Matter of Empire Mut. Ins. Co., 39 N.Y.2d 720 (1976)
An insurer seeking to disclaim liability based on the insured’s non-cooperation bears a heavy burden to prove both diligent efforts to secure cooperation and a willfully obstructive attitude by the insured.
Summary
This case addresses the extent of an insurer’s responsibility to prove non-cooperation by its insured before disclaiming liability. Empire Mutual sought to avoid arbitration by disclaiming coverage, alleging non-cooperation. The court held that Empire Mutual failed to meet its heavy burden of proving that the insured willfully obstructed the investigation. The insurer’s efforts to contact the insured, while diligent, did not demonstrate the insured’s willful obstruction, as there was insufficient proof the insured received the insurer’s communications. The court emphasized that mere non-action is insufficient to establish non-cooperation unless the inference of non-cooperation is practically compelling.
Facts
The claimant was involved in an accident with an automobile insured by Boston Old Colony Insurance Company, which was later acquired by Empire Mutual Insurance Company. The claimant’s attorney notified Boston Old Colony of the accident. The insurer’s adjuster sent multiple letters to the owner and operator of the insured vehicle over five months, via regular and registered mail, but only the registered mail was returned undelivered. The adjuster also visited the insured’s known addresses, left cards, communicated with the insured’s broker, and contacted the Motor Vehicle Department. Independent investigators also located the address of both the owner and operator, made several trips to the address, and left messages; however, none of these efforts elicited a response from either the owner or the operator.
Procedural History
The initial court and the Appellate Division ruled against Empire Mutual, finding insufficient evidence of non-cooperation to justify disclaiming liability. Empire Mutual appealed to the New York Court of Appeals.
Issue(s)
Whether Empire Mutual, the insurer, presented sufficient evidence to demonstrate that its insureds willfully and avowedly obstructed the investigation of the accident, thereby justifying the insurer’s disclaimer of liability based on non-cooperation.
Holding
No, because the insurer failed to prove that the insureds received any post-accident communications and demonstrated a willful and avowed obstruction. The insurer’s efforts, while diligent, were insufficient to demonstrate the necessary level of obstruction by the insureds.
Court’s Reasoning
The Court of Appeals affirmed the Appellate Division’s order, holding that Empire Mutual failed to meet its burden of proving non-cooperation. The court emphasized that under New York Insurance Law § 167, subd. 5, the burden of proving failure or refusal to cooperate rests heavily on the insurer. The court cited Thrasher v. United States Liab. Ins. Co., stating that the insurer must demonstrate not only that it acted diligently to obtain the insured’s cooperation and that its efforts were reasonably calculated to do so, but also that the insured’s attitude was one of “willful and avowed obstruction.”
The court found no evidence that the insureds acted or failed to act in a way that could support a finding of non-cooperation. While the return of registered mail might suggest receipt of regular mail, there was insufficient proof the insured received any post-accident communications from the insurer or claimant’s attorney. The court distinguished this case from Thrasher, where the insured’s nonactions were more significant.
The court clarified that non-action could potentially evidence a lack of cooperation, but the inference of non-cooperation must be practically compelling. In this instance, the court deemed the evidence presented insufficient to meet this high standard.
The court explicitly stated: “We find in this record no evidence of acts or omissions to act on the part of the insured on which could be predicated a finding of non-co-operation… This record discloses only nonaction on the part of the insureds. In our view this cannot be escalated in this case to non-co-operation; it was short even of the series of nonactions by the insured in the Thrasher case.”
The court also noted that the assigned risk nature of the insurance policy did not relieve the insurer of its burden to prove the requisite failure or refusal to cooperate.