Weeks Marine, a member of non-profit mutual insurance association, American Club, brought suit seeking a declaration that it had complied with the terms of its insurance contract and seeking damages. One of Weeks’s former employees had suffered a concussion at work and sued Weeks. Weeks defended the claim on its own; American Club only learned of it after a jury rendered a $3.7 million plaintiff’s verdict. The certificate evidencing the relationship between Weeks and American Club provided that Weeks was responsible for investigation, settlement, and defense of claims, but required Weeks to give prompt notice of claims to American Club.
American Club defended against Weeks’s coverage suit, arguing that governing New York law provided that Weeks’s late notice, even absent a showing of prejudice, vitiated the contract. This late notice rule, however, did not apply to reinsurance agreements. Weeks argued that its relationship with American Club was like a reinsurance contract because Weeks had the duty to investigate and resolve claims and, further, Weeks had self-insured the first million dollars of risk. The court rejected this argument, reasoning that the contract was not sufficiently like a reinsurance contract for the exception to the late notice rule to apply. The court therefore granted summary judgment for American Club, based upon Weeks’s late notice of the claim. Weeks Marine, Inc. v. Am. Steamship Owners Mut. Prot. & Indem. Ass’n, Inc., Case No. 08-9878 (USDC S.D.N.Y. Aug. 25, 2011).
This post written by Ben Seessel.