In re Empire Mutual Insurance Co., 36 N.Y.2d 719 (1975)

An insurer seeking to disclaim liability based on the insured’s non-cooperation bears a heavy burden to prove that it acted diligently to secure the insured’s cooperation and that the insured’s attitude amounted to willful and avowed obstruction.

Summary

This case addresses the standard for an insurer to disclaim liability due to the insured’s alleged non-cooperation. The New York Court of Appeals held that Boston Old Colony Insurance Company was not justified in disclaiming liability based on the non-cooperation of its insureds. The court emphasized that the insurer bears a heavy burden to demonstrate both diligent efforts to obtain the insured’s cooperation and a willful and avowed obstruction by the insured. Mere non-action by the insured is generally insufficient to establish non-cooperation unless the inference of non-cooperation is practically compelling.

Facts

Empire Mutual sought arbitration under the uninsured motorist provision of its policy, due to an accident involving an alleged tortfeasor insured by Boston Old Colony. Boston Old Colony attempted to disclaim liability, alleging non-cooperation by its insureds (the tortfeasors) after the accident. The claimant’s attorney provided timely notice of the accident. The insurer’s adjuster sent multiple letters to the owner and operator of the other vehicle over five months. Registered mail copies were returned undelivered, while regular mail copies were not returned. The adjuster visited the insureds’ addresses, left cards, and communicated with the insured’s broker and the Motor Vehicle Department. Independent investigators located the insureds’ address and left messages, but received no response.

Procedural History

The case reached the Appellate Division, which the Court of Appeals affirmed. The lower courts found that Boston Old Colony had not met its burden to prove non-cooperation justifying a disclaimer of liability. The Court of Appeals reviewed the evidence presented by the insurer and determined it was insufficient to demonstrate the insured’s willful obstruction.

Issue(s)

1. Whether the issue of whether the alleged tort-feasors were insured falls within the scope of arbitration?
2. Whether Boston Old Colony Insurance Company presented sufficient evidence to justify disclaiming liability based on the insured’s non-cooperation?

Holding

1. No, because under New York precedent, the claimant’s insurance company was entitled to a prior judicial determination as to the validity of the disclaimer before arbitration.
2. No, because the insurer failed to demonstrate both diligent efforts to obtain the insured’s cooperation and a willful and avowed obstruction by the insured.

Court’s Reasoning

The court emphasized the heavy burden placed on the insurer to prove non-cooperation, citing Insurance Law § 167(5) and Thrasher v. United States Liab. Ins. Co., 19 N.Y.2d 159, 168. The court stated that the insurer must demonstrate both diligent efforts to bring about the insured’s cooperation and that the insured’s attitude was one of “willful and avowed obstruction.”

The court found that the insurer’s efforts, while extensive, did not establish non-cooperation. The court reasoned, “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.”

The court acknowledged that non-action could, in some circumstances, evidence a lack of cooperation, but emphasized that “the inference of non-co-operation must be practically compelling.” The court concluded that the evidence presented was insufficient to meet this high standard. The court also noted that the fact that the risk was an assigned risk did not relieve the insurer of its burden of proof.