OneBeacon waived its late notice defense because although it specifically mentioned late notice in a disclaimer for a different policy, it issued a general disclaimer reserving “all of its rights” under the policy at issue. The court explained that since neither party was able to locate the relevant policy at the time of disclaimer, OneBeacon “did not have knowledge of the facts upon which the existence of its right to disclaim coverage under the relevant policy depended.”
After finding no waiver, the court addressed the merits of the late notice defense. The parties disputed whether NYSEG’s obligation to provide notice of an occurrence “as soon as practicable” was first triggered at the time of the operative occurrence or when NYSEG reasonably should have known that liability from the occurrence was likely to implicate coverage. The court declined to resolve that issue, finding that under either standard, NYSEG failed to provide timely notice.