Loblaw, Inc. v. Employers’ Liability Assurance Corp., 49 N.Y.2d 871 (1980)

An insured’s obligation to provide notice to an excess insurer is triggered when the insured knows or reasonably should know that a claim may exceed the retention limit, and this obligation is ongoing if circumstances change such that excess coverage is reasonably implicated.

Summary

Loblaw, a self-insured retail chain, sought reimbursement from its excess insurer, Employers’ Liability, for a worker’s compensation claim. The policy required Loblaw to provide immediate written notice of any accident that “may involve liability” on Employers’ part. Loblaw delayed notifying Employers’ for several years, even as the claim’s costs mounted and its own agent advised doing so. The court held that Loblaw’s notice was untimely as a matter of law. The court emphasized that the notice provision served to protect the insurer’s interests by allowing them to set appropriate reserves and investigate claims promptly. The court stressed that an objective, reasonable standard should be applied to determine when notice is required, considering what the insured knew or should have known about the potential for the claim to exceed the retention limit.

Facts

A Loblaw employee suffered a work-related back injury in February 1964. Initially, the injury seemed minor. Over the next 14 months, the employee’s condition worsened, requiring multiple hospitalizations and surgery. By April 1966, Loblaw’s insurance adjusting agent assessed the claim as potentially