New York Law Review

Tag: non-cooperation

  • Country-Wide Ins. Co. v. Preferred Trucking Services Corp., 22 N.Y.3d 571 (2014): Timeliness of Disclaimer for Non-Cooperation

    Country-Wide Ins. Co. v. Preferred Trucking Services Corp., 22 N.Y.3d 571 (2014)

    An insurer’s disclaimer of coverage based on an insured’s non-cooperation must be made within a reasonable time after it is clear that further attempts to elicit the insured’s cooperation would be futile, and the reasonableness of the delay is evaluated on a case-by-case basis.

    Summary

    Country-Wide Insurance sought a declaratory judgment that it had no duty to defend or indemnify Preferred Trucking and its driver, Arias, in a personal injury lawsuit due to their failure to cooperate. The New York Court of Appeals held that Country-Wide’s disclaimer was timely because, despite diligent efforts, Arias’s lack of cooperation wasn’t clear until shortly before the disclaimer. The court emphasized that insurers must be given reasonable latitude to secure cooperation before disclaiming coverage, especially when initial non-compliance is followed by sporadic promises of cooperation. This case underscores the insurer’s heavy burden to demonstrate diligent efforts to secure the insured’s cooperation before issuing a disclaimer.

    Facts

    Gallina sued Preferred Trucking and its driver, Arias, for personal injuries. Country-Wide, Preferred Trucking’s insurer, repeatedly tried to contact the company’s president, Markos, and Arias, without success. Plaintiffs sought a default judgment, prompting Country-Wide’s initial notice of potential disclaimer. Markos briefly expressed willingness to cooperate but remained unreachable. Despite ongoing efforts, Arias only became reachable several months later. After initially promising cooperation, Arias later stated he did not care about the deposition date. Country-Wide then disclaimed coverage based on non-cooperation.

    Procedural History

    The Supreme Court struck the defendant’s answer, awarded judgment to the Gallinas, and directed an assessment of damages. Country-Wide then sued for a declaration that it had no duty to defend or indemnify. The Supreme Court declared Country-Wide obligated to indemnify Preferred Trucking but not Arias. The Appellate Division affirmed, finding the disclaimer untimely. The Court of Appeals reversed, holding the disclaimer was timely.

    Issue(s)

    Whether Country-Wide’s disclaimer of coverage, issued approximately four months after its initial awareness of potential non-cooperation, was timely under New York Insurance Law § 3420(d)(2), given its ongoing efforts to secure the insured’s cooperation.

    Holding

    No, because Country-Wide acted reasonably in continuing its efforts to secure Arias’s cooperation, and the insured’s lack of cooperation only became definitively clear shortly before the disclaimer was issued.

    Court’s Reasoning

    The Court of Appeals emphasized that Insurance Law § 3420(d)(2) requires insurers to disclaim coverage “as soon as is reasonably possible.” However, timeliness is case-specific, especially when disclaiming for non-cooperation, which “is often not readily apparent” (Continental Cas. Co. v Stradford, 11 NY3d 443, 449 [2008]). The Court reiterated that insurers should disclaim only after it’s clear that further attempts to elicit cooperation will be futile. The court highlighted the insurer’s “heavy” burden to show it acted diligently in seeking cooperation and that the insured’s attitude was one of “willful and avowed obstruction” (Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168 [1967]). Here, the delay was justified because Arias, the driver, initially promised cooperation after prior unresponsiveness. His ultimate unwillingness to cooperate became clear only shortly before the disclaimer. The Court reasoned that as long as Country-Wide was seeking Arias’s cooperation in good faith, it could not disclaim.

  • In re Empire Mutual Insurance Co., 36 N.Y.2d 719 (1975): Insurer’s Burden to Prove Non-Cooperation for Disclaimer

    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.