KeySpan Gas East Corporation, Respondent,v.Munich Reinsurance America, Inc. et al., Appellants.BriefN.Y.May 6, 2014To be Argued by: JONATHAN D. HACKER Pro Hac Vice (Admission Pending) (Time Requested: 30 Minutes) New York County Clerk’s Index No. 604715/97 Court of Appeals of the State of New York LONG ISLAND LIGHTING COMPANY, Plaintiff, – and – KEYSPAN CORPORATION, Plaintiff-Respondent, – against – ALLIANZ UNDERWRITERS INSURANCE COMPANY, CERTAIN UNDERWRITERS OF LLOYD’S AND LONDON MARKET INSURANCE COMPANIES, CONTINENTAL CASUALTY COMPANY, DAIRYLAND INSURANCE COMPANY, FIRST STATE INSURANCE COMPANY, (For Continuation of Caption See Inside Cover) JOINT BRIEF FOR DEFENDANTS-APPELLANTS JONATHAN D. HACKER, ESQ. O’MELVENY & MYERS LLP 1625 Eye Street, NW Washington, DC 20006 Tel.: (202) 383-5300 Fax: (202) 383-5414 LAWRENCE A. NATHANSON, ESQ. SIEGAL & PARK 533 Fellowship Road, Suite 120 Mount Laurel, New Jersey 08054 Tel.: (856) 380-8900 Fax: (856) 380-8901 JOHN L. ALTIERI, JR., ESQ. BOUTIN & ALTIERI, P.L.L.C. P.O. Box 630 Carmel, New York 10512 Tel.: (845) 306-7076 Fax: (866) 585-9604 Attorneys for Defendant-Appellant Century Indemnity Company (For Continuation of Appearances See Inside Cover) APL 2013-00216 Date Completed: October 7, 2013 GAN NATIONAL INSURANCE COMPANY, GENERAL REINSURANCE CORPORATION, HIGHLANDS INSURANCE COMPANY, HOME INSURANCE COMPANY, NORTH STAR REINSURANCE CORPORATION, PROTECTIVE NATIONAL INSURANCE COMPANY OF OMAHA, REPUBLIC INSURANCE COMPANY, UNITED STATES FIRE INSURANCE COMPANY and ASSOCIATED ELECTRIC & GAS INSURANCE SERVICE LIMITED, Defendants, – and – AMERICAN RE-INSURANCE COMPANY, CENTURY INDEMNITY COMPANY and NORTHERN ASSURANCE COMPANY OF AMERICA, Defendants-Appellants. –––––––––––––––––––––––––– MICHAEL L. GIOIA, ESQ. LANDMAN CORSI BALLAINE & FORD P.C. 120 Broadway, 27th Floor New York, New York 10271 Tel.: (212) 238-4800 Fax: (212) 238-4848 – and – ROBERT J. BATES, JR., ESQ. BATES CAREY NICOLAIDES LLP 191 North Wacker Drive, Suite 2400 Chicago, Illinois 60606 Tel.: (312) 762-3100 Fax: (312) 762-3200 Attorneys for Defendant-Appellant American Re-Insurance Company, now known as Munich Reinsurance America, Inc. ROBERT F. WALSH, ESQ. WHITE AND WILLIAMS LLP One Penn Plaza, Suite 4110 New York, New York 10119 Tel.: (212) 244-9500 Fax: (212) 244-6200 Attorneys for Defendant-Appellant Northern Assurance Company of America CORPORATE DISCLOSURES Pursuant to 22 N.Y.R.C.C. §§ 500.1(f) and 500.13(a), Defendants make the following disclosures: AMERICAN RE-INSURANCE COMPANY American Re-Insurance Company, now known as Munich Reinsurance America, Inc., is a wholly owned subsidiary of Munich Re America Corporation, a subsidiary of Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft (“Munich Re”). Munich Re is a German Corporation that issues shares which are traded only on the Deutsche Böerse [German Stock Exchange] (“DAX”). No other parent companies, subsidiaries or affiliates of Munich Reinsurance America, Inc. issue shares to the public. CENTURY INDEMNITY COMPANY Century Indemnity Company (“Century”), as successor to CCI Insurance Company, as successor to Insurance Company of North America, individually and as successor to Indemnity Insurance Company of North America (“INA”), is a wholly owned subsidiary of Brandywine Holdings Corp., which is a wholly owned subsidiary of INA Financial Corp. INA Financial Corp. is a wholly owned subsidiary of INA Corporation, which is a wholly owned subsidiary of ACE INA Holdings, Inc. ACE INA Holdings, Inc. is 80% owned by ACE Group Holdings Inc. and 20% owned by ACE Limited. ACE Group Holdings, Inc. is a wholly owned subsidiary of ACE Limited. The ultimate parent of Century is ACE Limited, a publicly owned, Swiss corporation (NYSE: ACE). NORTHERN ASSURANCE COMPANY OF AMERICA Northern Assurance Company of America (“NOAC”) is an indirect wholly owned subsidiary of OneBeacon Insurance Group, Ltd., approximately 28% of the stock of which is publicly traded. Approximately 72% of the stock of OneBeacon Insurance Group, Ltd. is indirectly owned by White Mountains Insurance Group, Ltd., a publicly held company. A list of NOAC’s affiliates is attached. Century Indemnity hereby advises the Court that the following is a listing of its parent companies, subsidiaries, and affiliates, each of which is directly or indirectly owned, in whole or in part, by ACE Limited: Entity Name Domestic Jurisdiction ACE (CIDR) Limited United Kingdom ACE (CR) Holdings United Kingdom ACE (RGB) Holdings Limited United Kingdom ACE Alternative Risk Ltd. Bermuda ACE American Insurance Company Pennsylvania ACE Arabia Cooperative Insurance Company Saudi Arabia ACE Arabia Insurance Company Ltd. B.S.C.(C) Bahrain ACE Asia Pacific Services Pte. Ltd. Singapore ACE Asia Pacific Services Sdn. Bhd. Malaysia ACE Asset Management Inc. Delaware ACE Australia Holdings Pty Limited Australia ACE Bermuda Insurance Ltd. Bermuda ACE Bermuda International Insurance Limited Ireland ACE Canada Holdings, Inc. Delaware ACE Capital II Limited United Kingdom ACE Capital III Limited United Kingdom ACE Capital IV Ltd. United Kingdom ACE Capital Limited United Kingdom ACE Capital Title Reinsurance Company New York ACE Capital V Ltd. United Kingdom ACE Capital VI Limited United Kingdom ACE Capital VII Limited United Kingdom ACE Chintai SSI Japan ACE Environmental Health And Safety Consulting (Shanghai) Company Limited China ACE Europe Life Limited United Kingdom ACE European Group Limited United Kingdom ACE European Group Limited United Kingdom ACE European Holdings Limited United Kingdom ACE European Holdings No. 2 Limited United Kingdom ACE Financial Solutions International, Ltd. Bermuda ACE Financial Solutions, Inc. Delaware ACE Fire Underwriters Insurance Company Pennsylvania ACE Gibraltar Limited Gibraltar ACE Global Markets Limited United Kingdom ACE Group Holdings Ltd. United Kingdom ACE Group Holdings, Inc. Delaware ACE Group Management and Holdings Ltd. Bermuda ACE Holdings (Gibraltar) Limited Gibraltar ACE Holdings Limited Cayman Islands ACE ICNA Italy - Societa` A Responsabilita` Limitata Italy ACE INA Excess and Surplus Insurance Services, Inc. (CA) California ACE INA Excess and Surplus Insurance Services, Inc. (PA) Pennsylvania ACE INA Financial Institution Solutions, Inc. Delaware ACE INA G. B. Holdings, Ltd Delaware ACE INA Holdings Inc. Delaware ACE INA Insurance Ontario ACE INA International Holdings Ltd., Agencia En Chile Chile ACE INA International Holdings, Ltd. Delaware ACE INA Life Insurance Canada ACE INA Overseas Holdings, Inc. Delaware ACE INA Overseas Insurance Company Ltd. Bermuda ACE INA Properties, Inc. Delaware ACE INA Services U.K. Limited United Kingdom ACE Insurance (Japan) Japan ACE Insurance (Switzerland) Limited Switzerland ACE Insurance Agency, Inc. Puerto Rico ACE Insurance Company Puerto Rico ACE Insurance Company Egypt S.A.E. Egypt ACE Insurance Company Limited Vietnam ACE Insurance Company of the Midwest Indiana ACE Insurance Limited Australia ACE Insurance Limited Hong Kong ACE Insurance Limited New Zealand ACE Insurance Limited Pakistan ACE Insurance Limited Singapore ACE Insurance Limited South Africa ACE Insurance Management (DIFC) Limited United Arab Emirates ACE Insurance S.A.-N.V. Belgium ACE International Management Corporation Pennsylvania ACE Jerneh Insurance Berhad Malaysia ACE Leadenhall Limited United Kingdom ACE Life Assurance Company Limited Thailand ACE Life Insurance Company Connecticut ACE Life Insurance Company Egypt S.A.E. Egypt ACE Life Insurance Company Limited Vietnam ACE Life Insurance Company Ltd. Bermuda ACE Life Insurance Company Ltd. Korea ACE London Aviation Limited United Kingdom ACE London Group Ltd. United Kingdom ACE London Holdings Limited United Kingdom ACE London Investments Limited United Kingdom ACE London Services Limited United Kingdom ACE London Underwriting Limited United Kingdom ACE Marketing Group C.A. Venezuela ACE Participacoes Ltda. Brazil ACE Pension Trustee Limited United Kingdom ACE Property and Casualty Insurance Company Pennsylvania ACE Realty Holdings Limited Bermuda ACE Reinsurance (Switzerland) Limited Switzerland ACE Resseguradora S.A. Brazil ACE Resseguradora S.A. Brazil ACE Risk Solutions, Inc. New York ACE Seguradora S.A. Macau ACE Seguradora S.A. Macau ACE Seguradora S.A. (Brazil) Brazil ACE Seguros De Vida S.A. Chile ACE Seguros De Vida S.A. Chile ACE Seguros S.A. Argentina ACE Seguros S.A. Chile ACE Seguros S.A. Colombia ACE Seguros S.A. Ecuador ACE Seguros S.A. Mexico ACE Seguros S.A. Peru ACE Seguros, S.A. Panama ACE Services Limited Cayman Islands ACE Servicios S.A. Argentina ACE Songai Service Kabushikigaisha Japan ACE Structured Products, Inc. Delaware ACE Synergy Insurance Berhad Malaysia ACE Tarquin United Kingdom ACE Tempest Life Reinsurance Ltd. Bermuda ACE Tempest Re Canada Inc. Quebec ACE Tempest Re Escritorio De Representacao No Brasil Ltda. Brazil ACE Tempest Re USA, LLC Connecticut ACE Tempest Reinsurance Limited Bermuda ACE Underwriting Agencies Limited United Kingdom ACE Underwriting Services Limited United Kingdom ACE US Holdings, Inc. Delaware AFIA Unknown AFIA (ACE) Corporation, Limited Delaware AFIA (INA) Corporation, Limited Delaware AFIA Finance Corp. Chile Limitada Chile AFIA Finance Corporation Delaware AFIA Finance Corporation Agencia En Chile Chile AFIA Venezolana, C.A. Venezuela AGRI General Insurance Company Iowa AGRI General Insurance Service, Inc. Iowa American Lenders Facilities, Inc. California American Millers Insurance Company Pennsylvania ASI Administrative Services Inc. Yukon Asset Archives, Inc. Georgia Atlantic Employers Insurance Company New Jersey Bankers Standard Fire And Marine Company Pennsylvania Bankers Standard Insurance Company Pennsylvania Brandywine Holdings Corporation Delaware Century Indemnity Company Pennsylvania Century International Reinsurance Company Ltd. Bermuda Century Inversiones, S.A. Panama CGA Group Limited Bermuda Chilena Consolidata Seguros Generales, S.A. Chile CJSC ACE Insurance Company Russia Combined Insurance Company Of America Illinois Combined Insurance Company of Europe Limited Ireland Combined Insurance Company of New Zealand Limited New Zealand Combined International Services Limited United Kingdom Combined Life Insurance Company of Australia Limited Australia Combined Life Insurance Company Of New York New York Commercial Guaranty Assurance Ltd. Bermuda Conference