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Timeliness Required Under Direct Action Statute (NY)

May 27, 2016

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<p style="text-align: justify;">New York Insurance Law § 3420(a)(2) allows an injured party who has an unsatisfied judgment to file suit against that parties insurance company - but certain conditions still need to be met.</p>
<p style="text-align: justify;">Seville Electronics sued D.P. Holding to recover damages suffered in a fire.  The parties agreed to a settlement for more than $800,000 that included a confession of judgment.  In <a href="http://In Mt. Hawley Ins. Co. v. Seville Elecs. Trading Corp., in the underlying case"><em>Mt. Hawley Ins. Co. v. Seville Elecs. Trading Corp.</em></a>, D.P. Holding's insurer, brought a declaratory judgment action seeking a declaration that it was not obligated to provide coverage and Seville filed a counterclaim pursuant to the Insurance Law to recover the amount of the unsatisfied judgment in the underlying action.</p>
<p style="text-align: justify;">Plaintiff moved for summary judgment dismissing the counterclaim, which the court denied. On appeal, the Appellate Division, 2nd Department,  found that although Insurance Law § 3420 does allow for recovery of an unsatisfied judgment, it requires that the injured party demonstrate that they acted diligently in ascertaining the identity of the insurer and then notifying that insurer in an expeditious manner. Here, because Seville failed to act diligently in expeditiously notifying the insurer of the judgment, the appellate court reversed the Supreme Court’s order.</p>
<p style="text-align: justify;">Thanks to Josh Gornitsky for his contribution to this post and please write to <a href="mailto:">Mike Bono </a>for more information.</p>


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