Property insurance policies typically require that, once an insured suffers a loss, the insured report the loss to the insurance carrier promptly. The purpose of such a provision is to allow an insurer to investigate a claim close in time to the occurrence so as to protect itself from fraud, take early control of the direction of the claim to anticipate where that claim might lead, and to ensure that it has adequate reserve funds in place. Naturally, the question often becomes how much time may elapse after a loss to make a delay in reporting unreasonable, and whether an insured may be excused from compliance with such late notice provisions by pleading lack of prejudice to the insurer, lack of sophistication, or some other, similar, mitigating factor. In Minasian v. IDS Prop. Cas. Ins. Co., 2017 U.S. App. LEXIS 1079 (2d Cir. Jan. 19, 2017), the Second Circuit found that a reporting delay of three months ran afoul the policy’s reporting requirement, and resoundingly rejected the insureds’ arguments that certain extenuating circumstances should excuse their compliance with the policy’s post-loss notice requirements.
In Minasian, nearly $200,000 in assorted watches, bracelets, and rings were stolen from the insureds’ apartment in Nyack, New York on New Year’s Day 2014 under what the district court strongly hinted were suspicious circumstances. The insureds reported the theft to the police that same day, but did not notify their various insurers of the loss until March 28, 2014, some 86 days after the jewelry went missing. The insureds claimed that they delayed in reporting the claim because they believed that the police investigation would succeed in recovering the jewelry, because they were unsophisticated and had no counsel nor prior experience with insurance policies, and because the insurers were not prejudiced by the delay. Following an investigation, the insurers denied the claim, citing the notice and intentional concealment and fraud provisions, among others. Suit followed, and the insurers moved for summary judgment. The district court – 2015 U.S. Dist. LEXIS 164860 (S.D.N.Y. Dec. 9, 2015) – granted summary judgment to the insurers on the timely notice issue.
The district court first noted that timely notice of a loss is a condition precedent to coverage, and that a delay may be found inexcusable when no excuse is advanced or when the proffered excuse is meritless. To determine when the post-loss notice clock begins to run, one must consider “whether the circumstances known to the insured at that time would have suggested to a reasonable person the possibility of a claim.” In opposing the insurers’ summary judgment motion, the insureds argued that their notice was timely and that they should be excused from compliance with the notice requirement. The insureds also argued that New York Insurance Law § 3420(a)(5), which requires the existence of prejudice caused by late notice to deny a claim in the liability context, should be considered as a factor in the property context. The district court rejected the insureds’ various excuses and found the insureds’ notice to be untimely and inexcusable as a matter of law. The district court also rejected the insureds’ prejudice argument by noting that § 3420 did not apply in the first-party property claims.
On appeal, the Second Circuit affirmed the district court’s grant of summary judgment. The court noted that New York law does not require that an insurer demonstrate prejudice to deny a first-party property claim on late notice grounds. The court also noted that New York courts have determined that a fairly short delay – as short as 26 days – can implicate a late notice provision. The Second Circuit concluded that the insureds’ 86-day delay was unreasonable as a matter of law, and that none of the proffered explanations for the reporting delay could excuse the timely notice requirement.
Minasian provides a useful reminder as to the proper application of late notice provisions in the first-party property context in New York. The case emphasizes that even a relatively short delay may bar an insured’s claim, and that the burden is on the insured to provide a reasonable and credible explanation for any delay in reporting a loss to its insurer.