New York's Insurance Notice Statute and Contractual Choice of Law

Two recent decisions have held that despite an express choice-of-law clause selecting New York law to apply to an insurance policy, a policyholder is not entitled to the protection of New York's statute requiring an insurance company to show prejudice before coverage is forfeited on the grounds of late notice, unless the policy was also issued or delivered in New York. These decisions are contrary to the general rule that a contractual choice-of-law clause should be read as selecting the substantive law of a particular state, and not its conflict-of-law rules. The “issued or delivered” language of the notice-prejudice statute is a conflict-of-law provision, and so does not apply to limit the statute's scope when the parties already have selected the substantive law of New York to apply to their contract. Nevertheless, given the recent case law disregarding this rule, policyholders should review carefully the wording of any choice-of-law clauses in their insurance policies, particularly when selecting New York law.