Facilities, Inc. Pennsylvania Corporate Officers & Directors Assurance Ltd. Bermuda Cover Direct, Inc. Delaware Cover-All Technologies Inc. Delaware Cravens, Dargan & Company, Pacific Coast Delaware Delpanama S.A. Panama Eksupsiri Company Limited Thailand Employee Benefit Communications, Inc. Florida ESIS Asia Pacific Pte. Ltd. Singapore ESIS Canada Inc. Canada ESIS, Inc. Pennsylvania Fire, Equity And General Insurance Company Limited Nigeria Freisenbruch-Meyer Insurance Ltd. Bermuda Freisenbruch-Meyer Insurance Services Ltd. Bermuda Huatai Insurance Holding Co., Ltd China Huatai Life Insurance Company, Limited China Illinois Union Insurance Company Illinois INA Corporation Pennsylvania INA Financial Corporation Delaware INA Holdings Corporation Delaware INA International Holdings, LLC Delaware INA Tax Benefits Reporting, Inc. Delaware INACAN Holdings Ltd. Canada INACOMB S.A. De C.V. Mexico INAMAR Insurance Underwriting Agency, Inc. New Jersey INAMAR Insurance Underwriting Agency, Inc. Of Texas Texas INAMEX S.A. Mexico INAVEN, C.A. Venezuela Indemnity Insurance Company Of North America Pennsylvania Insurance Company Of North America Pennsylvania Inversiones Continental, S.A. de C.V. Honduras Inviva, Inc. Delaware L.L.C. ACE Life Insurance Russia Nam Ek Company Limited Thailand NewMarkets Insurance Agency, Inc. Delaware Oasis Insurance Services Ltd. Bermuda Oasis Investments 2 Ltd. Bermuda Oasis Investments Limited Bermuda Oasis Personnel Limited Cayman Islands Oasis Real Estate Company Ltd. Bermuda Oriental Equity Holdings Limited BVI Pacific Employers Insurance Company Pennsylvania Paget Reinsurance International Ltd Bermuda Paget Reinsurance Limited Bermuda Pembroke Reinsurance, Inc. Delaware Penn Millers Agency, Inc. Pennsylvania Penn Millers Holding Corporation Pennsylvania Penn Millers Insurance Company Pennsylvania PMMHC Corporation Pennsylvania Proclaim America, Inc. Texas PT. ACE INA Insurance Indonesia PT. ACE Life Assurance Indonesia PT. ADI Citra Mandiri Indonesia Rain and Hail do Brasil, Ltda. Brazil Rain and Hail Financial, Inc. Iowa Rain and Hail Insurance Corporation Canada Rain and Hail Insurance Service de Mexico, S.A. de C.V. Mexico Rain And Hail Insurance Service Incorporated Iowa Rain and Hail Insurance Service International, Inc. Iowa Rain and Hail Insurance Service, Ltd. Canada Rain and Hail L.L.C. Iowa Recovery Services International, Inc. Delaware Rhea International Marketing (L) Inc. Malaysia Ridge Underwriting Agencies Limited United Kingdom Rio Guayas Compania de Seguros y Reaseguros S.A. Ecuador RIYAD Insurance Company Ltd. Bermuda Scarborough Property Holdings Ltd. Bermuda Servicios ACE INA, S.A. de C.V. Mexico Siam Liberty Insurance Broker Co., Ltd. Thailand Sovereign Risk Insurance (Dubai) Limited United Arab Emirates Sovereign Risk Insurance Ltd. Bermuda Ventas Personales Limitada Chile VOL Properties Corporation Delaware Westchester Fire Insurance Company Pennsylvania Westchester Specialty Insurance Services, Inc. Nevada Westchester Specialty Services, Inc. Florida Westchester Surplus Lines Insurance Company Georgia NORTHERN ASSURANCE COMPANY OF AMERICA AFFILIATES American Employers’ Insurance Company AutoOne Insurance Company AutoOne Select Insurance Company Atlantic Specialty Insurance Company The Camden Fire Insurance Association The Employers’ Fire Insurance Company Essentia Insurance Company Esurance Insurance Company Esurance Property and Casualty Insurance Company Homeland Central Insurance Company Homeland Insurance Company of New York Massachusetts Homeland Insurance Company Midwestern Insurance Company OneBeacon America Insurance Company OneBeacon Insurance Company OneBeacon Midwest Insurance Company Pennsylvania General Insurance Company Potomac Insurance Company Potomac Insurance Company of Illinois Traders & General Insurance Company Western States Insurance Company York Insurance Company of Maine OneBeacon Lloyd’s of Texas A.W.G. Dewar, Inc. Adirondack AIF, LLC AutoOne Management Company, Inc. Auto One Insurance Agency, Inc. New Jersey Skylands Management LLC Houston General Insurance Management Co. OneBeacon Lloyd’s, Inc. OneBeacon Professional Partners, Inc. OneBeacon Risk Management, Inc. TCH Insurance Agency, Inc. TABLE OF CONTENTS Page i QUESTIONS PRESENTED ..................................................................................... 1 JURISDICTIONAL STATEMENT ......................................................................... 1 INTRODUCTION .................................................................................................... 1 STATEMENT OF THE CASE ................................................................................. 4 A. Factual Background .............................................................................. 4 1. Hempstead And Bay Shore Site Contamination ........................ 4 2. LILCO Delays Notice ................................................................ 5 3. Insurers’ Policy Provisions ........................................................ 6 4. Insurers Respond And Reserve Rights To Deny Coverage On Late Notice Grounds ............................................................ 7 B. Proceedings Below ............................................................................... 8 1. Trial Court Proceedings ............................................................. 8 a. Justice Gammerman’s Decision ...................................... 8 b. Justice Kapnick’s Decision .............................................. 9 2. Appellate Proceedings ............................................................. 10 ARGUMENT .......................................................................................................... 10 I. COMMON-LAW WAIVER AND ESTOPPEL PRINCIPLES HAVE LONG PROVIDED THE APPROPRIATE LIMITS ON AN INSURER’S RIGHT TO DISCLAIM COVERAGE ................................... 12 A. Waiver Requires Intentional Conduct By The Insurer With Full Knowledge Of All Facts, And Cannot Be Inferred From Mere Silence ................................................................................................ 14 B. Estoppel Requires Proof That The Insured Detrimentally Relied Upon Or Was Otherwise Prejudiced By The Insurer’s Acts Or Omissions ........................................................................................... 17 II. THE SPECIAL TIME LIMIT STANDARD OF § 3420(d) SHOULD NOT BE APPLIED OUTSIDE ITS LEGISLATIVELY INTENDED CONTEXT OF ACCIDENTAL DEATH AND BODILY INJURY CLAIMS ....................................................................................................... 18 TABLE OF CONTENTS (continued) Page ii A. Insurance Law § 3420(d)’s Duty Of Prompt Disclaimer Overrides Common-Law Waiver And Estoppel Rules Only For Death And Bodily Injury Claims, As This Court And Others Have Recognized ................................................................................ 19 B. Section 3420 Was Enacted To Override Common-Law Waiver And Estoppel Rules For Policy Reasons Specific To Accidental Bodily Injury And Death Claims ....................................................... 23 C. This Court Should Not Apply The Legislative Prompt Disclaimer Duty Of § 3420(d) Outside Its Legislatively Mandated Confines, Especially Where The Insurers Had No Duty To Defend .................................................................................. 28 III. UNDER COMMON-LAW RULES, THE INSURERS ARE ENTITLED TO JUDGMENT AS A MATTER OF LAW ON THEIR LATE NOTICE DEFENSE .......................................................................... 33 A. LILCO Cannot Show That The Insurers Consciously Abandoned Their Late-Notice Defense ............................................. 34 B. LILCO Cannot Demonstrate Any Prejudice ...................................... 37 CONCLUSION ....................................................................................................... 38 TABLE OF AUTHORITIES Page(s) iii CASES Ace Packing Co. v. Campbell Solberg Assoc., Inc., 835 N.Y.S.2d 32 (1st Dep’t 2007) ...................................................................... 32 Admiral Ins. v. State Farm & Cas. Co., 927 N.Y.S.2d 629 (1st Dep’t 2011) .................................................................... 31 Albert J. Schiff Assocs., Inc. v. Flack, 51 N.Y.2d 692 (1980) ............................................................................. 14, 16, 17 Allstate Insurance Co. v. Gross, 27 N.Y.2d 263 (1970) ..................................................................................passim Arbegast v. Bd. of Educ. of S. New Berlin Cent. Sch., 65 N.Y.2d 161 (1985) ......................................................................................... 28 Argo Corp. v. Greater N.Y. Mut. Ins. Co., 4 N.Y.3d 332 (2005) ........................................................................................... 13 B & F Bldg. Corp. v. Liebig, 76 N.Y.2d 689 (1990) ......................................................................................... 28 Beadle v. Chenego Cnty. Mut. Ins. Co., 3 Hill (N.Y.) 161 (1842) ..................................................................................... 12 Benjamin Shapiro Realty Co. v. Agricultural Ins. Co., 731 N.Y.S.2d 453 (1st Dep’t 2001) .............................................................. 16, 36 Burt Rigid Box, Inc. v. Travelers Prop. Cas. Corp., 302 F.3d 83 (2d Cir. 2002) ........................................................................... 16, 17 Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) .............................................................................................. 32 Commercial Union Ins. Co. v. Int’l Flavors & Fragrances, Inc., 822 F.2d 267 (2d Cir. 1987) ......................................................................... 13, 17 Compis Servs., Inc. v. Hartford Steam Boiler Inspection & Ins. Co., 708 N.Y.S.2d 770 (4th Dep’t 2000) ............................................................. 17, 38 TABLE OF AUTHORITIES (continued) Page(s) iv Eaton v. N.Y.C. Conciliation & Appeals Bd., 56 N.Y.2d 340 (1982) ......................................................................................... 29 Estee Lauder Inc. v. OneBeacon Ins. Grp., LLC, 873 N.Y.S.2d 592 (1st Dep’t 2009) ........................................................ 