N.Y. Judge Predicts California Would Adopt Bad Faith Exception to Notice-Prejudice Rule

NEW YORK — Argonaut Insurance Co. may be relieved of having to show it was prejudiced by its cedent’s failure to provide timely notice if it can show that the cedent acted in bad faith, a New York federal judge has held, predicting that California courts would recognize a bad faith exception to the notice-prejudice rule in the reinsurance context.

On Aug. 6, Judge Denise Cote of the U.S. District Court for the Southern District of New York determined that Argonaut’s cedent, the Insurance Company of the State of Pennsylvania, breached the reinsurance contract’s notice provision. However, the judge …