Amendment to New York Insurance Law Requires Insurers to Prove Prejudice in Order to Deny Coverage for Late Notice

On July 23, New York Governor David A. Paterson approved a revision to New York’s Insurance Law heralding important and long-awaited changes in favor of policyholders.

The new law revises Section 3420 of New York’s Insurance Law bringing it into line with the majority of states which require a liability insurer to prove that it has been prejudiced by late notice in order to deny coverage on that basis. Previously, an insurer could avoid coverage if it could demonstrate that the insured had provided untimely notice. Now, if an insurer receives notice of a claim by or on behalf of an insured within two years of that claim, the insurer cannot avoid its duty to defend unless it can prove that it has been prejudiced by the late notice.

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