23, 34, 35 Fairmont Funding, Ltd. v. Utica Mut. Ins. Co., 694 N.Y.S.2d 389 (1st Dep’t 1999) .............................................................. 18, 22 Gager v. White, 53 N.Y.2d 475 (1981) ......................................................................................... 32 Gibson Elec. v. Liverpool & London & Globe Ins. Co., 159 N.Y. 418 (1899) ........................................................................................... 15 Gilbert Frank Corp. v. Fed. Ins. Co., 70 N.Y.2d 966 (1988) ............................................................................. 14, 15, 36 Globecon Grp., LLC v. Hartford Fire Ins. Co., 434 F.3d 165 (2d Cir. 2006) ............................................................................... 17 Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d 184 (1982) ................................................................................... 32, 33 Hammelburger v. Foursome Inn Corp., 54 N.Y.2d 580 (1981) ......................................................................................... 28 Hartford Ins. Co. v. Cnty. of Nassau, 46 N.Y.2d 1028 (1979) ....................................................................................... 23 Hotel des Artistes, Inc. v. Gen. Accident Ins. Co. of Am., 927 N.Y.S.2d 629 (1st Dep’t 2004) .............................................................. 23, 36 Ill. Nat’l Ins. Co. v. Tutor Perini Corp., No. 11 Civ. 431, 2013 WL 443956 (S.D.N.Y. Feb. 5, 2013) ............................. 15 Inc. Vill. of Pleasantville v. Calvert Ins. Co., 612 N.Y.S.2d 441 (2d Dep’t 1994) ..................................................................... 23 TABLE OF AUTHORITIES (continued) Page(s) v Kiernan v. Dutchess Cnty. Mut. Ins. Co., 150 N.Y. 190 (1896) ........................................................................................... 14 Long Island Lighting Co. v. Allianz Underwriters Ins. Co., 805 N.Y.S.2d 74 (1st Dep’t 2005) ........................................................................ 9 Lugo v. AIG Life Ins. Co., 852 F. Supp. 187 (S.D.N.Y. 1994) ......................................................... 17, 18, 38 Luria Bros. & Co. v. Alliance Assurance Co., 780 F.2d 1082 (2d Cir. 1986) ............................................................................. 16 Malca Amit N.Y. v. Excess Ins. Co., 685 N.Y.S.2d 55 (1st Dep’t 1999) ...................................................................... 23 Mason-Henry Press v. Aetna Life Ins. Co., 130 N.Y.S.2d 961 (4th Dep’t 1911) ................................................................... 17 Matter of Firemen’s Fund Ins. Co. of Newark v. Hopkins, 88 N.Y.2d 836 (1996) ......................................................................................... 22 New York v. Amro Realty Corp., 936 F.2d 1420 (2d Cir. 1991) ....................................................................... 16, 36 O’Dowd v. Am. Surety Co., 3 N.Y.2d 347 (1957) ........................................................................................... 38 Only Natural, Inc. v. Realm Nat’l Ins. Co., 830 N.Y.S.2d 229 (2d Dep’t 2007) ..................................................................... 23 Orinoco Realty Co. v. Bandler, 233 N.Y. 24 (1922) ............................................................................................. 28 Palma v. Nat’l Fire Ins. Co. of Hartford, 270 N.Y.S. 503 (4th Dep’t 1934) ....................................................................... 15 People v. Colozzo, 283 N.Y.S.2d 409 (N.Y. Sup. Ct. 1967) ............................................................. 28 TABLE OF AUTHORITIES (continued) Page(s) vi Preserver Ins. Co. v. Ryba, 10 N.Y.3d 635 (2008) ......................................................................................... 21 S. & E. Motor Hire Corp. v. N.Y. Indem. Co., 255 N.Y. 69 (1930) ............................................................................................. 14 Sec. Mut. Ins. Co. v. Acker-Fitzsimmons Corp., 31 N.Y. 2d 436 (1972) ........................................................................................ 12 Sirignano v. Chi. Ins. Co., 192 F. Supp. 2d 199 (S.D.N.Y. 2002) ................................................................ 14 State v. Ackley, 664 N.Y.S.2d 876 (3d Dep’t 1997) ..................................................................... 23 Titus v. Glens Falls Ins. Co., 81 N.Y. 410 (1880) ............................................................................................. 15 Touchette Corp. v. Merchants Mut. Ins. Co., 429 N.Y.S.2d 952 (4th Dep’t 1980) ................................................................... 38 Transit Comm. v. Long Island R. R. Co., 253 N.Y. 345 (1930) ........................................................................................... 28 Travelers Indem. Co. v. Orange & Rockland Utils., Inc., 905 N.Y.S.2d 11 (1st Dep’t 2010) ...................................................................... 22 United States Fidelity & Guar. Co. v. Weiri, 696 N.Y.S.2d 200 (2d Dep’t 1999) ..................................................................... 22 Vechiarrelli v. Cont’l Ins. Co., 716 N.Y.S.2d 524 (4th Dep’t 2000) ................................................................... 23 W. World Ins. Co. v. Jean & Benny’s Rest., Inc., 419 N.Y.S.2d 163 (2d Dep’t 1979) ..................................................................... 18 Weatherwax v. Royal Indemn. Co., 250 N.Y. 281 (1929) ........................................................................................... 17 TABLE OF AUTHORITIES (continued) Page(s) vii STATUTES AND RULES CPLR 5602 ................................................................................................................. 1 Ins. Law § 167(1)(e) ........................................................................................... 23, 25 Ins. Law § 167(8) ..................................................................................................... 26 Ins. Law § 3420(d) ............................................................................................passim OTHER AUTHORITIES 2 Holmes’ Appleman on Insurance 2d § 8.1 ........................................................... 14 22 Holmes’ Appleman on Insurance 2d § 139.2 ..................................................... 12 R. Keeton, Insurance Law § 7.2(b) (1988) .............................................................. 13 1 QUESTIONS PRESENTED 1. Whether a new rule requiring insurers to issue a denial of coverage “as soon as reasonably possible” should be imposed judicially, supplanting longstanding common-law waiver and estoppel rules governing such denials. 2. Whether an insurer is prohibited from enforcing a contractual coverage condition on grounds of waiver or estoppel where: • the insurer expressly reserved the right to enforce the condition; • the insurer did not invoke other coverage conditions or defenses; and • the insured does not and could not argue that it has suffered any prejudice. JURISDICTIONAL STATEMENT This Court has jurisdiction to hear this appeal pursuant to CPLR 5602, because the Appellate Division granted leave to appeal the questions presented. A4-5. The questions presented were preserved below. A6-8. INTRODUCTION The Appellate Division decision in this case rewrites insurance-law principles that have governed this state since the nineteenth century. It has long been settled that conditions of coverage specified in an insurance policy—like conditions on the performance of any other private contract—must be enforced, 2 except in two narrow circumstances: where the insurer intentionally waives enforcement of the condition, or where the insurer is estopped from enforcing it. The principles of waiver and estoppel have been developed and applied by the courts for more than a century. They provide clear guidance as to when and how an insurer must give notice of its decision to deny coverage. Waiver applies when an insurer knowingly abandons a coverage defense. Estoppel applies when the insured demonstrates that it was prejudiced by the insurer’s actions. Neither principle imposes a categorical time limit on an insurer to make a coverage determination. This makes sense in most insurance matters, including the environmental matters at issue in this case, because the insurer often needs time to undertake a review of the underlying facts—such as when the insured became aware of the possibility of environmental damage and potential cleanup liability— before making its coverage determination. There is no waiver or estoppel here: the Insurers in this case specifically reserved their rights to deny coverage based on the insured’s violation of the contractual requirement to give timely notice of an occurrence. The common-law rule has always been that the explicit reservation of the right to assert a specific coverage defense defeats a claim of waiver or estoppel as a matter of law. 3 The decision below abandons those settled principles in favor of a new rule requiring all insurers to make a coverage determination “as soon as reasonably possible,” even absent intentional waiver by the insurer or prejudice to the insured. This Court has never applied such a standard in insurance coverage cases governed by common-law rules. The standard instead appears in Insurance Law § 3420(d), which imposes on insurers a duty to disclaim coverage “as soon as is reasonably possible” only for accidental death and bodily injury claims, for policy reasons specific to such claims. If there is a demonstrated policy need to apply the duty to other claims, the legislature can do so by amending the Insurance Law, after the extensive hearings and legislative record-building that normally accompanies statutory reform. There is no warrant for doing so judicially, thereby overriding the legislature’s policy judgment that a prompt disclaimer duty is required for accidental death and bodily injury claims, but not for other types of claims. The property damage claims in this case are governed not by any duty of prompt disclaimer, but by long-settled common-law waiver and estoppel rules. And under those rules, the Insurers are entitled to judgment as a matter of law as to coverage for the two sites at issue here, because LILCO’s notice for those sites was late, and the Insurers neither waived their late-notice defense nor are estopped from 4 enforcing it. This Court should hold that the Insurers are entitled to a judgment of no coverage for the two sites at issue here. STATEMENT OF THE CASE A. Factual Background 1. Hempstead And Bay Shore Site Contamination From as early as the 1870s, LILCO or its predecessors operated manufactured gas plants (“MGPs”) at seven locations on Long Island, including Hempstead and Bay Shore, the two sites at issue here. A12. In the 1950s, with the arrival of a natural gas pipeline, LILCO replaced the MGP technology. A12. After LILCO and other gas utilities ceased MGP operations, byproducts and waste products from those plants continued to cause environmental damage. A13-14. By the early 1990s, federal, New York State and County environmental and health agencies had contacted LILCO about the continuing environmental harm of its MGPs, and LILCO management was preparing to respond. A17-21. By December 1991 and into 1992, LILCO’s management had concluded that a regulatory mandate to investigate and remediate its former plants was “inevitable.” A27, A99. LILCO adopted a proactive strategy to investigate and remediate each of its MGPs in hopes of saving costs by proceeding on a voluntary basis, ahead of the inevitable regulatory order to do so. A21-22. By August 1992, 5 LILCO had budgeted $2.125 million and $3.75 million for remediation work at the Hempstead and Bay Shore MGPs to take place in 1993 and 1994. A138. By the first quarter of 1994, LILCO’s financial records had already accrued a $6 million liability for Bay Shore and a $4 million liability for Hempstead. A159, A30. 