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This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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USCOA2 No. 163
Briggs Avenue LLC,
Appellant,
v.
Insurance Corporation of
Hannover,
Respondent.
Robert A. Scher, for appellant.
Nancy Lyness, for respondent.
Complex Insurance Claims Litigation Association, amicus
curiae.
SMITH, J.:
We hold that a liability insurer is entitled to
disclaim coverage when the insured, because of its own error in
failing to update the address it had listed with the Secretary of
State, did not comply with a policy condition requiring timely
notice of a lawsuit.
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Briggs Avenue L.L.C. is the owner of a building in the
Bronx. The company was incorporated in 1999. Shaban Mehaj is
its manager and only member. As required by Limited Liability
Company Law § 301, Briggs’s articles of organization designated
the Secretary of State as its agent to receive service of
process. The articles included Briggs’s address, but Briggs
later moved, and Mehaj did not notify the Secretary of State of
the change. His explanation is that the lawyer who formed the
company for him did not tell him of the need to keep the address
updated.
In July 2003, a tenant of the building, Nelson Bonilla,
began a personal injury action against Briggs, and served the
summons and complaint on the Secretary of State. Because the
Secretary of State did not have a current address for Briggs,
Mehaj did not receive the summons and complaint and did not know
that the lawsuit existed. He learned of it only in April 2004,
when Bonilla served directly on Briggs a motion for a default
judgment. Briggs then gave notice to its liability insurer,
Insurance Corporation of Hannover (ICH), of the claim against it.
ICH promptly disclaimed coverage, relying among other things on a
policy provision saying: “If a claim is made or ‘suit’ is brought
against any insured, you must . . . [n]otify us as soon as
practicable.”
Briggs brought a declaratory judgment action in Supreme
Court against ICH, asking that the insurer be required to defend
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the Bonilla case. ICH removed the action to the United States
District Court for the Southern District of New York, and the
District Court dismissed Briggs’s complaint, holding that ICH’s
disclaimer was valid. Briggs appealed to the United States Court
of Appeals for the Second Circuit, which certified to us the
following question:
“Upon all the facts of this case, given the
terms of the insurance policy and the reason
for the insured’s failure to give more prompt
notice of the lawsuit to the insurer, should
the insurer’s disclaimer of coverage be
sustained?”
Our answer to the question is yes.
The validity of ICH’s disclaimer turns on whether
Briggs complied with the condition of the policy requiring it to
give notice of a lawsuit to ICH “as soon as practicable.”
Clearly, it did not. It was unquestionably practicable for
Briggs to keep its address current with the Secretary of State,
and thus to assure that it would receive, and be able to give,
timely notice of the lawsuit. Briggs’s failure to do so was
simply an oversight.
Briggs relies on Agoado Realty Corp. v United Intl.
Ins. Co. (95 NY2d 141 [2000]), in which we held that there was an
issue of fact as to whether notice of a lawsuit was given “as
soon as practicable.” But Agoado is distinguishable. In that
case, the Secretary of State sent documents to the insureds’
lawyer, but the lawyer had died, and the insureds claimed they
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did not know of his death. Thus, in Agoado it may really have
been impracticable for the insureds to find out about the lawsuit
and give timely notice to the insurer. In this case, however, it
is clear that the insured could have prevented the mishap.
Briggs’s argument is essentially that its mistake was
understandable; that it caused no prejudice to the insurer; and
that the loss of insurance coverage is a harsh result. All this
may be true, but it is irrelevant. We have long held, and
recently reaffirmed, that an insurer that does not receive timely
notice in accordance with a policy provision may disclaim
coverage, whether it is prejudiced by the delay or not (Argo
Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339 [2005];
Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d
436, 440 [1972]). While this rule produces harsh results in some
cases, it also, by encouraging prompt notice, enables insurers to
investigate claims promptly and thus to deter or detect claims
that are ill-founded or fraudulent. The Legislature, weighing
the competing interests at stake, has recently enacted
legislation that strikes a different balance, more favorable to
the insured (see L 2008, ch 388, §§ 2, 4 [amending Insurance Law
§ 3420, applicable to policies issued after January 17, 2009]),
but that legislation has not yet become effective. The common
law no-prejudice rule applies to this case.
Accordingly, the certified question should be answered
in the affirmative.
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* * * * * * * * * * * * * * * * *
Following certification of a question by the United States Court
of Appeals for the Second Circuit and acceptance of the question
by this Court pursuant to section 500.27 of the Rules of Practice
of the New York State Court of Appeals, and after hearing
argument by counsel for the parties and consideration of the
briefs and the record submitted, certified question answered in
the affirmative. Opinion by Judge Smith. Chief Judge Kaye and
Judges Ciparick, Graffeo, Read, Pigott and Jones concur.
Decided November 20, 2008