Security Mutual Insurance v. Acker-Fitzsimons Corp.
293 N.E.2d 76, 31 N.Y. 2d 436, 340 N.Y.S.2d 902 (1972)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An insured's good-faith belief of non-liability may excuse a delay in providing notice of an occurrence to its insurer, but this belief must be objectively reasonable under the circumstances, which includes a duty to conduct a reasonable investigation when possessing information that would lead a prudent person to suspect potential liability.
Facts:
- Security Mutual Insurance Company issued a liability policy to Fernley Realty Corp. (Fernley), covering its president, Norman Levy, and its managing agent, Acker-Fitzsimons Corp.
- On May 23, 1965, a major fire occurred at the insured property, and three days later the New York City Department of Buildings cited the premises for structural violations.
- On October 4, 1965, a second fire occurred, during which three firemen, defendants Adams, Harrington and Manning, were allegedly injured.
- On November 9, 1965, Levy heard rumors that firemen had been injured in the October fire and informed his insurance broker, who advised that no action was needed.
- On December 19, 1965, the Sunday News reported that two of the firemen had filed a claim against the City of New York and mentioned the potential liability of the property owners.
- On December 27, 1965, Levy sent a copy of the newspaper article to his broker, suggesting it be forwarded to the insurer, but the broker again took no action.
- The insureds, Fernley and Acker-Fitzsimons, were formally served with a summons and complaint by the firemen on April 28, 1967, with Levy being served on June 23, 1967.
Procedural Posture:
- Security Mutual Insurance Company initiated a declaratory judgment action in the Supreme Court, Bronx County (trial court) against its insureds (Fernley, Levy, Acker-Fitzsimons) and the injured firemen.
- The trial court granted judgment for Security Mutual, declaring it was not obligated to defend or indemnify its insureds due to late notice.
- The insureds and the firemen, as appellants, appealed to the Appellate Division of the Supreme Court (intermediate appellate court).
- The Appellate Division reversed the trial court's judgment, holding that the insureds' notice was given as soon as practicable.
- Security Mutual, now the appellant, appealed the reversal to the Court of Appeals of New York, the state's highest court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an insured's 19-month delay in notifying its liability insurer of an occurrence violate the policy's requirement to provide notice 'as soon as practicable,' when the insured, aware of potential injuries and pre-existing structural violations, failed to investigate and instead relied on a belief of non-liability?
Opinions:
Majority - Jasen, J.
Yes, the 19-month delay violates the policy's notice provision. While a good-faith belief of non-liability can excuse a delay in giving notice, such a belief must be objectively reasonable. Here, the insureds possessed information—specifically, a newspaper article reporting the injuries and mentioning their potential liability, coupled with their knowledge of existing structural violations—that would cause a reasonable and prudent person to investigate the circumstances and evaluate their potential liability. The insureds' failure to conduct any investigation rendered their reliance on a belief of non-liability unreasonable. Therefore, the otherwise unreasonable 19-month delay is not excused.
Analysis:
This decision clarifies the 'good-faith belief of non-liability' exception for late notice under insurance policies. It establishes that the insured's belief must be objectively reasonable, not merely a subjective hope. The ruling effectively imposes a duty on the insured to conduct a reasonable inquiry into the facts of an occurrence once they possess information suggesting a potential for liability. This strengthens the position of insurers in denying coverage for late notice by preventing insureds from claiming ignorance when the circumstances would prompt a prudent person to investigate.
