On January 8, 2015, in Travelers Indem. Co. v. Orange & Rockland Utilities, Inc., the New York Appellate Division upheld a decision finding that Orange & Rockland Utilities Inc.’s notice to Travelers Indemnity Co. of potential environmental liabilities was late as a matter of law. As a result, Travelers was not required to provide coverage under ORU’s insurance policies.

ORU first notified Travelers of potential environmental liabilities at its former manufactured gas plants on April 14, 1995. Travelers argued that ORU was sufficiently aware of its potential liability from at least 1981 when ORU notified the Environmental Protection Agency that three of its plants contained possible contamination from its operations. Travelers also presented numerous reports and evidence of regulatory interactions from 1981 until 1995 demonstrating that ORU should have been aware of a reasonable possibility that the Travelers’ policies would be implicated.

The appellate panel agreed that ORU did not give timely notice under the policies. The Court highlighted ORU’s “willful failure to investigate, i.e. its apparent strategy of waiting to be directed by the appropriate regulatory agencies to investigate the sites and remediate pollution, despite the overwhelming evidence of potential contamination.”

Under New York law, compliance with the notice provisions of a liability insurance policy is required for coverage and is triggered by the insured’s “awareness of a reasonable possibility that the policy will be implicated.” Absent a valid excuse, an insurer may deny coverage based on untimely notice. Unlike most jurisdictions, New York does not also require showing that the insurance carrier was somehow prejudiced by the late notice. By contrast, in New Jersey, an insurer must establish “appreciable prejudice from late notice to avail itself from this defense.” See Chemical Leaman Tank Lines, Inc. v. Aetna Cas. and Sur. Co., 89 F.3d 976 (3d Cir. 1996).

As the decision in Travelers Indem. Co. demonstrates, timely notice of a claim may be a critical issue in coverage determinations. Policyholders should take care to provide notice in accordance with their insurance policy terms and as soon as possible after learning of a possible claim.