Reinsurer Need Not Establish Prejudice for Late Notice Defense Under Illinois Law, Says Second Circuit
04.30.15
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(Article from Insurance Law Alert, April 2015)
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September 2014 Alert reported on a Second Circuit decision holding that under Illinois law, late notice defeats a ceding insurer’s coverage claim regardless of prejudice to the reinsurer.
AIU Ins. Co. v. TIG Ins. Co., 2014 WL 4211080 (2d Cir. Aug. 27, 2014). There, the Second Circuit explicitly ruled that Illinois law does not require a showing of prejudice. The decision is noteworthy because neither the Illinois Supreme Court nor any Illinois appellate courts have directly addressed this issue. In a decision issued this month, the Second Circuit again ruled that Illinois law permits a reinsurer to deny coverage based on late notice, regardless of prejudice.
Granite State Ins. Co. v. Clearwater Ins. Co., 2015 WL 1474605 (2d Cir. Apr. 2, 2015). Citing to
AIU, the court noted that the consensus drawn from various state and federal decisions interpreting Illinois reinsurance law was that Illinois has endorsed a no prejudice rule.