2. LILCO Delays Notice Although it knew by 1992 that it faced millions of dollars of potential liabilities, LILCO waited until the fourth quarter of 1994 to begin notifying its insurers, including the Insurers here,1 of the environmental issues it faced. A32-33, A173, A176. LILCO gave notices with respect to each of its six MGPs to “nearly 80 primary or excess liability insurers, on approximately 420 separate policies dating back to 1937.” A564; see also A528. LILCO gave each of the Insurers notice as to its Bay Shore and Hempstead MGPs in October and November 1994. A173, A176, A32-33. LILCO’s letters stated that no lawsuit had been commenced by any of the regulatory agencies, and that it planned to deal with the MGPs on a voluntary basis. A173-74, A532. Each of LILCO’s letters also stated that the amount of LILCO’s liability, if any, could not be ascertained until the regulatory agencies had reviewed the remedial studies 1 The Insurers here are American Re-Insurance Company, now known as Munich Reinsurance America, Inc. (“American Re”), Century Indemnity Company (“Century”), and Northern Assurance Company of America (“NOAC”). 6 and selected a remedy. A173, A176-77, A32-33. LILCO eventually did enter into an Administrative Consent Order, and none of the regulatory agencies ever commenced a lawsuit. A31-32. 3. Insurers’ Policy Provisions Commercial insurance is typically provided in layers, with risks spread among the insured and multiple insurers in primary and excess layers. The Insurers issued excess liability policies between 1953 and 1969—a period in which LILCO chose to self-insure at the primary level. A10-11, A40-46. None of the excess policies at issue contained any provision establishing a duty to defend against bodily injury or property damage claims. See A192-206, A210-322, A330- 386, A470-508, see also A510. And their indemnification provisions attach at varying levels ranging from $25,000 to $3.5 million. A40-46. Because the excess policies contained no duty to defend and their indemnification provisions were not yet triggered, LILCO’s notice of potential coverage for the MGP liabilities did not include a request for any action at that time from the excess insurers; LILCO instead assumed responsibility both for its own defense and for the initial levels of indemnity. The excess policies also each included a provision establishing, as a threshold condition for coverage, that LILCO provide prompt notice of any 7 occurrence that potentially implicated the insurers’ indemnification duties. The notice conditions in all of Century’s policies required that LILCO give notice as soon as an occurrence is “reasonably likely” to involve Century. A245, A290, A309. The Northern Assurance policies incorporated the Century notice provision. A326-27, A50. The American Re policies required immediate notice of any accident or occurrence that “will probably” or “appears likely” to involve coverage under the policies. A44-45, A50. 4. Insurers Respond And Reserve Rights To Deny Coverage On Late Notice Grounds In response to LILCO’s notice letters for Bay Shore and Hempstead, each Insurer issued timely reservation of rights letters that specifically identified late notice as a potential defense and informed LILCO of its intent to investigate the Hempstead and Bay Shore claims. A33-34. Century’s responses in each case stated that the information provided by LILCO was insufficient to identify any circumstances in which the excess policies would be called upon to defend or indemnify, and requested that LILCO notify Century immediately if it became aware of such circumstances. A179-82, A183- 87. The following year, LILCO provided supplemental packages of information to each of its insurers, but LILCO did not advise Century or the other Insurers that it 8 had expended, or would soon expend, amounts sufficient to trigger any duty to indemnify under the excess policies. A420-27, A437-40, A450-62. B. Proceedings Below 1. Trial Court Proceedings LILCO initiated coverage litigation in 1996 by filing a declaratory judgment action in federal court. A35. After another group of insurers moved to dismiss for lack of subject matter jurisdiction, LILCO filed this action seeking essentially the same relief. Id. The federal action was dismissed and this action proceeded. Id. Each Insurer’s answer included LILCO’s late notice as a defense to its coverage claim. A8, A521, A568.8-568.9. In 2000, the Insurers moved for summary judgment on LILCO’s coverage claims for the MGP sites and for a non- MGP site, the Syosset Landfill Superfund site, based on late notice. A35-36, A38. a. Justice Gammerman’s Decision The Supreme Court (Gammerman, J.S.C.) granted the Insurers’ motions regarding Syosset Landfill. A38. After finding that LILCO’s notice was late, Justice Gammerman rejected LILCO’s argument that the Insurers’ supposed delay in disclaiming coverage constituted a waiver of their right to deny coverage based on late notice. A583-84. Citing this Court’s ruling in Allstate Insurance Co. v. Gross, 27 N.Y.2d 263 (1970), Justice Gammerman ruled that because the Insurers 9 specifically reserved their rights to deny coverage based on late notice while they investigated the claims, the Insurers did not waive their late-notice defense. A584. In December 2005, the Appellate Division affirmed Justice Gammerman’s rulings. Long Island Lighting Co. v. Allianz Underwriters Ins. Co., 805 N.Y.S.2d 74 (1st Dep’t 2005), leave to appeal dismissed, 6 N.Y.3d 844 (2006). b. Justice Kapnick’s Decision The Insurers had also moved for summary judgment on late notice of occurrence as to the Bay Shore and Hempstead MGPs and five other MGPs. Those motions had been dismissed without prejudice because of an intervening appeal of a privilege ruling concerning a LILCO document cited in the moving papers. A36. Upon resolution of the privilege issue and multiple attempts by LILCO to appeal the Syosset ruling to this Court, the renewed motions were finally briefed and argued in 2010. The Supreme Court (Kapnick, J.S.C.) granted the Insurers’ motions on Bay Shore and denied their motions on Hempstead and five other MGP sites. A63. The court agreed that LILCO’s notice on Bay Shore was late, but held that genuine disputes of material fact remained as to Hempstead and the other sites. A63-64. More broadly, however, the court rejected LILCO’s threshold contention that the Insurers had waived the late-notice defense for every site because they did not immediately deny coverage on that basis. A61-63. 10 2. Appellate Proceedings The parties cross appealed to the Appellate Division, First Department. On review of Justice Kapnick’s summary judgment ruling, the Appellate Division held that LILCO’s notices of occurrence at both the Bay Shore and Hempstead sites were late as a matter of law. A7. The Appellate Division, however, ruled that summary judgment was premature because genuine issues of material fact remain as to whether the Insurers waived their right to disclaim based on late notice. A7-8. The court acknowledged that the Insurers specifically reserved their rights to assert the late notice defense. A7. The court, however, held that the Insurers had an “obligation to issue a written notice of disclaimer on the ground of late notice as soon as reasonably possible after first learning of the accident or of grounds for disclaimer of liability.” A8. The court concluded that there was a triable issue of fact as to whether the Insurers’ disclaimers were timely under that standard. Id. The Insurers moved for reargument and for permission to appeal. The Appellate Division denied reargument, but granted permission to appeal. A4-5. ARGUMENT The decision below applies a rule requiring all insurers to make a coverage determination “as soon as reasonably possible,” or forfeit their rights to deny 11 coverage. No such duty exists at common law. As shown below, most insurers’ rights to deny coverage are governed solely by principles of waiver and estoppel, which provide familiar and appropriate constraints on insurers’ coverage determinations See infra Part I. The Appellate Division’s rule requiring a coverage denial “as soon as reasonably possible”—even absent waiver or estoppel—is derived from a statutory standard prescribed for one particular category of insurance claims, i.e., accidental death and bodily injury claims, for policy reasons specific to those claims. This Court should not override common- law waiver and estoppel rules in favor of a legislative rule the legislature itself has not seen fit to apply outside the context of accidental death and bodily injury claims. See infra Part II. Under the common-law rules that properly govern this case, LILCO’s late notice as to the Bay Shore and Hempstead sites warrants a judgment of non-coverage for the Insurers as to those sites. See infra Part III. The Insurers did not intentionally waive their rights to deny coverage based on late notice, and LILCO does and cannot argue that it was prejudiced by any delay in the coverage denial. This Court should hold that, as a matter of law, LILCO is not entitled to coverage for the Bay Shore and Hempstead sites. 