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Insurance Coverage/Maritime

Our client, an insurance company, issued a charterer's legal liability policy to the insured, a charterer transporting a cargo of gypsum drywall boards from China to Florida. The cargo shifted during the voyage, causing the charterer to incur liability for damage to the cargo and vessel. While the charterer promptly notified our client of the occurrence, it waited several months to notify our client of lawsuits commenced by the cargo and vessel interests. The charterer commenced a declaratory judgment action against our client seeking a declaration of coverage. Following discovery, we moved for summary judgment on behalf of our client on the ground that late notice of the lawsuits was a valid basis to disclaim insurance coverage and that there was no requirement to show prejudice. The District Court granted our motion and, in affirming the District Court's decision, the Second Circuit adopted our position that under New York law our client was not required to show prejudice in order to decline coverage on the grounds of late notice of the lawsuit even though notice of the occurrence was timely. Notably, in a footnote to its decision, the Court of Appeals also agreed with our position that recently enacted provisions of the New York Insurance Law, §§ 3420(a)(5) and 3420(c)(2)(A), which require a showing of prejudice in order to disclaim insurance coverage on the grounds of late notice, was not applicable to maritime insurance policies. Pactrans Air & Sea Inc. v. New York Marine & General Insurance Co., 2010 U.S. App. LEXIS 14971 (2d Cir. 2010)