Today, New York Governor David A. Paterson signed a law that makes a major change to New York's longstanding "no prejudice" rule. On the new law's effective date, a liability insurer will be prohibited from denying coverage based on the policyholder's failure to provide timely notice unless the insurer has been prejudiced by the late notice. Additionally, claimants in suits arising out of death or personal injury now may maintain an action directly against an insurer to address the insurer's disclaimer based on the failure to provide timely notice. Where it is applicable, the legislation signals a sea change in the approach to late notice under New York law. In the attached article, the authors explain the policy considerations underlying the debate over the prejudice requirement, and how the new law will apply to policies issued or delivered in New York.