88 N.Y.2d 836 (1996)

An insurer must provide written notice of disclaimer as soon as reasonably possible after learning of the accident or grounds for disclaimer, and failure to do so precludes an effective disclaimer.

Summary

Firemen’s Fund sought to stay arbitration of an uninsured motorist claim, arguing the claimant, Hopkins, failed to provide timely notice of the accident. Hopkins was injured in 1989, but didn’t notify Firemen’s Fund until 1992. The Court of Appeals affirmed the Appellate Division’s order to proceed to arbitration, holding that Firemen’s Fund failed to disclaim coverage in a timely manner. The court emphasized the insurer’s duty to promptly notify the claimant of its intent to disclaim coverage and that an unexplained delay can result in the waiver of the right to disclaim.

Facts

Hopkins sustained injuries in 1989 as a passenger in a friend’s car, allegedly caused by an unknown individual who forcibly took control of the vehicle. Almost three years later, in June 1992, Hopkins notified Firemen’s Fund of his intent to file an uninsured motorist claim under his father’s policy, asserting the vehicle was stolen at the time of the accident. Firemen’s Fund requested details about the accident and an explanation for the delay. Hopkins provided the requested information in October 1992 but offered no explanation for the delay. Firemen’s Fund did not respond until Hopkins served a notice of intention to arbitrate.

Procedural History

Firemen’s Fund initiated a CPLR article 75 proceeding to permanently stay arbitration. Supreme Court granted the stay. The Appellate Division reversed, dismissed the petition, and directed the parties to arbitration. Firemen’s Fund appealed to the Court of Appeals.

Issue(s)

Whether Firemen’s Fund effectively disclaimed coverage for the uninsured motorist claim, given the delay between receiving notice of the claim and initiating proceedings to stay arbitration.

Holding

No, because Firemen’s Fund failed to provide timely notice of disclaimer after becoming aware of grounds for disclaimer, precluding an effective disclaimer.

Court’s Reasoning

The court relied on the principle that an insurer must give written notice of disclaimer “as soon as is reasonably possible after it first learns of the accident or of grounds for disclaimer of liability.” The court highlighted that failure to do so “precludes effective disclaimer” (citing Hartford Ins. Co. v County of Nassau, 46 N.Y.2d 1028, 1029 (1979)). Firemen’s Fund should have been aware the claim was untimely upon receiving Hopkins’ notification in June 1992. The court noted that Firemen’s Fund did not send a notice of disclaimer; instead, the intent to disclaim was only communicated in the February 1993 petition to stay arbitration. This was nearly eight months after the initial notice and four months after receiving the complete record, which was deemed an unreasonable delay. The court dismissed Firemen’s Fund’s attorney’s claim that the claim was denied earlier due to a lack of evidentiary support. The court effectively applied a strict interpretation of the prompt disclaimer requirement, placing the onus on the insurer to act swiftly upon awareness of potential grounds for denial. The ruling reinforces the policy that insurers must act promptly to avoid prejudicing claimants who may rely on coverage. The Court emphasized the importance of insurers providing timely notice of disclaimer, or else they will be barred from asserting the defense of late notice. In effect, the insurance company waived the right to deny coverage based on late notice by failing to promptly communicate its disclaimer.