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NEW LAW ESTABLISHES
'NO PREJUDICE' RULE
IN NEW YORK STATE

New York Gov. David Paterson recently signed a bill prohibiting insurers from denying a claim simply because an insured failed to provide timely notice of the claim.

As reported in the Spring 2008 edition of AAIS's Viewpoint magazine, New York had been the last major jurisdiction to hold that timely notice was a "condition precedent" to coverage. Under that rule, insureds could lose their coverage if they failed to meet contractual conditions for reporting a claim.

Under the recent New York law, if an insured under an occurrence form reports a liability claim within two years of its occurrence, the insurer must provide coverage unless it can demonstrate that a delay in reporting the claim prejudiced the insurer's ability to defend against it.

If a claim is reported more than two years after the occurrence, then the law shifts that burden of proof to the insured or other claimant, who must demonstrate that the insurer was not prejudiced by the delay.

Regarding claims-made policies, the law specifies that claim-made policies may require that claims be reported within the policy period, a renewal policy period, or any extended reporting period.

Among other things, the Viewpoint article reported on a small but growing tendency for states to require that the "no prejudice" standard be written into insurance contracts. The latest New York law explicitly requires a provision in occurrence forms specifying that failure to give notice shall not invalidate a claim unless the failure prejudiced the insurer.

With the latest law, effective Jan. 19, 2009, the "no prejudice" rule is effectively the law of the land, but with some variations from jurisdiction to jurisdiction as to who bears the burden of proving prejudice.

Update on Aug. 18: The new law applies to policies issued on or after Jan. 19, 2009, so the "condition precedent" standard may still apply to policies issued prior to that date.

AAIS STAFF AVAILABLE AT
UPCOMING INDUSTRY EVENTS

AAIS staff members will be in attendance at several upcoming industry events:

• Sherry Taylor, manager of farm and agribusiness, will give a presentation at the annual meeting of the Illinois Association of Mutual Insurance Companies, Aug. 17-19 in Peoria, Ill. Rick Maka, director of marketing, will also be at the event.
  
  Sherry Taylor and Rick Maka will also attend the Midwest Agribusiness Conference, Oct. 22-23 in Des Moines, Iowa.

• Paul Baiocchi, president, Joyce Tignino, vice president of marketing and industry relations, and Joseph Harrington, director of corporate communications, will be at booth #603 at the annual meeting of the CPCU Society, Sept. 6-8 in Philadelphia.

• Rick Maka will be at the annual convention of the Wisconsin Association of Mutual Insurance Companies, Sept. 14-16 in LaCrosse, Wis.

• Paul Baiocchi, Joyce Tignino, and Rick Maka will be at booth #500 at the annual convention of the National Association of Mutual Insurance Companies, Sept. 28-Oct. 1 in Philadelphia.

• Robert Guevara, vice president of inland marine, will speak at the annual conference of the Association of Insurance Compliance Professionals, Oct. 5-8 in Atlanta, Ga. Joyce Tignino and AAIS compliance staff members Laura Lemke and Pahlavi Shah will also be in attendance at booth #117.

ESSAY DISCUSSES HOMEOWNERS COVERAGE
FOR ON-ROAD USE OF GOLF CARTS

The consumer media is reporting that a growing number of  people are using golf carts for short trips as a way to save on gasoline. Local officials are reportedly promoting the trend by granting permits for limited use of golf carts on public roads and pathways.

An essay by AAIS explains that consumers may not always be aware  that their homeowners insurance may provide little if any liability coverage for bodily injury or property damage that results from their use of golf carts as a means of transportation.

MARYLAND REQUIRES WRITTEN OFFER
OF SEWER BACKUP COVERAGE

As of Oct. 1, 2008, companies writing homeowners insurance in Maryland must provide written notice that sewer backup coverage is available.

Even before this year, Maryland insurance law required homeowners insurers to offer coverage for loss resulting from water that backs up through sewers and drains and is not caused by the negligence of the insured.

A recent bulletin from the Maryland Insurance Administration reminds homeowners carriers that a 2008 statute specifies that the offer must be part of the application form or on a separate form retained as part of the application records. Either way, the offer must be made upon the initial application and each subsequent renewal, and it must be made in a way that requires the applicant to clearly accept or reject the offer.

Carriers cannot satisfy the requirement by simply including sewer backup coverage on a list of optional coverages.