Opinion ID: 3029577
Heading Depth: 3
Heading Rank: 1

Heading: Identifying and Classifying the Conflict

Text: Applying the above framework, we must first determine whether there is an “actual” conflict between the New York and Pennsylvania late notice laws. Pennsylvania requires an insurer to establish it was prejudiced by an insured’s late notice before it can disclaim coverage on those grounds (the “prejudice rule”). Brakeman, 371 A.2d at 198. Under New York law, “absent a valid excuse” for late notice, an insured’s “failure to satisfy the notice requirement vitiates the policy” regardless of whether the insurer can show prejudice (the “no prejudice rule”). Security Mutual, 293 N.E.2d at 440. Because there are relevant differences between the New York and Pennsylvania late notice laws, we must proceed to the second prong of the inquiry and determine if this is a true or false conflict. Hammersmith contends there is a false conflict because only Pennsylvania’s interests will be harmed if the Court does not apply its law. Hammersmith reasons that the application of Pennsylvania law will not impair the interests underlying New York law because, if an insurer actually suffered “the harm New York’s rule is intended to avert . . . [,] then [it could establish prejudice and] avoid its coverage obligation even under Pennsylvania law.” Appellant’s Br. 32. Conversely, applying New York’s no-prejudice rule would impair Pennsylvania’s interest in protecting an insured or accident victim from the “unnecessary forfeiture of insurance benefits.” Id. at 31. 21 We disagree with Hammersmith and find there is a true conflict between Pennsylvania and New York law. As Hammersmith points out, Pennsylvania’s prejudice rule is designed to safeguard the interests of the insured and accident victim by protecting them against forfeitures on technical grounds. Brakeman, 371 A.2d at 196-98 & n.8. On the other hand, New York’s law, by requiring strict compliance with notice provisions, is meant to protect insurers from fraud or collusion, and enable them to “take an active, early role in the litigation process, and in any settlement discussions and to set adequate reserves.” Argo Corp. v. Greater N.Y. Mut. Ins. Co., 827 N.E.2d 762, 765 (N.Y. 2005). We believe both states’ interests are implicated on the facts of this case. Although the named insured, DKM, had its headquarters in New York (App. 875a) and thus is not a Pennsylvania resident, the accident victim is a Pennsylvania domiciliary and was injured while working in Pittsburgh. In Brakeman, the Pennsylvania Supreme Court made clear that the prejudice rule serves the public interest by ensuring that accident victims are not denied “recovery against the insurance company because it received late notice of the accident, even though it suffered no prejudice as a consequence thereof.” 371 A.2d at 198 n.8. New York’s interests are also implicated even though the insurer, TIG, is not a New York resident. There is no evidence that New York intended its “no-prejudice” rule to protect only resident insurers, rather than all insurers doing business in the state of New York. Because TIG issued an insurance policy in New York to a New York resident, New York clearly has a regulatory interest in this 22 matter.12 Thus, there is a true conflict between Pennsylvania and New York law, and we must determine which state has the most significant relationship to this dispute.