The Court combined two appeals involving disputes over notice of claim provisions for underinsured motorist coverage. Underinsurance coverage is designed to increase the level of protection afforded to policyholders injured by negligent drivers who lack adequate liability insurance. The policy from the Nationwide Insurance Company ("Nationwide") required notice of claims for underinsurance benefits to be filed "as soon as practicable". The Metropolitan Property and Casualty Company policy ("Metropolitan") required written notice "within 90 days or as soon as practicable." The Metropolitan policy did not specify the starting point of the ninety-day countdown.

DiGioacchino/Nationwide Claim

DiGioacchino's claim arose out of a December 1994 accident. The Plaintiff filed his claim for first party (no fault) benefits immediately after the accident with Nationwide, who was the insurer for both motorists. However, the Plaintiff filed the claim for underinsurance only after learning on October 23, 1996, during settlement talks, that the tortfeasor had a $25,000 policy limit. When Nationwide refused to pay, citing untimely notice, the appellant served Nationwide with a demand for arbitration. Nationwide responded by bringing a proceeding in supreme court for a permanent stay of arbitration. The Supreme Court granted the stay and the Appellate Division subsequently affirmed.

Mancuso/Metropolitan Claim

Mancuso's claim originated from a May 1993 accident. Mancuso also immediately filed a claim with the insurer, Metropolitan, for first party (no fault) benefits. However, Mancuso only learned of the tortfeasor's insufficient coverage on May 30, 1996, eight months after commencement of a personal injury. The Plaintiff then filed a notice of claim for underinsurance with Metropolitan six days after learning this fact. Metropolitan also denied coverage because of the untimely notice. The Plaintiff served the insurer with a demand for arbitration. Metropolitan, in response, brought a proceeding in Supreme Court for a permanent stay. The Supreme Court granted the stay for Metropolitan and the Appellate Division subsequently affirmed.

Whether the insured may be denied coverage where the policy for underinsurance provides for notice to be given "as soon as practicable" or "within 90 days or as soon as practicable" and the insured gave notice after the insured learned that the tortfeasor was underinsured.

Yes. Underinsurance coverage may be denied since the notice of the claim period is calculated from the date the claimant knew, or reasonably should have known, that the tortfeasor was underinsured.

State of the Law Before Metropolitan

Underinsurance coverage provides the insured with the same level of protection as that purchased by the insured to protect against liability. See Insurance Law § 3420 (f)(2); See also In re Prudential Property & Cas. Co. v. Szeli, 83 N.Y.2d 681, 687 (N.Y. 1994). Reasonable notice to the insurance provider is a condition precedent to a cognizable underinsurance claim. See White v. N.Y.C., 81 N.Y.2d 955, 957 (N.Y. 1993). Many insurance policies provide for reasonable notice, "as soon as practicable." New York courts previously clarified this standard by specifying notice "within a reasonable time under all the circumstances." See Deso v. London & Lancashire Indem. Co. of America, 2 N.Y.2d 127, 129 (N.Y. 1957); see also Matan v. Nationwide Mut. Ins. Co., 243 A.D.2d 978 (N.Y. App. Div. 1997) (finding reasonable notice where the insured sends written notice before knowing the actual policy limits).

Many insurance policies, however, left unclear what triggers the notice requirement. See In re Arbitration between Travelers Ins. Co. v. Duaria, 224 A.D.2d 259 (N.Y. App. Div. 1996) (finding timely notice where claimant sent notice shortly after learning tortfeasor had limited policy coverage); see also In re Travelers Ins. Co. v. Morzello, 221 A.D.2d 291 (N.Y. App. Div. 1995) (finding 90 day period did not begin to run until claimant became aware that tortfeasor was underinsured).

The burden of proof is on the insured to prove that any delay was reasonable. See White, 81 N.Y.2d at 957 ("There may be circumstances, such as lack of knowledge that an accident has occurred or a reasonable belief in nonliability, that will excuse or explain delay in giving notice, but the insured has the burden of showing the reasonableness of such excuse.") (citing Sec. Mut. Ins. Co. of N.Y. v. Acker-Fitzsimmons Corp. et al., 31 N.Y.2d 441 (N.Y. 1972)). The White court, however, found that where a reasonable person could envision liability, the insured has a duty to make some inquiry. White, 81 N.Y.S.2d at 955 (finding New York City Housing Authority had not reasonably delayed in reporting the claim to insurance provider where four-year-old girl fractured skull on a playground and required six days of hospitalization).

