Auswin Realty Corp. v. Harleysville Ins. Co., 56 N.Y.2d 834 (1982)
An insured cannot avoid its duty to cooperate with an insurer’s investigation by commencing an action before the insurer has repudiated liability; unexcused and willful refusal to comply with requests for proof of loss or examination warrants unconditional dismissal of the insured’s claim.
Summary
Auswin Realty Corp. sued Harleysville Ins. Co. on a fire insurance policy. The insurer demanded proof of loss and an examination of the insured, but the insured did not comply, claiming the demand was made too late (10 months after the loss) and after the insured had already filed suit. The New York Court of Appeals held that the insured’s unexcused and willful refusal to cooperate with the insurer’s investigation, by failing to provide proof of loss or submit to examination, warranted unconditional dismissal of the complaint because the insurer had not yet repudiated liability.
Facts
Auswin Realty Corp. sustained a loss covered by a fire insurance policy issued by Harleysville Ins. Co. Ten months after the loss, Harleysville demanded that Auswin provide proof of loss and submit to an examination as required by the policy. Auswin had already commenced an action against Harleysville to recover under the policy, believing this was necessary to protect itself against the policy’s 12-month limitation period (later shown to be a 2-year period based on state law). Auswin failed to comply with Harleysville’s demands.
Procedural History
Auswin Realty Corp. brought an action against Harleysville Ins. Co. to recover under a fire insurance policy. The lower court dismissed Auswin’s complaint due to its failure to file proof of loss or submit to an examination as requested by Harleysville. The Appellate Division affirmed. The New York Court of Appeals affirmed the Appellate Division’s order.
Issue(s)
Whether an insured’s unexcused failure to comply with an insurer’s demand for proof of loss and examination, made after the insured commenced an action on the policy but before the insurer repudiated liability, warrants unconditional dismissal of the insured’s claim.
Holding
Yes, because the insured cannot insulate itself against cooperation by commencing an action before the insurer has repudiated liability, and the insured offered no valid excuse for its noncompliance.
Court’s Reasoning
The Court of Appeals reasoned that while an insurer cannot create grounds for refusing to pay a claim by demanding compliance with policy provisions after repudiating liability, the insured also cannot avoid its duty to cooperate by filing suit before the insurer has repudiated liability. The court distinguished this case from cases where the insured had attempted to comply with the policy requirements but had fallen short due to minor omissions or defects. The court emphasized that Auswin offered no reason for its noncompliance with Harleysville’s demands. Citing Do-Re Knit v National Union Fire Ins. Co., the court stated that an insured cannot prevent cooperation by starting a lawsuit before there has been a repudiation of liability by the insurer. The court noted, “neither can the insured insulate itself against co-operation by commencing an action before there has in fact been repudiation of liability by the insurer.” Because there was no attempt to comply or valid excuse for noncompliance, the court found summary judgment dismissing the complaint unconditionally was appropriate. The Court distinguished the holding from other cases where there was partial compliance from the insured.