12 I. COMMON-LAW WAIVER AND ESTOPPEL PRINCIPLES HAVE LONG PROVIDED THE APPROPRIATE LIMITS ON AN INSURER’S RIGHT TO DISCLAIM COVERAGE The common law has long recognized that parties to an insurance policy— like parties to any other contract—may agree to impose certain conditions on the exercise of rights under the policy. See Beadle v. Chenego Cnty. Mut. Ins. Co., 3 Hill (N.Y.) 161, 162 (1842) (“The parties may insert what conditions they please in a policy, provided there be nothing in them contrary to the criminal law, or public policy. This is constantly done in marine policies, and the principle which upholds it there extends to all other policies.”). One common condition is that the insured give the insurer prompt notice of a covered occurrence. See 22 Holmes’ Appleman on Insurance 2d § 139.2 (“Most insurance policies … require that the insured give the insurer prompt notice of every occurrence, accident, claim or suit that can result in the insurer’s obligation to provide a defense, indemnification, or any other type of coverage under the policy.”). This Court has long recognized that “the giving of the required notice is a condition to the insurer’s liability.” Sec. Mut. Ins. Co. v. Acker-Fitzsimmons Corp., 31 N.Y.2d 436, 440 (1972). Compliance with the notice condition “protects the carrier against fraud or collusion; gives the carrier an opportunity to investigate claims while evidence is fresh; allows the carrier to make an early estimate of 13 potential exposure and establish adequate reserves and gives the carrier an opportunity to exercise early control of claims, which aids settlement.” Argo Corp. v. Greater N.Y. Mut. Ins. Co., 4 N.Y.3d 332, 339 (2005) (citations omitted); see Commercial Union Ins. Co. v. Int’l Flavors & Fragrances, Inc., 822 F.2d 267, 271 (2d Cir. 1987) (applying N.Y. law) (prompt notice “enable[s] insurers to make a timely investigation of relevant events and exercise early control over a claim,” which “may lead to a settlement before litigation and enable insurers to take steps to eliminate the risk of similar occurrences in the future”). Like other coverage conditions, courts “predicate[] the enforcement of timeliness provisions on the rationale that courts should not interfere with the effects of clear and unambiguous contract provisions.” R. Keeton, Insurance Law § 7.2(b) (1988). The common law recognizes only two circumstances under which a coverage condition (including a notice requirement) will not be enforced: where the insurer intentionally waives the condition, and where the insurer is estopped from enforcing it. As shown below, these principles respect the parties’ agreement and allow the insurer to enforce its contractual rights, while protecting the insured against prejudice caused by the insurer’s action or inaction. 14 A. Waiver Requires Intentional Conduct By The Insurer With Full Knowledge Of All Facts, And Cannot Be Inferred From Mere Silence Waiver is the “voluntary and intentional relinquishment of a known right.” Albert J. Schiff Assocs., Inc. v. Flack, 51 N.Y.2d 692, 698 (1980). A waiver thus “ordinarily must be predicated upon full knowledge of all the facts upon which the existence of the right depends,” S. & E. Motor Hire Corp. v. N.Y. Indem. Co., 255 N.Y. 69, 72 (1930), and “should not be lightly presumed,” Gilbert Frank Corp. v. Fed. Ins. Co., 70 N.Y.2d 966, 968 (1988). “Waiver cannot be lightly inferred and cannot be found unless the carrier made a conscious choice to waive its rights.” Sirignano v. Chi. Ins. Co., 192 F. Supp. 2d 199, 207 (S.D.N.Y. 2002). A waiver may be express or implied, but an implied waiver still requires “proof that the insurer intended to abandon the defense.” Schiff, 51 N.Y.2d at 698. The insured thus must adduce evidence from which “a clear manifestation of intent by defendant to relinquish the protection of the contractual [condition] [can] be reasonably inferred.” Gilbert Frank, 70 N.Y.2d at 968; see Kiernan v. Dutchess Cnty. Mut. Ins. Co., 150 N.Y. 190, 195 (1896) (implied waiver only where insurer’s conscious intent to waive is “clearly to be inferred from circumstances”); 2 Holmes’ Appleman on Insurance 2d § 8.1 (insurer’s “intention to waive a policy provision or forfeiture must plainly appear”). 15 An implied waiver “cannot be inferred from … mere silence” on the part of the insurer in response to a coverage request, Titus v. Glens Falls Ins. Co., 81 N.Y. 410, 419 (1880), but “require[s] some affirmative action on the part of the insurer which indicated that it intended to waive the result of the plaintiff’s breach,” Gibson Elec. v. Liverpool & London & Globe Ins. Co., 159 N.Y. 418, 424-25 (1899); see Palma v. Nat’l Fire Ins. Co. of Hartford, 270 N.Y.S. 503, 507 (4th Dep’t 1934) (waiver cannot be inferred from “mere silence”), modified, 284 N.Y.S. 654 (4th Dep’t 1935). As this Court put it in Gross, the “passage of time” following a coverage request will not itself suffice to establish waiver under the common law; what is required is evidence demonstrating “the insurer’s manifested intention to release a right.” 27 N.Y.2d at 269; see Gilbert Frank, 70 N.Y.2d at 968 (reversing Appellate Division ruling, 514 N.Y.S.2d 215, 216-17, that insurer delay in enforcing contractual limitations period sufficed to create factual issue of waiver); Ill. Nat’l Ins. Co. v. Tutor Perini Corp., No. 11 Civ. 431, 2013 WL 443956, at *4 (S.D.N.Y. Feb. 5, 2013) (“Lloyd’s did not waive its right to deny coverage by failing to respond because there is no fact indicating that Lloyd’s consciously, and with full knowledge, voluntarily gave up that right.”). Although inaction by the insurer on a coverage request is by itself insufficient to prove waiver, a waiver can be implied from other affirmative 16 actions, such as when the insurer “disclaims coverage for failure to satisfy one condition precedent but neglects to assert other such conditions.” Burt Rigid Box, Inc. v. Travelers Prop. Cas. Corp., 302 F.3d 83, 95 (2d Cir. 2002); see Schiff, 51 N.Y.2d at 698. That is, “when one specific ground of forfeiture is urged against the claim, and a refusal to pay is based upon a specific ground, all other grounds are waived.” Luria Bros. & Co. v. Alliance Assurance Co., 780 F.2d 1082, 1090 (2d Cir. 1986) (quotation omitted). An implied waiver arises in that situation, however, only if the insurer was aware of the facts giving rise to the unasserted defense, yet chose not to assert it. Because waiver is by definition a “voluntary and intentional relinquishment of a known right,” Schiff, 51 N.Y.2d at 698, an “insurer cannot waive a defense by asserting another defense as grounds for declination if it had no knowledge of the facts giving rise to the unasserted defense,” Luria Bros., 780 F.2d at 1090; see New York v. Amro Realty Corp., 936 F.2d 1420, 1431 (2d Cir. 1991); Benjamin Shapiro Realty Co. v. Agricultural Ins. Co., 731 N.Y.S.2d 453, 454 (1st Dep’t 2001). Further, the assertion of one coverage defense, or even the insurer’s initial agreement to defend the claim, does not establish an implied waiver of other defenses where the insurer expressly reserves the right to assert specific defenses pending further factual development. As this Court stated in Gross, “[r]eservations 17 of right” are “effective … against the defense of waiver.” 27 N.Y.2d at 269. And almost 85 years ago, the Court (per Judge Cardozo) applied an express reservation to hold that an insurer did not waive a late-notice defense to coverage even after the insurer had assumed defense of the claim. See Weatherwax v. Royal Indemn. Co., 250 N.Y. 281, 287 (1929). Numerous other precedents have held that under New York law, an express reservation of the right to assert a specific defense defeats any claim that that particular defense was waived.2 B. Estoppel Requires Proof That The Insured Detrimentally Relied Upon Or Was Otherwise Prejudiced By The Insurer’s Acts Or Omissions Estoppel, though related to waiver and sometimes confused with it, is a distinct concept in New York insurance law. See Burt Rigid Box, 302 F.3d at 95; Schiff, 51 N.Y.2d at 697-99. In the insurance context, estoppel “arises where an insurer acts in a manner inconsistent with a lack of coverage, and the insured reasonably relies on those actions to its detriment.” Burt Rigid Box, 302 F.3d at 95. Unlike waiver, estoppel “requires a showing of prejudice to the insured.” Id. Thus, “delay in giving notice of disclaimer of coverage, even if unreasonable, will 2 See, e.g., Globecon Grp., LLC v. Hartford Fire Ins. Co., 434 F.3d 165, 176 (2d Cir. 2006); Commercial Union, 822 F.2d at 274; Lugo v. AIG Life Ins. Co., 852 F. Supp. 187, 192 (S.D.N.Y. 1994); Compis Servs., Inc. v. Hartford Steam Boiler Inspection & Ins. Co., 708 N.Y.S.2d 770, 772 (4th Dep’t 2000); Mason-Henry Press v. Aetna Life Ins. Co., 130 N.Y.S.2d 961, 965 (4th Dep’t 1911). 