Effect of Metropolitan on Current Law

The Nationwide policy required a claimant to provide notice of an underinsurance claim "as soon as practicable". The Court specified that notice must be given with reasonable promptness after the insured knew or reasonably should have known that the tortfeasor was underinsured. The Court further stated that an objective standard will be used to determine what constitutes "reasonable ascertainment." Whether the insured provided notice "as soon as practicable" will be determined in light of the circumstances surrounding each individual case. The Court of Appeals affirmed the lower courts' decision to grant the permanent stay of arbitration since the ten month period that elapsed between the accident and the underinsurance claim was too lengthy under the circumstances to amount to notice provided "as soon as practicable." The Metropolitan policy required notice "within ninety days or as soon as practicable". The policy, however, did not indicate what triggers the ninety day period. The Court stated that when an insurance provider drafts ambiguously-worded provisions, and attempts to limit its liability by relying on those provisions, the court will interpret the language in a manner more favorable to the insured. The Court indicated that the claimant could file a claim within ninety days from the date he knew or reasonably should have known of the tortfeasor's insufficient coverage. The Court, however, affirmed the decision of the Appellate Division because the claimant should reasonably have known of the tortfeasor's insufficient coverage earlier than fourteen months after the commencement of the personal injury action, and three years after the accident.

In the future the insurance requirement that notice be provided "as soon as practicable" will be interpreted to mean that notice must be given with reasonable promptness after the insured knew or reasonably should have known.

Unanswered Questions

The Court of Appeals affirmed both decisions to grant the permanent stay of arbitration, but failed to provide analysis of why either time period is unreasonable. The Court expanded the notion of what constitutes reasonable notice, but did not outline a framework for determining whether a period of time to request underinsurance is reasonable. The Court also does not explain the relative importance of the multiple factors relevant to the reasonableness determination. These factors include the seriousness and the nature of the insured's injuries, the potential liability of multiple parties, and the extent of the tortfeasor's coverage. While the Court calls for case by case analysis, it does not indicate any method of weighing the factors or provide a balancing framework. Another issue left unanswered is whether it is significant if the same insurance provider represents the tortfeasor and the insured. Nationwide represented the tortfeasor and DiGioacchino, yet the Court still finds that there was unreasonable delay in providing notice. It seems that there should not be a notice issue since the same provider represented both parties.

Survey of the Law in Other Jurisdictions

The Court's interpretation of the insurance policy's provisions for notice "as soon as practicable" and "within 90 days or as soon as practicable" is consistent with the interpretation of a number of other courts.

In Texas, the phrase "as soon as practicable" means within a reasonable time. See Duzich v. Marine Office of America Corp. 980 S.W.2d 857, 866 (Tx. Civ. App. ú Corpus Christi 1998). The Texas Court of Appeals also believes that rea.sonable time depends on the circumstances of each case. Id.

The California Court of Appeals wrote that, generally, "as soon as practicable" requires notice that is prompt and given within a reasonable time under the circumstances. Pacific Employers Ins. Co. v. Superior Court of Los Angeles County, 221 Cal. App. 3d 1348, 1356, 270 Cal. Rptr. 779, 782 (Cal. Ct. App. 1990). In Illinois, the insured's duty to give notice for excess coverage does not ripen until the insured believes that it is reasonably likely that there is a claim for excess coverage. Atlanta Int'l Ins. Co. v. Checker Taxi Co. Inc., 574 N.E.2d 22, 26 (Ill. App. Ct. 1991) (finding the insurer liable for excess coverage where the insured did not give notice until two years after an automobile accident that led to a wrongful death action).

Some courts consider the prejudice of the delay to the insurer in evaluating the timeliness of the notice. See Pacific Employers Ins. Co. v. Superior Court of Los Angeles County, 221 Cal. App. 3d 1348, 1356, 270 Cal. Rptr. 779, 782 (Cal. Ct. App. 1990) (referring to California's "notice-prejudice" rule that "bars insurance companies from disavowing coverage on the basis of lack of timely notice unless the insurance company can show actual prejudice from the delay"). In Indiana, the court interpreted "as soon as practicable" to require notice within a reasonable time after the accident or loss, and then considered a rebuttable presumption that delayed notice prejudices the insurer. Sutton v. Littlepage, 669 N.E.2d 1019, 1023 (Ind. Ct. App. 1996) (holding that a two year delay in notice because of negotiations did not prejudice the insurer).

A Massachusetts court wrote that an insurance company might deny underinsurance benefits because of the injured party's delay in providing notice only if such a delay prejudices the insurer. Lighter v. Lumbermens Mutual Casualty Ins. Co. 683 N.E.2d 297, 299 (Mass. App. Ct. 1997) (granting underinsurance benefits where the insured did not notify the carrier for two years and nine months). It held the insurer carries the burden of showing that the delay materially prejudiced it. Id.