STEADFAST INSURANCE COMPANY v. << (2007)

Order, Supreme Court, New York County (Edward H. Lehner, J.), entered May 31, 2006, which, to the extent appealed from as limited by the briefs, denied plaintiff's cross motion for summary judgment seeking a declaration that it owes no duty to provide a defense or coverage in the underlying North Carolina wrongful death action, unanimously affirmed, with costs.

 The state of California adheres to the “Notice-Prejudice Rule” under which “a defense based on an insured's failure to give timely notice requires the insurer to prove that it suffered substantial prejudice.   Prejudice is not presumed from delayed notice alone.   The insurer must show actual prejudice, not the mere possibility of prejudice” (Shell Oil Co. v. Winterthur Swiss Ins. Co., 12 Cal.App.4th 715, 760, 15 Cal.Rptr.2d 815, 845 [1993] [citations omitted];  see also Northwestern Tit. Sec. Co. v. Flack, 6 Cal.App.3d 134, 141, 85 Cal.Rptr. 693, 696-697 [1970];  Insurance Co. of Pa. v. Associated Intl. Ins. Co., 922 F.2d 516, 524 [9th Cir.1991] ).

California law is imbued with a strong public policy against technical forfeitures in the insurance context (see Cal. Civ. Code § 3275;  Insurance Co. of Pa., 922 F.2d at 524;  California Compensation & Fire Co. v. Industrial Acc. Commn., 62 Cal.2d 532, 535, 399 P.2d 381, 383 [1965];  O'Morrow v. Borad, 27 Cal.2d 794, 800, 167 P.2d 483, 487 [1946] ), and California courts may refuse to enforce a provision in an insurance policy that violates public policy (see Pacific Empls. Ins. Co. v. Superior Court, 221 Cal.App.3d 1348, 1359, 270 Cal.Rptr. 779, 784-785 [1990] ).   Thus, for example, even where an insurance policy makes the notice provision a condition precedent to coverage, an insurer must nonetheless demonstrate prejudice to avoid liability based on the breach of notice requirement (see Insurance Co. of Pa., 922 F.2d at 524;  Hanover Ins. Co. v. Carroll, 241 Cal.App.2d 558, 565, 50 Cal.Rptr. 704, 708-709 [1966] ).

 Given these principles, the motion court correctly determined that under California law, a policy endorsement waiving the requirement that an insurer must demonstrate prejudice in order to disclaim for untimely notice, thereby waiving the Notice-Prejudice Rule, is void as against public policy (see Service Mgt. Sys. v. Steadfast Ins. Co., 216 Fed.Appx. 662 [9th Cir.2007] ).