Excess Insurer Not Able To Enforce Notice Provision In Contract With Primary Insurer

The Supreme Court of New Jersey ruled 6-1, with a strong dissent, that an excess insurer — a risk retention group — was not able to refrain from indemnity on the ground that the underlying insurer failed to comply with a 120-day notice provision. The case is Gazis v. Miller, 2006 WL 686489 (March 20, 2006).
The court gave the usual analysis when a notice provision is considered in the context of an occurrence policy: there is no harm, and therefore the notice provision cannot be enforced, unless there was actual prejudice to the insurer’s rights. Otherwise, courts hold, the insurer would be allowed to take a forfeiture and receive a windfall. The dissent, by Justice Rivera-Soto, said that the usual analysis does not apply in this case, because both sides of the bargain were sophisticated insurers who could negotiate on equal terms, and the notice provision should be enforced as written.

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