We have written on the topic of late notice a number of times. Typical property insurance policies require that the insured notify its carrier of a loss promptly. The purposes of such a provision include allowing an insurer to investigate a claim close in time to the occurrence so as to ensure that it is able to gather all the relevant facts associated with the reported loss and to ensure that it has adequate reserve funds in place. A federal court in New York recently determined that a four month delay in notifying an insurer of a loss was too late and that the insurer need not establish that it suffered prejudice as a result of the delay.

In Trustworthy LLC v. Vt. Mut. Ins. Group, 2018 U.S. Dist. LEXIS 42536 (N.D.N.Y. Mar. 15, 2018), the insured purchased a Days Inn hotel in 2009 with a roof that had been in place since 1983. The insured made various repairs to the roof, and every year there were leaking issues due to weight of snow requiring springtime repairs on a yearly basis. The insured’s policy included a typical late notice provision requiring that the insured provide “prompt notice of the loss or damage.”  On September 11, 2014, the insured submitted a claim to Vermont Mutual citing a May 16, 2014 date of loss. When the adjuster inspected the loss, she noted that many repairs had already been effectuated, consisting of roof repairs, ripping out sheetrock, removing carpet, walls and ceilings. Vermont Mutual denied the claim based on the delay in reporting, and the repairs conducted before inspection made it impossible for Vermont Mutual to verify the cause of loss.

The insured filed suit, and in opposition to Vermont Mutual’s motion for summary judgment, provided an affidavit stating that the date of loss was actually in late August 2014. The court stated succinctly that the “Plaintiff cannot create an issue of fact out of thin air, which contradicts its own evidence.” Citing New York law on late notice finding that delays of “one or two months are routinely held unreasonable,” the district court granted summary judgment in favor of Vermont Mutual and determined that the insured’s four month delay in reporting the loss was unreasonable. The court’s decision was based in part on the fact that the proffered excuses for the delay in reporting the loss, i.e., the inability to find a public adjuster until late August and the fact that it was “a really busy time for me and on top of that I was planning this wedding of mine” were not excuses that New York courts would find reasonable to explain the delay. Importantly, even though the court determined that Vermont Mutual had provided evidence of prejudice, the district court (citing the Appellate Division, Second Department’s decision in Provencal, LLC v. Tower Ins. Co. of New York, 30 N.Y.S. 3d 138 (N.Y. App. Div. 2d Dept 2016)), stated that the heightened requirements of establishing prejudice pursuant to Ins. Law § 3420 are not applicable in a first party property dispute.

The Trustworthy decision reiterates well-established New York law finding that Ins. Law § 3420 does not apply to first party insurance claims and that an insurer need not establish prejudice when late notice is at issue.