## Facts

- Gardner-Denver Co. rented a mobile air compressor to Dic-Underhill Construction Co. for use at New York’s World Trade Center construction site.
- The Port Authority of New York and New Jersey owned the World Trade Center project and was insured by American Home Assurance Co.
- American Home’s policy was understood to provide certain coverage for losses suffered by the Port Authority’s contractors, including Dic-Underhill, in connection with the project.
- In mid-August 1973, the air compressor was stolen from the construction site.
- On or shortly after the theft, Dic-Underhill notified American Home and pursued coverage under the Port Authority’s insurance program.
- Nearly two years later, in March 1975, American Home’s adjuster informed Dic-Underhill that the American Home policy did not cover the theft.
- In April 1975, Dic-Underhill first notified its own insurer, St. Paul Fire & Marine Insurance Co., of the loss.
- St. Paul had issued an “all risk” contractors’ equipment policy requiring Dic-Underhill to give notice of loss “as soon as practicable.”
- Gardner-Denver sued Dic-Underhill and the Port Authority to recover the value of the stolen compressor.
- Dic-Underhill pursued coverage from St. Paul, and St. Paul moved for summary judgment, arguing that the roughly 19-month delay in notice barred coverage; the Port Authority asserted a derivative claim as subrogee.

## Issues

1. Whether Dic-Underhill’s first notice to St. Paul about 19 months after the theft satisfied the policy requirement of notice “as soon as practicable” under New York law.
2. Whether Dic-Underhill’s reliance on the belief that American Home would cover the loss excused the delay in notifying St. Paul.
3. Whether the Port Authority, as subrogee/derivative claimant, could recover from St. Paul despite Dic-Underhill’s late notice.

## Decision

- The court granted St. Paul’s motion for summary judgment.
- The court held that the 19-month delay in notifying St. Paul was untimely as a matter of law and barred coverage under the St. Paul policy.
- The court rejected the contention that Dic-Underhill’s expectation of coverage from American Home, standing alone, justified withholding notice to St. Paul for an extended period.
- Because timely notice was a condition precedent to coverage, St. Paul had no duty to indemnify Dic-Underhill, and the Port Authority’s derivative/subrogation claim failed as well.

## Legal Principles

- Under New York law, a policy requirement of notice “as soon as practicable” demands notice within a reasonable time in light of the circumstances.
- Timely notice is a condition precedent to an insurer’s liability; when notice is late, the insurer may disclaim without proving prejudice (under the New York rule applied by the court).
- Although reasonableness of notice can present a fact question, a substantial delay that is unexplained or unjustified may be deemed unreasonable as a matter of law on summary judgment.
- An insured’s belief that another insurer will pay does not automatically excuse noncompliance with its own policy’s notice requirement; the belief must be reasonable on the record and does not permit the insured to ignore its contractual notice duty.
- A subrogee or party claiming through the insured generally takes subject to the same policy defenses available against the insured, including late notice.

## Conclusion

The court held that Dic-Underhill’s approximately 19-month silence to St. Paul about the theft violated the “as soon as practicable” notice condition as a matter of law, and that Dic-Underhill’s reliance on potential coverage from the Port Authority’s insurer did not excuse the delay; accordingly, St. Paul was entitled to summary judgment against both Dic-Underhill and the Port Authority’s derivative claim.


Gardner-Denver Co. v. Dic-Underhill Construction Co., 416 F. Supp. 934 (1976)