Christiania General Ins. Corp. v. Great American Ins. Co.

Issue Discussed: Notice

Submitted by Lawrence S. Greengrass, Ann E. Halden

Date Promulgated: September 3, 1992

Christiania General Ins. Corp. v. Great American Ins. Co., 979 F.2d 268 (2d Cir. 1992)

Court: United States Court of Appeals, Second Circuit

Issues Decided:  Whether a reinsurer may deny indemnification where it asserts that notice of the claim was untimely.

Key Holding

A reinsurer sued for declaratory judgment arguing that it should be relieved of its indemnity obligations as a result of the ceding company’s failure to provide prompt notice of the claims under the reinsurance contract. The court found that the reinsurer can be relieved from its indemnification obligations because of a ceding company’s failure to provide timely notice, but, absent a provision providing timely notice as a condition precedent to coverage, under New York law the reinsurer must show it was prejudiced by the delay.  In order to trigger a duty to provide notice, the court stated that the reinsured must conduct an objective evaluation of the known facts.  Thus, where a notice provision requires notice when it “appears likely” that a claim “may” involve a reinsurer, the court stated that notice would generally be required where there was “reasonable possibility” of a contract being implicated based on an objective assessment of the available information.

Key Takeaways

A ceding company’s duty to report a claim is triggered by the objective evaluation of the facts.  A reinsurer asserting a late notice defense must show it was prejudiced by the untimely notice, unless the contract specially provides that timely notice is a condition precedent to coverage.

* Lawrence S. Greengrass is Senior Counsel and Ann E. Halden is Special Counsel at Mound Cotton Wollan and Greengrass LLP, where they specialize in reinsurance litigation and arbitration.