Rule Followed by NY Federal Court for Damages Outside NY

Indian Harbor Insurance Company v. The City of San Diego  (Case No. 12-cv-5787) (S.D.N.Y., September 25, 2013)

A New York federal court continued to honor the line of New York cases that stand for the proposition that a showing of prejudice is not required for the late notice defense on policies issued or delivered prior to January 17, 2009. This case arose as a result of multiple underlying claims made against a California State municipality by two homeowners associations and a real estate construction company.  Among those claims included allegations that sewer gases containing hydrogen sulfide were migrating from the City’s sewer main along a highway into building systems, causing property damages. The particular policy in this case was a pollution and remediation legal liability insurance policy, which included the requirement that the policyholder give notice “as soon as practicable.”  Notice in the underlying actions was not given until 31 months, 12 months and 2 months after the municipality received notice of the claim.  The policy also contained a New York choice-of-law provision. The court disagreed with the policyholder’s argument that the New York choice-of-law provision was unconstitutional because the parties were free to decide on the matter.  It further found that the time of delay in each case was sufficiently late and that because New York law applied, and because the policy at issue was issued prior to January 17, 2009, a showing of prejudice was not required.

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