Commercial Division Blog
Notice of Claim Sent To Insured's Broker Does Not Constitute Notice To Insurance Carrier
On November 24, 2014, the Court of Appeals issued a decision in Strauss Painting, Inc. v. Mt. Hawley Ins. Co., 2014 NY Slip Op. 08214, ruling that "a policyholder's timely notice to a broker does not constitute the notice contemplated by [an] insurance policy."
Strauss Painting arose from an injury suffered by an employee of a subcontractor hired by Strauss (a general contractor) to perform work at the Metropolitan Opera House. Strauss' liability carrier denied coverage based on late notice. In affirming the lower courts' decision that the notice to Strauss' insurance carrier was untimely as a matter of law, the Court of Appeals ruled that, in general, an insured does not satisfy an insurance policy's notice requirement by notifying its insurance broker, "since a broker is normally the agent of the insured," not the carrier. The Court distinguished its decision in Mighty Midgets v. Centennial Ins. Co., 47 N.Y.2d 12 (1979), which concluded, in a unique context, that an insured satisfied the notice requirement by giving notice to its broker. The Court explained that Mighty Midgets was driven by "unusual and extenuating facts," including the insured's lack of sophistication, and more importantly, the unusually close relationship between the broker and the insurance carrier, that did not apply in this case:
The record here does not support the proposition that the insurer and broker had a relationship sufficiently close to suggest that service to the broker was effectively service to the insurer. By contrast, in a situation more akin Mighty Midgets it might be possible for even a relatively sophisticated representative of an insured to have a good faith, reasonable belief that notice to the broker is sufficient if the insurer's own actions hold the broker out to be its agent for the purpose of giving notice. In such a case, if the effect of the insurer's representations is to lull the insured into a false belief that notice had been provided through the agent, the insurer should not be able to raise the insured's failure to provide an earlier notice as a defense to coverage.
In another decision issued on November 24, Sierra v. 4401 Sunset Park, LLC, 2014 NY Slip Op 08216 (about which we previously have blogged), the Court of Appeals held that an insurance carrier did not satisfy its obligation to notify the insured of a disclaimer of coverage by sending notice to another insurance carrier for the insured, rather than the insured itself. Strauss Painting shows that the strict application of the notice obligations applies to insurance companies and insureds alike.