When an insurance company decides to disclaim coverage it has to be very careful about timing the notice and the substance of the disclaimer. Courts have been generally strict in finding that a carrier’s failure to specify a ground for disclaimer precludes the carrier from raising that ground subsequently as an affirmative defense in a coverage action. Disclaimers based on late notice add additional complexity given the carrier’s need to demonstrate prejudice in many states.
In a recent coverage case in New York, a carrier sought to amend its answer to assert the affirmative defense of late notice. The motion court granted the carrier’s motion, but on appeal, the appellate court reversed, holding that the carrier waived its right to assert the late notice defense. The carrier appealed, and the New York Court of Appeals reversed and reinstated the motion court’s order allowing the answer to be amended to assert the affirmative defense of late notice.