18 not estop the insurer to disclaim unless the insured has suffered prejudice from the delay.” Fairmont Funding, Ltd. v. Utica Mut. Ins. Co., 694 N.Y.S.2d 389, 391 (1st Dep’t 1999); see Gross, 27 N.Y.2d at 269 (prejudice required to show estoppel under New York common law); accord Lugo v. AIG Life Ins. Co., 852 F. Supp. 187, 192 (S.D.N.Y. 1994); W. World Ins. Co. v. Jean & Benny’s Rest., Inc., 419 N.Y.S.2d 163, 165 (2d Dep’t 1979). * * * * In sum, an insurance policy’s notice requirement will be enforced unless the insurer chooses not to enforce it, or the insured can show that it was prejudiced by the insurer’s actions—or inaction—in determining coverage. As the next section demonstrates, the common law does not impose on insurers a duty to deny coverage promptly or not at all. That duty has been imposed legislatively only for accidental death and bodily injury claims, and should not be expanded judicially beyond that specific context. II. THE SPECIAL TIME LIMIT STANDARD OF § 3420(d) SHOULD NOT BE APPLIED OUTSIDE ITS LEGISLATIVELY INTENDED CONTEXT OF ACCIDENTAL DEATH AND BODILY INJURY CLAIMS Section 3420(d) of the Insurance Law requires an insurer to issue any coverage denial “as soon as is reasonably possible,” but only in the context of accidental death and bodily injury claims. The decision below does not cite 19 § 3420(d), but holds that an identically worded prompt disclaimer duty also should apply to property damage claims. That holding is incorrect. The § 3420(d) standard supplants common-law waiver and estoppel rules in the specific context of accidental death and bodily injury claims for reasons specific to such claims. It should not be applied to override those rules for other types of insurance claims. A. Insurance Law § 3420(d)’s Duty Of Prompt Disclaimer Overrides Common-Law Waiver And Estoppel Rules Only For Death And Bodily Injury Claims, As This Court And Others Have Recognized Section 3420(d) by its terms applies to “a liability policy that provides coverage with respect to a claim arising out of the death or bodily injury of any person,” among other narrowing specifications. Ins. Law § 3420(d)(1)(A). The provision imposes various extra-contractual duties on the insurer to provide information to the claimant concerning potential coverage for the death or bodily injury,3 and then provides: 3 The statute provides: (B) Upon an insurer’s receipt of a written request by an injured person who has filed a claim or by another claimant, an insurer shall, within sixty days of receipt of the written request: (i) confirm to the injured person or other claimant in writing whether the insured had a liability insurance policy of the type specified in subparagraph (A) of this paragraph in effect with the insurer on the date of the alleged occurrence; and (ii) specify the liability insurance limits of the coverage provided under the policy. 20 If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant. Ins. Law § 3420(d)(2). In other words, an insurer that disclaims coverage for accidental death or bodily injury must do so “as soon as is reasonably possible.” See Gross, 27 N.Y.2d at 268-69 (statute governs not only timing of written notice, but also timing of decision itself). As LILCO recognizes, the prompt disclaimer duty established in § 3420(d) does not simply supplement or clarify the common-law waiver and estoppel rules that otherwise govern coverage disclaimers. Section 3420(d) instead “replac[es] the common-law doctrines of waiver and estoppel with ‘an absolute rule that unduly delayed disclaimer of liability or denial of coverage violate[s] the right of the insured.’” Opp’n to Rearg. Mot. 8 (emphasis added) (quoting Gross, 27 (C) If the injured person or other claimant fails to provide sufficient identifying information to allow the insurer, in the exercise of reasonable diligence, to identify a liability insurance policy that may be relevant to the claim, the insurer shall within forty-five days of receipt of the written request, so advise the injured person or other claimant in writing and identify for the injured person or other claimant the additional information needed. Within forty-five days of receipt of the additional information, the insurer shall provide the information required under subparagraph (B) of this paragraph. Ins. Law § 3420(d)(1)(B)-(C). 21 N.Y.2d at 269). LILCO concedes that under the common-law rules, “an insurer’s delay will prevent it from disclaiming coverage only if the policyholder can establish ‘the insurer’s manifested intention to release a right as in waiver, or … prejudice to the insured as in estoppel.’” Id. (emphasis added) (quoting Gross, 27 N.Y.2d at 269). “In contrast,” LILCO explains, “when § 3420(d) applies,” the statute imposes a “time limit” on the disclaimer, which thus may be forfeited “based ‘merely on the passage of time’ … no matter how clearly the insurer manifests its intent not to waive a defense and regardless of whether the policyholder has been prejudiced by the delay.” Id. (quoting Gross, 27 N.Y.2d at 269). Under § 3420(d), in other words, waiver and prejudice are irrelevant— immediacy of action is all that matters. By contrast, outside the context of § 3420(d), immediacy of action per se is not relevant, as this Court held in Preserver Insurance Co. v. Ryba, 10 N.Y.3d 635, 639 (2008). The insured in Ryba sought coverage for a breach of contract claim arising from a personal injury. The insurer disclaimed coverage, but the lower courts held that the disclaimer was unreasonably delayed and thus time-barred under § 3420(d). Id. at 639. This Court reversed, holding, inter alia, that because the claim was for breach of contract, the insurer “would not be barred from denying coverage” based on its delay in disclaiming “since Insurance Law 22 § 3420(d) requires timely disclaimer only for denials of coverage ‘for death or bodily injury.’” Id. at 642.4 Where § 3420(d) does not apply, coverage disclaimers are governed only by common-law waiver and estoppel rules, which do not impose a duty of prompt disclaimer: “[D]elay in giving notice of disclaimer of coverage, even if unreasonable, will not estop the insurer to disclaim unless the insured has suffered prejudice from the delay.” Fairmont Funding, 694 N.Y.S.2d at 391; see Travelers Indem. Co. v. Orange & Rockland Utils., Inc., 905 N.Y.S.2d 11, 12 (1st Dep’t 2010) (“[T]he court erred in holding that plaintiff waived its right to disclaim for late notice simply as a result of the passage of time. Contrary to the court’s assumption, Insurance Law § 3420 applies only to claims for death and bodily injury, and not to pollution insurance.” (citation omitted)); United States Fidelity & Guar. Co. v. Weiri, 696 N.Y.S.2d 200, 201 (2d Dep’t 1999) (“[B]ecause the underlying action does not involve death or bodily injury, USF&G’s untimely disclaimer of coverage will be given effect unless Weiri can demonstrate prejudice as a result of the unreasonable delay in disclaiming coverage.”); see also Only 4 In finding a duty to disclaim “as soon as reasonably possible” in this non- § 3240(d) case, the decision below ignores Ryba and instead cites Matter of Firemen’s Fund Ins. Co. of Newark v. Hopkins, 88 N.Y.2d 836 (1996). A8. Hopkins, however, was a bodily injury case, see 88 N.Y.2d at 837, and thus necessarily subject to the § 3420(d) standard. 23 Natural, Inc. v. Realm Nat’l Ins. Co., 830 N.Y.S.2d 229, 231 (2d Dep’t 2007); Vechiarrelli v. Cont’l Ins. Co., 716 N.Y.S.2d 524, 526 (4th Dep’t 2000); State v. Ackley, 664 N.Y.S.2d 876, 878 (3d Dep’t 1997); Inc. Vill. of Pleasantville v. Calvert Ins. Co., 612 N.Y.S.2d 441, 443 (2d Dep’t 1994).5 As the following sections show, §3420(d)’s duty to disclaim “as soon as is reasonably possible” applies only to accidental death and bodily injury claims for reasons specific to those claims, and should not be applied judicially outside that context. B. Section 3420(d) Was Enacted To Override Common-Law Waiver And Estoppel Rules For Policy Reasons Specific To Accidental Bodily Injury And Death Claims The statute now codified at Insurance Law § 3420(d) was first enacted in 1958 as Insurance Law § 167(1)(e). That provision was one component of a broader statute designed to “plug … loopholes in the Compulsory Automobile 5 Three First Department decisions have stated that a duty of prompt disclaimer exists outside the death and bodily injury context. See Estee Lauder Inc. v. OneBeacon Ins. Grp., LLC, 873 N.Y.S.2d 592, 594 (1st Dep’t 2009); Hotel des Artistes, Inc. v. Gen. Accident Ins. Co. of Am., 927 N.Y.S.2d 629, 633 (1st Dep’t 2004); Malca Amit N.Y. v. Excess Ins. Co., 685 N.Y.S.2d 55, 56 (1st Dep’t 1999). In Malca Amit, however, there is no indication that the insurer reserved its rights. And the case erroneously relied on an earlier precedent involving § 3420(d). See 685 N.Y.S.2d at 56 (citing Hartford Ins. Co. v. Cnty. of Nassau, 46 N.Y.2d 1028, 1029 (1979)). In Estee Lauder and Hotel des Artistes, the insurers had initially disclaimed coverage on other grounds while omitting mention of late notice. Accordingly, both cases are, on their facts, consistent with standard waiver principles. See supra at 15-16; see also infra at 34-36 (discussing Estee Lauder). 24 Insurance Act.” Letter from Assemblyman Stanley Steingut, Mar. 24, 1958, Bill Jacket, L. 1958, ch. 759, at 7. As expressed by the Committee on Banking and Insurance of the New York County Lawyers’ Association, the policy concern was that “[t]he Compulsory Automobile Insurance Law … cannot protect persons injured by uninsured autos registered in a foreign state, unidentified autos which leave the scene of an accident, resident motorists who evade the Compulsory Law by not carrying liability insurance, stolen motor vehicles, motor vehicles operating without the permission of the owner, insured cars where the carrier disclaims, and unregistered autos.” Report of the Comm. on Banking & Ins. of the N.Y. Cnty. Lawyers’ Ass’n, Mar. 13, 1958, Bill Jacket, L. 1958, ch. 759, at 6. The new law was intended to “close this gap” by creating the Motor Vehicle Accident Indemnification Corporation (“MVAIC” or “Corporation”), which included as members all licensed auto liability carriers, who were “subject to assessment to cover the payment of claims of persons who have been injured by any of the enumerated classes of motorists.” Id. One provision of the new law required that all liability policies issued in the state include certain provisions, including: (e) A provision that in case the insurer shall disclaim liability or deny coverage, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant. 25 Ins. Law § 167(1)(e) (1958). This provision was supposed to serve the objectives of the broader law, which created the MVAIC to “provide[] for protection to a third party who might be injured by an insured motorist whose insurance carrier disclaimed.” Memorandum from Assistant Counsel of the Assoc. of Cas. & Sur. Cos., Mar. 16, 1959, Bill Jacket, L. 1959, ch. 649, at 13. The prompt notice requirement was added because it was “felt that in such cases both the insured and the injured person or any other claimant should receive notice of such disclaimer in order to preserve the claimant’s rights against the Corporation.” Id. Mandating prompt disclaimer by the insurer, in other words, would both ensure that the claimant could proceed instead against the MVAIC, and would alert the MVAIC to the potential claim. Memorandum from Thomas Thacher, Superintendent of Ins., Mar. 18, 1959, Bill Jacket, L. 1959, ch. 649, at 14-15. As written however, the prompt notice provision was