Impatient Owner Voids Title Policy
The background facts, gleaned mostly from the Nassau County Supreme Court decision
, are as follows: All State Properties purchased the property in September, 2004, apparently obtaining coverage from Old Republic at that time. A couple of months later, it commenced a holdover proceeding against one LaMonica, who was in possession. LaMonica’s answer in the holdover proceeding, dated December 28, 2004, alleged that he was actually the owner of a fractional interest in the premises. Old Republic was notified by letter dated February 16, 2005 that a claim against the property had been asserted. This letter “‘demanded’ written confirmation of coverage within 7 days and assurance that Old Republic would take all necessary action to clear title.” On March 16, 2005, All State Properties commenced a quiet title action against LaMonica, Old Republic and the title agency (the action against the title agency was later discontinued). All State Properties ultimately prevailed against LaMonica and sought to recover its costs from Old Republic.
The trial court found that one month between the tender of defense and commencement of the action was “an insufficient amount of time as a matter of law to investigate the claim in this complex case” [emphasis supplied]. In addition, once All State Properties commenced its action against Old Republic “all cooperation on plaintiffs part ceased” and, since cooperation is a condition precedent under the policy, Old Republic was under no further obligation to defend or reimburse. The Second Department affirmed.
The insured didn’t help its cause by delaying seven weeks before notifying the insurer and then demanding immediate action. The Appellate Division makes clear that “the mere act of commencing suit against one's insurer does not, standing alone, constitute noncooperation sufficient to relieve the insurer of its obligations under the policy.” In the instant case the insured’s “noncooperation was established by the fact that it also precipitously brought its own action on the claim, instead of affording Old Republic a reasonable time within which to investigate the claim and determine how to proceed.”