Insurer Wants Its $3.5M Back Because City Delayed Reporting Claims for 5 Years

The city of New Haven’s insurance company is insisting that the city pay back the $3.55 million the insurer paid to settle claims over a 2019 rooming house fire in which two people were killed.

Pennsylvania Manufacturers Association Insurance Co. has alleged that the Connecticut city breached the terms of its excess insurance policy by not informing it of the wrongful death claims “as soon as practicable” but instead waiting five years when the trial had already begun before notifying it.

Both of the underlying lawsuits alleged that the fire victims were residents of a West Street building that was being utilized as a rooming house when the fire occurred. The complaints alleged that the city was aware that the owner of the property did not obtain permits to operate the property as a rooming house, and that the property was not in compliance with state and local fire codes.

By 2021, complaints had been filed against the city. Because the building owner had only $100,000 in insurance coverage, the city was, from the beginning, destined to be the target defendant, according to the insurer’s complaint.

The two lawsuits eventually settled for a total of $14.5 million. PMAIC issued a commercial excess liability policy to the city effective September 30, 2018, through September 30, 2019. The PMAIC policy provided general liability coverage excess to a $10 million policy issued by Argonaut Insurance Co., which in turn, sat above the city’s $1 million self-insured retention. PMAIC ended up paying $3.55 million, which it now seeks to recover, plus costs.

Both the Argonaut and PMAIC policies included conditions requiring the city to provide notice “as soon as practicable” of an event that might give rise to a claim.

Despite that policy language, for approximately five years, the city failed to report the claims to PMAIC, according to the complaint. On May 13, 2024, during jury selection of the consolidated lawsuits, PMAIC first received notice. “The notice was five years late, sent to the wrong address, and not emailed as the policy required,” the insurer alleges.

One week later, on May 21, 2024, PMAIC says the city wrote to it stating that a verdict on liability was likely and that the city faced significant exposure. According to the complaint, the city demanded that PMAIC settle the claims within its layer of insurance during “an upcoming mediation scheduled for tomorrow,” advising that “trial has commenced.”

PMAIC says it immediately retained counsel to participate in the defense. “However, litigation deadlines had long passed, trial strategies had been set, experts had been retained (and not retained), and witnesses had been deposed (and not deposed),” the insurer maintains. “Simply put, the die had been cast–and PMAIC had been placed in the precise position that its policy language, and the notice requirements, had been drafted to protect it against.”

The insurer said it paid to settle the suits after it belatedly learned of them but reserved its right to recover the monies.

PMAIC maintains it has been materially prejudiced by the “unexcused and unreasonable” late notice of the underlying lawsuits. The insurer argues that it was forced to settle to “avoid/mitigate potential exposure to additional liabilities” and it was unable to take any steps that would have “substantially lessened the value of the underlying claims.”

The complaint was filed in federal district court.