New York City, New York (NewYorkInjuryNews.com) — On July 21, 2008, New York State Governor David Paterson signed into law a piece of insurance legislation called the Declaratory Judgment/No Prejudice Bill.
This law, which takes effect on January 19, 2009, will largely eliminate New York’s archaic and unfair “forfeiture rule”. This rule allowed an insurance company, which had been collecting premiums, to disclaim coverage to its insured if it received “late” notification of a claim, even if it had not suffered an iota of prejudice by reason of the purported delay. Thus a defendant who has a claim made against him or her or faces a lawsuit forfeits all coverage just on the insurance company’s assertion that the claim was reported late.
In the past, insurance companies routinely took advantage of this rule by disclaiming coverage because of late notice and left countless New York policyholders without the protection they assumed they paid for and as a result often left the injury party without adequate, if any, compensation for their injuries.
Under this new law, an insurer will not be allowed to deny coverage for late notice unless it can demonstrate that it was materially prejudiced by the delay.
Additionally, in the past, an injured party would have to litigate their underlying personal injury action all the way to verdict and judgment before a determination could be made as to the validity of an insurer’s disclaimer.
This new law will expedite this process and reduce the strain on judicial resources by allowing the injured party to bring a declaratory judgment action directly against the disclaiming insurance company early on during the litigation of the underlying case.
This new law will thus provide for a far more equitable and expeditious determination of any issues related to insurance coverage where a defendant’s insurer seeks to disclaim on the grounds of alleged untimely notice.
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Contributor – Nicholas Papain – New York Personal Injury Attorney and NYC Trial Lawyer