broader than necessary—it applied to all liability policies, not just those covering automobile accidents. As the Chairman of the New York City Bar Association observed, the 1958 law “appears to be broad enough to require a disclaimer notice in cases such as policies of product liability insurance,” and such a disclaimer notice in that situation “might work a burden on the insurer.” Letter from Sheldon Oliensis, Chairman of the Assoc. of the Bar of the City of N.Y., Apr. 14, 1959, Bill Jacket, 26 L. 1959, ch. 649, at 21. The law was therefore repealed and replaced just a year later, to respond directly to this concern. See id. The new law was addressed solely to the motor vehicle accident situations that motivated the original law: If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer or denial of coverage to the insured and the injured person or any other claimant. Ins. Law § 167(8) (1959) (emphasis added). The new text made it “clear that this provision is only applicable to claims resulting from motor vehicle accidents, as was originally intended.” Letter from Michael J. Murphy, Gen. Mgr., Ass’n of N.Y. State Mut. Cas. Cos., Mar. 18, 1959, Bill Jacket, L. 1959, ch. 649, at 6. The law was amended again in 1975 to extend the prompt disclaimer notice requirement beyond motor vehicle accidents to death and bodily injury claims arising from other types of accidents: If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer or denial of coverage to the insured and the injured person or any other claimant. Ins. Law § 167(8) (1975). Comments from the Division of the Budget indicated that the chief concern related to personal expenses arising from bodily injuries: “It 27 is in the interests of protecting the consumer to prevent undue delay in the adjudication of cases involving liability insurance coverage, particularly where settlement fees are necessary to pay medical and legal expenses.” Budget Report, July 22, 1975, Bill Jacket, L. 1975, ch. 775, at 8. In a memorandum to the Governor on the proposed 1975 legislation, Superintendent of Insurance Thomas Hartnett commented on existing disclaimer law more broadly. The “decided cases,” he observed, hold that “mere delay by the insurer in making a disclaimer of liability is not enough to estop the insurer from asserting noncoverage under the policy; but where prejudice to the insured as a result of an unreasonable delay in disavowing is shown, the insurer is estopped to assert noncoverage and becomes liable.” Mem. from Thomas A. Harnett, Super. of Ins., July 18, 1975, Bill Jacket, L. 1975, ch. 775, at 13 (quotation omitted). “Where the insured is not prejudiced as a result of insurer’s delay in disclaiming liability under the policy,” Hartnett emphasized, “the insurer is not estopped from disclaiming liability as a matter of law.” Id. (quotation omitted). Hartnett concluded that outside the context of death and bodily injury claims, “insurers may not with impunity unreasonably delay taking a position with respect to coverage when such delay operates to prejudice the injured party or insured.” Id. at 14. 28 C. This Court Should Not Apply The Legislative Prompt Disclaimer Duty Of § 3420(d) Outside Its Legislatively Mandated Confines, Especially Where The Insurers Had No Duty To Defend As shown in the prior section, § 3420(d) reflects a legislative judgment that common-law waiver and estoppel principles should be supplanted by a duty to disclaim “as soon as is reasonably possible” in one particular context—i.e., accidental death and bodily injury claims—for policy reasons specific to that context. The legislature did not find it necessary to impose that duty in other contexts, and this Court should not override that policy judgment. When the legislature enacts a statute abrogating common-law rules to some extent, “[t]he Legislature is presumed to be aware of the law in existence at the time of an enactment and to have abrogated the common law only to the extent that the clear import of the language of the statute requires.” B & F Bldg. Corp. v. Liebig, 76 N.Y.2d 689, 693 (1990); see Arbegast v. Bd. of Educ. of S. New Berlin Cent. Sch., 65 N.Y.2d 161, 169 (1985). Thus, “to the extent it left [the common law] unchanged,” the legislature is presumed to have “accepted” the “background decisional law.” Hammelburger v. Foursome Inn Corp., 54 N.Y.2d 580, 588 (1981) (citing Transit Comm. v. Long Island R. R. Co., 253 N.Y. 345, 354-55 (1930); Orinoco Realty Co. v. Bandler, 233 N.Y. 24, 30 (1922); People v. Colozzo, 283 N.Y.S.2d 409 (N.Y. Sup. Ct. 1967), aff’d, 303 N.Y.S.2d 348 (2d Dep’t 1969)). 29 The legislature here is presumed to have accepted common-law waiver and estoppel rules as appropriate limits on coverage disclaimers in contexts other than death and bodily injury claims. See Eaton v. N.Y.C. Conciliation & Appeals Bd., 56 N.Y.2d 340, 345-46 (1982) (“Where as here, the statute describes the particular situations to which it is to apply an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded.” (quotation omitted)). If the legislature had been persuaded that a duty to disclaim “as soon as reasonably possible” was required for other types of insurance claims, the law would have been written to create a broader duty. And the law still could be written to apply more broadly—if and when an appropriate legislative record justifying such a change is developed. That record would have to establish, among other things, that common-law waiver and estoppel rules do not suffice to protect insureds’ rights and interests, and that a duty of prompt disclaimer would not unduly interfere with the ability of insurers to investigate claims adequately. No such record currently exists, and it cannot be conjured by inference and imagination. It certainly makes no sense to assume that insureds must be widely suffering from irremediable prejudice under the current common-law rules, given that a remedy for prejudice is built into those rules—if the insured demonstrates prejudice from the insurer’s conduct, including its inaction, the insurer is estopped 30 from denying coverage. See supra at 17-18. By contrast, if an insured cannot show prejudice, then there is no reason to deny the insurer its contractual rights. Further, the policy concerns that underlie § 3420(d) do not apply equally to other types of insurance claims. While the legislature is best positioned to make that assessment, some differences are obvious even absent a full legislative record. For instance, a death or bodily injury claim typically arises from a single traumatic event, involving a short time period and easily ascertainable facts. The coverage investigation thus will generally be straightforward. By contrast, property damage claims often involve a lengthy and complicated factual history, which may potentially implicate multiple coverage conditions and exclusions—especially in environmental contamination cases like this one. In particular, determining when the insured had notice of a potential claim can require significant inquiry into a lengthy and complicated underlying factual history, including which facts the insured knew and when the insured knew them, all derived from information provided by an insured with a strong incentive to avoid a late-notice determination. Requiring the insurer in that very common situation to deny coverage promptly or lose its contractual late-notice defense is not a workable or fair approach. What is more, as the legislative history of § 3420(d) makes clear, there is a particular concern in bodily injury cases with obtaining prompt payment from the 31 tortfeasor’s insurer so that the victim can pay for adequate medical care. See supra at 26-27. Companies potentially responsible for environmental contamination are hardly in the position of a single, injured individual facing serious medical bills and needing a source of payment. Indeed, the corporate insured here waited years to even provide notice of the liability. To the extent a corporate insured needs a coverage determination and the insurer does not respond, a declaratory judgment action is always available, and—as noted—there is no evidence that such actions have failed to avoid prejudice to the interests of commercial insureds. In addition to being unnecessary, a duty to disclaim “as soon as reasonably possible” would also create substantial problems for all parties involved in the process. Under the common-law rules, an insurer that is aware of a potential coverage defense, but lacks the full record necessary to determine its merit, can agree to defend the insured while reserving the right to deny coverage based on its investigation of the potential defense. See supra at 16-17. By contrast, if an insurer knows it will forfeit any defense that—in the estimation of a lay jury—is not asserted soon enough, the insurer will have a strong incentive to deny coverage on the basis of the potential defense, so as not to lose the defense forever. New York courts have disapproved of “disclaim now and investigate later” approaches by insurers. See Admiral Ins. v. State Farm & Cas. Co., 927 N.Y.S.2d 629, 633 32 (1st Dep’t 2011) (citing Ace Packing Co. v. Campbell Solberg Assoc., Inc., 835 N.Y.S.2d 32, 34 (1st Dep’t 2007)). Yet the “disclaim now or forfeit forever” rule urged by LILCO would encourage exactly that kind of approach, inevitably resulting in increased litigation over coverage defenses that are currently resolved through pre-lawsuit investigation and discussion between insurer and insured. Finally, a duty of prompt disclaimer makes no sense at all where, as here, the insurers (1) were excess insurers, (2) whose policies included no duty of defense at all. The policy interest underlying § 3420(d) is to promptly identify the source of payment for an injured individual’s medical bills and other expenses. That interest does not apply here, where the insured was seeking coverage under policies that provided no defense duty and provided indemnification only at excess levels that were not yet triggered. Under these circumstances, there is no legal, logical, or practical reason to impose on the Insurers a duty to act quickly to make a conclusive determination as to whether deny coverage, and if so on exactly what ground. Any duty of prompt disclaimer should be imposed, if at all, only where the insured requires immediate action from its insurer, which is not the case here.6 6 Any new duty to disclaim “as soon as reasonably possible” also should be applied only prospectively, which is appropriate when a new rule represents a “sharp break in the continuity of law.” Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d 184, 191-92 (1982); see Gager v. White, 53 N.Y.2d 475, 483-84 (1981); see also Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07 (1971). The Court 33 III. UNDER COMMON-LAW RULES, THE INSURERS ARE ENTITLED TO JUDGMENT AS A MATTER OF LAW ON THEIR LATE NOTICE DEFENSE The Appellate Division held that LILCO’s notices of occurrence for the Bay Shore and Hempstead sites here were untimely as a matter of law. But the court did not mandate judgment for the Insurers on that basis, because it further held that there was a jury question as to whether the Insurers had fulfilled their duty to deny coverage “as soon as reasonably possible.” No such duty exists, as already shown. The Insurers’ disclaimer instead is governed by traditional common-law rules, which require enforcement of the late-notice condition, unless LILCO can prove that the Insurers intentionally waived enforcement of the condition or that considers three factors in deciding whether to make a new common-law rule non- retroactive. The first is whether the rule “overrul[es] clear past precedent on which litigants may have relied” or “decid[es] an issue of first impression whose resolution was not clearly foreshadowed.” Gurnee, 55 N.Y.2d at 191-92. Replacing waiver and estoppel rules with a new duty to disclaim coverage “as soon as reasonably possible,” even absent waiver or prejudice, would override all the precedent discussed in this brief, on which the Insurers here relied while evaluating LILCO’s coverage claims. The second factor is “the prior history of the rule at issue and the impact of retroactive application upon its purpose and effect.” Id. Common-law waiver and estoppel rules are deeply ingrained in the state’s law and in the longstanding practice of insurers making coverage evaluations. Overriding those doctrines with a new duty of prompt disclaimer would mark a profound, unexpected shift in the law and practice of coverage determinations. The final factor is “any inequity that would be created by retroactive application.” Id. The inequity is obvious: insurers would be forced to pay claims despite unambiguous policy breaches, where the insurers reserved rights while investigating claims and insureds could show no prejudice. 34 prejudice to LILCO estops the Insurers from enforcing it. As shown below, there is no waiver here, and LILCO does not even attempt to establish estoppel. A. LILCO Cannot Show That The Insurers Consciously Abandoned Their Late-Notice Defense Contrary to the Appellate Division’s ruling, under the correct legal standard there is no factual question of waiver here, for a very simple reason: the Insurers expressly and specifically reserved their rights to enforce the notice condition. As discussed above, it is settled that “[r]eservations of right” are “effective … against the defense of waiver.” Gross, 27 N.Y.2d at 269; see supra at 16-17. Until this case, no court applying New York common-law rules had ever allowed a waiver finding where, as here, the insurer made a specific reservation of the particular defense, and did not assert any other defenses. See supra at 16-17. The case LILCO principally relied on below was Estee Lauder, but that case is both wrong on the law and distinguishable on its facts. The insurer in that case made a “sweeping reservation of all of its rights,” but the court held the blanket reservation ineffective against a claim that the insurer had waived the late-notice defense. 873 N.Y.S.2d at 595. The court held that an insurer “must give written notice of disclaimer on the ground of late notice as soon as is reasonably possible after it learns of the accident or of grounds for disclaimer of liability,” and that “failure to do so precludes effective disclaimer.” Id. at 594 (quotation omitted). 35 The reservation of rights was insufficient, the court held, because “the duties to disclaim promptly and specifically are imposed by law, [and] an insurer cannot unilaterally absolve itself of those duties.” Id. at 594-95 (internal citation omitted). The Estee Lauder court simply misstated long-settled New York law governing the enforcement of contractual coverage conditions. The only “duties to disclaim promptly and specifically” that “are imposed by law” are imposed by § 3420(d), and they apply only to accidental death and bodily injury claims. Coverage disclaimers are otherwise governed by waiver or estoppel, which do not include a duty to disclaim promptly, but instead require either a conscious intent to waive or demonstrable prejudice to the insured. The mere passage of time before a disclaimer is asserted is not enough to establish either condition, especially where the insurer expressly reserves its rights. See supra at 15. Estee Lauder also differs materially from this case on its facts. The insurer in Estee Lauder had disclaimed on other specific grounds, without mentioning late notice, before ultimately denying coverage on late-notice grounds. 873 N.Y.S.2d at 594. The Estee Lauder court cited several New York precedents holding that where the insurer asserts specific grounds for disclaiming coverage, it is deemed to have waived any other grounds it was aware of (actually or constructively) but did not assert, even when the insurer makes a blanket assertion of rights. See id. at 36 594-95 & n.2 (citing Hotel Des Artistes, 927 N.Y.S.2d at 271; Benjamin Shapiro Realty, 731 N.Y.S.2d 453; Amro Realty, 936 F.2d at 1431). That principle would have fully sufficed to resolve Estee Lauder without the need for further commentary about a (nonexistent) duty to make a prompt and specific disclaimer in all circumstances. The same principle, however, does not apply here, where the Insurers did make a specific reservation of the right to assert late notice, and did not disclaim on any other grounds. That specific reservation of rights precludes a waiver finding as a matter of law. See supra at 16-17. The foregoing analysis also demonstrates the error in LILCO’s contention below that a jury could find waiver based on the additional information LILCO supplied after the insurers reserved their rights and based on the disclaimer given by other insurers in response to that additional information. See Opp’n to Rearg. Mot. 9 (“a jury could infer waiver from [the Insurers’] inaction following receipt of sufficient information to assert a late defense”). Those facts are not material under the common-law waiver doctrine, which requires the insured to prove that the insurer consciously intended to waive enforcement of a coverage condition violated by the insured. See supra at 14-16. As this Court held in Gilbert Frank, an insurer’s delay in enforcing a coverage condition while investigating a claim does not create a factual issue as to whether the insurer intentionally waived the 37 condition. 70 N.Y.2d at 268 (reversing Appellate Division ruling, 514 N.Y.S.2d 215, 216-17). The Insurers’ alleged “inaction” here does nothing to show that they consciously chose to abandon their reservation and forgo the late-notice defense, especially given that when LILCO finally gave notice, it was not requesting that the Insurers actually provide a defense or fund a settlement. See supra at 6. There is, in short, no triable issue as to whether the Insurers intentionally waived their rights to enforce their policies’ notice condition. B. LILCO Cannot Demonstrate Any Prejudice There is also no triable issue on estoppel. Indeed, LILCO below argued only waiver, and did not even attempt to show that it was prejudiced when the Insurers did not deny coverage immediately on the basis of LILCO’s late notice. Any such argument now would be not only forfeited, but frivolous as well. There is no prejudice because the Insurers’ policies lacked any duty to defend, and thus LILCO did not need a prompt coverage determination to obtain a defense in an ongoing matter. See supra at 6. What is more, the Insurers’ policies were excess policies, and primary coverage was not yet exhausted when notice was given. See supra at 6. For both of these reasons, there was no urgency to the Insurers’ coverage determination, as there might be in a claim for coverage during an ongoing case under a primary policy with a duty to defend. Finally, the Insurers 38 specifically reserved their rights to enforce the notice condition, which defeats an estoppel claim as a matter of law. See Compis, 708 N.Y.S.2d at 772 (“Hartford Steam conducted its investigation and entered into settlement negotiations ‘under a full reservation of rights,’ and thus … estoppel may not be inferred therefrom”); accord O’Dowd v. Am. Surety Co., 3 N.Y.2d 347, 355 (1957); Touchette Corp. v. Merchants Mut. Ins. Co., 429 N.Y.S.2d 952, 955 (4th Dep’t 1980); Lugo, 852 F. Supp. 187 at 191-92. CONCLUSION For the foregoing reasons, the judgment of the Appellate Division should be modified. This Court should hold that the Insurers did not waive their late-notice defense as a matter of law, and the case should be remanded with directions to enter judgment of non-coverage on the Bay Shore and Hempstead sites. Dated: October 7, 2013 MICHAEL L. GIOIA LANDMAN CORSI BALLAINE & FORDP.C. 120 Broadway, 27th Floor New York, New York 10271 Tel.: (212) 238-4800 Fax: (212) 238-4848 -and- ROBERT J. BATES, JR. BATES CAREY NICOLAIDES LLP 191 North Wacker Drive, Suite 2400 Chicago, Illinois 60606 Tel.: (312) 762-3100 Fax: (312) 762-3200 Attorneys for Defendant-Appellant American Re-Insurance Company, now known as Munich Reinsurance America, Inc. ROBERT F. WALSH WHITE AND WILLIAMS LLP One Penn Plaza, Suite 4110 New York, New York 10119 Tel.: (212) 244-9500 Fax: (212) 244-6200 Attorneys for Defendant-Appellant Northern Assurance Company of America 39 J / L. ALTIERI, JR. BOUTIN & ALTIERI, P.L.L.C. P.O. Box 630 Carmel, New York 10512 Tel.: (845) 306-7076 Fax: (866) 585-9604 JONATHAN D. HACKER O'MEL VENY & MYERS LLP 1625 Eye Street, NW Washington, DC 20006 Tel.: (202) 383-5300 Fax: (202) 383-5414 LAWRENCE A. NATHANSON SIEGAL & PARK 533 Fellowship Road, Suite 120 Mount Laurel, New Jersey 08054 Tel.: (856) 380-8900 Fax: (856) 380-8901 Attorneys for Defendant-Appellant Century Indemnity Company