The New York Insurance Department’s (“NYID”) Office of General Counsel (“OGC”) recently issued an OGC Opinion (No. 09-06-08) representing the position of the NYID in respect of four distinct queries regarding the recent amendment to Insurance Law § 3420, which we have closely followed and written about in this blog. (See, e.g., here, here, here and here.) Each issue addressed by this Opinion will be discussed in a separate blog post. (See here, here and here for the other issues addressed in the OGC Opinion).
Recent amendments to NY Insurance Law § 3420 provide that a liability insurer can disclaim coverage on late notice grounds only where the insured’s untimely notice has prejudiced the insurer. The statute further provides, in relevant part, that the initial burden of establishing prejudice will rest with the insurer if the delayed notice is within 2 years, but shifts to the insured to prove the absence of prejudice if the delay is longer than that.
The fourth issue addressed by the OGC was whether a third party may bring a direct cause of action against a New York insurer in a foreign jurisdiction subsequent to the insurer’s denial of coverage on late notice grounds if the policy was delivered in a foreign jurisdiction that requires a judgment against, or settlement with, the insured prior to the initiation of such action. The OGC answered that query in the negative, stating that “Insurance Law § 3104(b) allows a New York insurer to include in any policy of insurance issued for delivery in another jurisdiction any provision required by the laws of such other jurisdiction applicable to such policy.” The OGC added that “[h]owever, if a jurisdiction outside New York prohibits a direct action, Insurance Law § 3104(b) expressly permits a domestic insurer to include in any insurance policy or annuity contract issued for delivery in that jurisdiction and governed by that jurisdiction’s law any provisions required by the laws of that jurisdiction applicable to the insurance policy or annuity contract.”