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Brutal loss on a coverage caseApril 25, 2012

Matter of Matter of AIU Ins. Co. v Veras, 2012 NY Slip Op 03116 (1st Dept. 2012)

“On June 4, 2005, respondent Veras and additional respondent Richard, who was driving a vehicle owned by additional respondent Wynder-Ortiz and insured by State Farm, were involved in an automobile accident. State Farm was not notified and did not learn of the accident from its insured. Nearly four years later, it learned of the accident from Veras, who served it with the judgment entered in his favor in the action he had commenced against Richard and Wynder-Ortiz. Although it completed its internal investigation and prepared letters of disclaimer within two weeks, State Farm waited another 15 days before sending out the letters. It was not error for the court to find this largely unexplained delay unreasonable (see Insurance Law § 3420[d]; First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 66 [2003]; Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 42-43 [2002]; see also George Campbell Painting v National Union Fire Ins. Co. of Pittsburgh, PA, 92 AD3d 104 [2012]).”

So, notice of the accident is received after 4 years.  A judgment is entered and served upon State Farm.  Then, a decision is made to deny within 2 weeks.  Then 15 days were not explained.  After this, a disclaimer was sent, and this was insufficient?

“We reject State Farm’s argument that the delay was due to its investigation of other possible grounds for disclaiming. State Farm’s witness testified that the investigation was completed in two weeks. In any event, however, “just as we would not permit the insured to delay giving the insurer notice of claim while investigating other possible sources of coverage, [*2]we should not permit the insurer to delay issuing a disclaimer on a known ground while investigating other possible grounds for avoiding liability” (George Campbell Painting, 92 AD3d at 115).”

13 Responses

  1. Kurt Lundgren says:

    Frankly, the decision puzzles me too JT. But it wasnt four years after the judgement, it was four years after the accident that that State Farm was notified. There must be more to this then stated in the decision.

    Nonetheless, my heart brakes and breaks for State Farm. Just glad to know “State Farm is there”.

  2. Dr. Freelove says:

    The insurer has 15 days to disclose its defense here, yet in Unitrin, the insurer is entitled to fail to disclose its policy condition defense until an actual lawsuit is commenced? Under Unitrin, an insurer may secret a defense for years and still rely on it at trial. Under Unitrin, the insurer may fabricate a completely new defenses simply for purposes of trial, after years of relying on a completely different defense. LOL. No sympathy for the devil. State Farm gets plenty from this Court.

    • JT says:

      It is interesting how the standards differ in third-party and first-party cases. Yet, in a third-party case (not this one due to the facts that were presented), plaintiff still has to prove something, other than the perfunctory mailing, CPLR 4518(a), and proof that the bill is overdue. Question: would the providers trade prima facie medical necessity for Unitrin? The answer should be no.

  3. Ray Zuppa says:

    I too am outraged by the mistreatment of my good neighbors by a Court of Law.

    It appears that if a case will not have larger implications court’s will still find against an insurer.

  4. Ray Zuppa says:

    There is no longer prima facie medical necessity in practice.

    I keep hearing about that Unitrin case. What’s that one about. Is that the App Term decision that holds that if the claimant was a day late in making her premium payment it is a coverage defense and even though the check was deposited by the insurance company and the policy was not cancelled the claimant’s claims are all denied.

  5. mitchell s. lustig says:

    This is another example why Unitrin makes no sense and is a departure from the general rules of insurance law that denials based upon a breach of a condition precdent to coverage, as opposed to a lack of coverage defense, must be asserted in a timely manner and without delay.

  6. Anonymous says:

    Mitch I agree with u. I don’t think the first dept knew what it was doing when it decided that case it threw one big monkey wrench in Plaintiffs cases and the sad thing is I am getting overturned by some Master Arbitrators saying Westchester in the 2d Dept is not good law. It’s ridiculous law. Once there is a contract signed by the parties, the damn insurance companies should have to follow the regs and timely deny every proof of claim. The regs say it. The general counsel said it in an opinion letter the second dept said it. Zappine and Chubb say it. I hate that I have to prove to everyone that a denial is needed when a bill is received. So sick of it. SMFH

    • JT says:

      That is why CPLR contains Article 75 and the Appellate Division is empowered to review Supreme Court determinations. You are seeking review of legal, as opposed to factual issues; so you will get a ruling on the merits since the review is based upon the less deferential Article 78 standard.

      Personally, I have gone to Supreme Court numerous times when AAA makes up their own rules to preclude the carriers from offering evidence. Sometimes I win, sometimes I do not. But, you have to try and give it your best shot. As long as you are not engaging in “Five Boro” frivolous appellate practice, nobody can ever legitimately chastise you.

      As for me, I foresee another three masters that I filed finding their way to the First Department next year. Point is, take a stab in the dark – you may very well win.

  7. Anonymous says:

    From what I hear it’s almost impossible to win Art 75. It has to be so egregious that it goest even make sense. I do t know if it’s worth the time and effort just to be thwarted. The Masters r SI out of control and if y complain to AAA and the master moron Bill Considine u get absolutely nowhere. U just don’t no. The masters give the appellant a second Arbitration and font do what they r supposed to do which is look to see if there is an error of law or the Arbitrator was capricious in their decision. I can’t stand it and feel like I am stuck unless I Art 75 which is a pain and the odds of winning r low. It’s very frustrating.

  8. Alan Klaus says:

    BTW the last 2 rants r by me not anonymous

  9. Larry Rogak says:

    This decision is no great departure from past rulings. No matter how late the notice is, the insurer has to disclaim on that ground right away. They’re not permitted to wait a bit and investigate. This puts insurers in a position where they have to disclaim at once and then investigate. They can change their position later if they decide the lateness was excusable, or they can add other bases for disclaiming once they discover them. It’s not good claims practice but this is what the courts imposed.

  10. nycoolbreez says:

    If the providers walk away from prima facie medical necessity for Unitrin would the carriers then have to prove non-cooperation viz a viz Thrasher?

  11. Dr. Freelove says:

    Unitrin’s goose is cooked. Why would the plaintiff’s bar trade off the existing medical necessity burden of proof against a single case that no other appellate court agrees with, that attempts to rewrite Chubb, and that is consistently rejected at arbitration? Unitrin makes no sense and illustrates that the First Department has no clue about No-fault.

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