The New York Insurance Department issued OGC Opinion No. 09-01-05 addressing several questions posed with respect to Chapter 388 of the Laws of 2008 (generally referred in this blog as the late notice Legislation), and the discussion of the Legislation in the Insurance Department's Circular Letter 26 (Nov. 18 2008), which we discussed here and here.
The OGC Opinion confirmed that the notice provision of the Legislation which requires liability policies issued or delivered in New York after January 17, 2009 to include a provision that late notice of a claim will not vitiate coverage unless the late notice has prejudiced the insurer, does apply to claims made policies. The OGC Opinion reiterated that the Legislation allows for a claims-made policy to provide that the claim must be made during the policy period or any renewal thereof or extended reporting period. The OGC Opinion notes that "the notice provision changes are not intended to vitiate the purpose of claims-made policies by creating overlapping coverage periods that would not exist but for the amendments.”
The OGC Opinion also responded to a question of whether the Legislation’s notice provision amendments apply to policies already in effect at the time of the Legislation’s effective date of January 17, 2009 that contain a liberalization clause. As noted by the OGC Opinion, a liberalization clause “typically provides that changes to the policy form made by an insurer for new or renewed policies, which broaden coverage under the policy, without additional premium charge, will automatically apply to the policy of issued within a specified period of time before the changes to the policy form go into effect.” The OGC Opinion pointed out that the Legislation’s notice provision amendments address policy conditions, and not coverage, but also noted that as liberalization clauses vary, the answer depends upon the specific language of the liberalization clause.
Lastly, the OGC Opinion answered a question regarding the commencement of the two year period determining whether the insurer or the insured has the burden of establishing prejudice due to late notice. Pursuant to the Legislation’s amendment of Insurance Law § 3420(c)(2)(A), the insurer bears the burden of proving prejudice as a result an insured’s late notice “if the notice was provided within two years of the time required under the policy,” and the insured (or injured person or other claimant) bears the burden of establishing that the insurer has not been prejudiced by the belated notice if the notice was provided more than two years after the time required under the policy. The OGC Opinion advised that the “policy language in an individual policy endorsement dictates when the notice of claim must be made to the insurer and, therefore, when the two year period determining the burden of proof begins to run.”