584 N.Y.S.2d 290 (1992) (citing cases under New York law). Moreover, a party seeking to avoid obligations under a contract must ordinarily show prejudice or material breach. Id.
The June 1994 Agreement does not expressly condition John's duty upon the promptness of Daniel's notice, nor does John make any claim of prejudice arising from the allegedly delinquent notice of the deduction from Daniel's taxes.
Nonetheless, it might be argued that the prompt notice provision in this case should be construed as a condition precedent to John's obligation to indemnify Daniel for a claim. Certainly, John's duty to indemnify Daniel for a claim is necessarily conditioned upon his receiving notice of the claim, but not necessarily upon his receiving prompt notice. Without notice, John could not be aware of his obligation to pay. However, there is no similarly compelling reason that John cannot indemnify Daniel for a claim merely because notification is delayed.
However, the indemnification agreement permits John to contest or litigate claims against Daniel that are subject to indemnification. It could be argued that the prompt notice provision should be treated as a condition precedent to John's obligation to indemnify Daniel, because prompt notice is necessary to permit John to effectively exercise his right to contest the claim.
New York insurance law provides a possible analogy to support such a reading of the prompt notice provision. Under New York law, a notice provision in an insurance contract operates as a condition precedent; an insurer need not show prejudice to rely on the defense of late notice. See Security Mut. Ins. Co. v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 440, 293 N.E.2d 76, 340 N.Y.S.2d 902 (1972).
Courts have justified the rule that notice provisions in insurance contracts are to be construed as conditions precedent on several grounds. Prompt notice permits insurers to protect themselves against fraudulent claims by timely investigation while witnesses and evidence are still available, enables insurers to better maintain sufficient reserve funds by making early estimates of potential exposure, and facilitates settlements by giving insurers early control over claims. See Unigard, 79 N.Y.2d at 581-82; see also American Home Assurance Co. v. International Ins. Co., 219 A.D.2d 143, 641 N.Y.S.2d 241 (1st Dept. 1996).
However, despite some superficial similarities between the indemnification agreement and insurance contracts, this Court declines to create a new exception to the general rule that contractual obligations are to be construed as independent promises, rather than conditions precedent to performance. The New York Court of Appeals has declined to extend the insurance exception to reinsurance contracts. See Unigard, 79 N.Y.2d at 583-84. The court reasoned that a reinsurer, unlike a primary insurer, is not obligated to the insured to provide a defense against or to investigate a claim, so that notice is not essential to permit the reinsurer to fulfill its contractual obligations. Id. at 583. The fact that a reinsurer has a right, as opposed to an obligation, to consult with and advise the primary insurer on the handling of a claim was held to be insufficient to create a presumption that a notice provision in a reinsurance contract should be read as a condition precedent. Id. at 583-84. Failure to provide prompt notice to a reinsurer does not excuse the reinsurer's performance, unless the reinsurer demonstrates actual prejudice. Id. at 584. See also American Home Assurance, 219 A.D.2d at 149-50 (declining to extend exception to excess insurance contracts).
Here, John has no obligation to litigate on Daniel's behalf (unless Daniel expressly requests that he do so). John's right to contest a claim, like the reinsurer's right to participate in the litigation and investigation of a claim, is insufficient to create a presumption that prompt notice is a condition precedent to John's obligation to pay. Because John has failed to allege any prejudice from the delay, Daniel's allegedly late notice, even if it did not satisfy his obligation to provide notice "as soon as practicable," does not excuse John from paying the claim.
Furthermore, John's request for a jury trial on the issue of whether Daniel satisfied the prompt notice provision will be denied. Since the prompt notice provision is not a condition precedent to John's obligation to pay and John alleges no prejudice from the delay, it is irrelevant whether Daniel satisfied the provision in this case. Thus, there is no material factual issue for a jury to decide. See American Home Assurance, 219 A.D.2d at 150 (factual dispute over whether excess insurer received late notice "need not be resolved as, absent any allegation of prejudice . . . [the excess insurer] should not be permitted to disclaim coverage on this basis").
IV. The Motions for Counsel Fees and Costs Will Be Denied
The parties' applications for counsel fees and costs will be denied. The parties' claims and defenses were not frivolous, and no purpose would be served by awarding fees and costs in this dispute.
For all of the foregoing reasons, Defendants' motion for contempt is hereby denied; Defendants' motion for an order releasing them in accordance with their proposed Release is hereby denied; and Defendants' motion for attorney's fees and costs is hereby denied. Daniel Palmadessa's motion for indemnification in the amount of $ 9,956.00 is hereby granted. His motion for attorney' fees and costs is hereby denied. John Palmadessa's demand for a jury trial is hereby denied. In addition, this Court's June 25 Order is hereby amended in accordance with this Opinion.
Settle order on notice.
It is so ordered.
New York, N.Y.
December 4, 1996
ROBERT W. SWEET
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