On January 17, 2012, the Supreme Court of the State of New York, Appellate Division, First Department, declined to follow and expressly overruled the insurance rule adopted in DiGuglielmo v. Travelers Prop. Cas., 6 A.D.3d 344 (N.Y. App. Div. 1st Dep’t 2004). The DiGuglielmo rule stated that “[a]n insurer is not required to disclaim on timelines grounds before conducting a prompt, reasonable investigation into other possible grounds for disclaimer.” Id. at 346.
In George Campbell Painting v. National Union Fire. Ins. Co., 2012 NY Slip Op 00254 (N.Y. App. Div. 1st Dep’t 2004), relying on the language of Insurance Law § 3420(d) (requiring a liability insurer to give the insured or the injured person written notice of disclaimer of a personal injury claim “as soon as is reasonably possible”), the court decided that the DiGuglielmo rule was contrary to the plain language of the statute, inconsistent with the Court of Appeals precedent interpreting the statute, and adverse to the statute’s intended purpose.
Overall, the court saw no reason in allowing insurance companies with knowledge of grounds to reject a claim to delay notifying the insured that the claim will be denied: “[J]ust as we would not permit the insured to delay giving the insurer notice of claim while investigating other possible sources of coverage, we should not permit the insurer to delay issuing a disclaimer on a known ground while investigating other possible grounds for avoiding liability.”
The new rule in New York, therefore, is that an insurer with knowledge of a valid ground for a disclaimer cannot delay issuing the disclaimer by further investigating other possible grounds for disclaiming.