States differ in how they treat situations where an insured has not timely notified its insurer after an accident, claim, or loss. While the majority of states apply the "noticeprejudice" rule (which requires an insurer to show that the late notice prejudiced it before it can disclaim coverage), a minority of states apply the common law "noprejudice" rule, which allows an insurer to disclaim coverage after late notice, regardless of whether it has been prejudiced. Until recently, New York State was one of the most zealous adherents to the no-prejudice rule, rigidly applying it and ignoring the often inequitable results. However, recently passed legislation has changed New York's approach to late notice and brought it closer to the majority position by requiring the use of the notice-prejudice rule in liability policies.
This Note examines the various approaches that states use to address late notice, with a particularf ocus on late notice in New York and the recent change in New York's law. New York occupies a uniquely influential position on insurance practices. As a result, New York's abandonment of the no-prejudice rule is likely to have an impact far beyond its borders. While the recent legislation is certainly a step in the right direction, this Note argues that it contains a number of provisions, which may prove to be problematic, and provides suggestions as to how courts should interpret them. Specifically, these provisions are: (r) the law's limited application to liability policies only, (2) how the law allocates the burden of showing prejudice, (3) the law's definition of prejudice, and (4) potential retroactive application of the law.
"No-Prejudice" No More: New York and the Death of the No-Prejudice Rule,
61 Hastings L.J. 497
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