IS FIVE YEARS “TIMELY NOTICE”?

Commercial General Liability	Bankruptcy
Summary Judgment	Timely Notice

Debra Kalthoff was injured when she slipped and fell on premises leased by Casual Male, Inc. (Casual Male). Kalthoff and her husband filed a personal injury suit against Casual Male in 2001. However, the company filed for bankruptcy shortly thereafter and the lawsuit was put on hold. In May 2004, a stipulation was entered that allowed the Kalthoffs to proceed against Arrowood to obtain proceeds from the liability policy.

At the time of the accident, Casual Male was insured under a liability policy issued by Arrowood Indemnity Company (Arrowood). Despite the fact that it knew about the incident, Casual Male did not inform Arrowood of the incident. In October 2004, the Kalthoffs sent a letter to Arrowood informing it of the incident and their claims. Arrowood disclaimed coverage because it stated that it did not receive prompt notice of the incident and the lawsuit.

The Kalthjoffs ultimately obtained a default judgment against Casual Male. In June 2008, after an inquest, the Kalthoffs were awarded almost $812,000. Arrowood refused to pay and the Kalthoffs filed a declaratory judgment action that sought payment of the default judgment. Arrowood moved for summary judgment to dismiss the complaint. The Kalthoffs cross-moved for summary judgment. They argued that Arrowod’s disclaimer of coverage was not effective against them. The New York Supreme Court ruled in favor of the Kalthoffs and Arrowood appealed.

On appeal, Arrowood asserted that the Kalthoffs knew that Casual Male had a liability policy with Arrowood in February 2003 and that they did not notify Arrowood until October 2004.

The Kalthoffs argued that the complicated facts and circumstances of their case as a result of the bankruptcy excused them from the burden of demonstrating that their delay was reasonable.

The Supreme Court, Appellate Division, Third Department, New York disagreed. It held that the Kalthoffs’ “professed confusion regarding the applicable law to be insufficient as a matter of law to constitute a reasonable excuse for their delay in notifying defendant of the accident and their claims.” The appellate court concluded it could not find that the Kalthoffs’ efforts to provide timely notice were reasonable.

The lower court’s decision was reversed and the complaint against Arrowood dismissed.

Kalthoff vs. Arrowood Indemnity Company. Supreme Court, Appellate Division, Third Department, New York. May 3, 2012. 2012 WL 1537575