Country-Wide Ins. Co. v. Preferred Trucking Services Corp., 22 N.Y.3d 571 (2014)
An insurer’s disclaimer of coverage based on an insured’s non-cooperation must be made within a reasonable time after it is clear that further attempts to elicit the insured’s cooperation would be futile, and the reasonableness of the delay is evaluated on a case-by-case basis.
Summary
Country-Wide Insurance sought a declaratory judgment that it had no duty to defend or indemnify Preferred Trucking and its driver, Arias, in a personal injury lawsuit due to their failure to cooperate. The New York Court of Appeals held that Country-Wide’s disclaimer was timely because, despite diligent efforts, Arias’s lack of cooperation wasn’t clear until shortly before the disclaimer. The court emphasized that insurers must be given reasonable latitude to secure cooperation before disclaiming coverage, especially when initial non-compliance is followed by sporadic promises of cooperation. This case underscores the insurer’s heavy burden to demonstrate diligent efforts to secure the insured’s cooperation before issuing a disclaimer.
Facts
Gallina sued Preferred Trucking and its driver, Arias, for personal injuries. Country-Wide, Preferred Trucking’s insurer, repeatedly tried to contact the company’s president, Markos, and Arias, without success. Plaintiffs sought a default judgment, prompting Country-Wide’s initial notice of potential disclaimer. Markos briefly expressed willingness to cooperate but remained unreachable. Despite ongoing efforts, Arias only became reachable several months later. After initially promising cooperation, Arias later stated he did not care about the deposition date. Country-Wide then disclaimed coverage based on non-cooperation.
Procedural History
The Supreme Court struck the defendant’s answer, awarded judgment to the Gallinas, and directed an assessment of damages. Country-Wide then sued for a declaration that it had no duty to defend or indemnify. The Supreme Court declared Country-Wide obligated to indemnify Preferred Trucking but not Arias. The Appellate Division affirmed, finding the disclaimer untimely. The Court of Appeals reversed, holding the disclaimer was timely.
Issue(s)
Whether Country-Wide’s disclaimer of coverage, issued approximately four months after its initial awareness of potential non-cooperation, was timely under New York Insurance Law § 3420(d)(2), given its ongoing efforts to secure the insured’s cooperation.
Holding
No, because Country-Wide acted reasonably in continuing its efforts to secure Arias’s cooperation, and the insured’s lack of cooperation only became definitively clear shortly before the disclaimer was issued.
Court’s Reasoning
The Court of Appeals emphasized that Insurance Law § 3420(d)(2) requires insurers to disclaim coverage “as soon as is reasonably possible.” However, timeliness is case-specific, especially when disclaiming for non-cooperation, which “is often not readily apparent” (Continental Cas. Co. v Stradford, 11 NY3d 443, 449 [2008]). The Court reiterated that insurers should disclaim only after it’s clear that further attempts to elicit cooperation will be futile. The court highlighted the insurer’s “heavy” burden to show it acted diligently in seeking cooperation and that the insured’s attitude was one of “willful and avowed obstruction” (Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168 [1967]). Here, the delay was justified because Arias, the driver, initially promised cooperation after prior unresponsiveness. His ultimate unwillingness to cooperate became clear only shortly before the disclaimer. The Court reasoned that as long as Country-Wide was seeking Arias’s cooperation in good faith, it could not disclaim.