Policyholders should know the wording of their insurance policies with respect to noticing of claims. When an occurrence, even one that has not yet developed into a claim, becomes known to the policyholder, notice to the insurance carriers should be provided as soon as possible. Failure to give timely notice can have negative results.
For instance, if a policyholder has a “claims-made” policy, which requires notice be given during the policy period (or reporting period), coverage can be forfeited if notice is not provided in accordance with the policy language. (See Craft v. Phila. Indem. Co., 343 P.3d 951, 953 (Colo. 2015)). Although some courts have held that, even with claims-made policies, an insurer is still required to demonstrate prejudice as a result of late notice when a policyholder fails to provide timely notice of a claim, (see, e.g., Prodigy Communs. Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374, 375 (Tex. 2009)), some courts do not require a showing of prejudice. See Templo Fuente v. National Union Fire Insurance Company, 224 N.J. 189, 129 A.3d 1069 (N.J. 2016).
With occurrence-based insurance policies, the notice provision often requires "prompt notice" or notice "as soon as practicable." In most jurisdictions, when an insurer seeks to deny coverage on the basis of "late notice", the insurer must show that it was prejudiced as a result. Many courts have adopted a strong policy against forfeiture of coverage based on a late notice defense. Thus, if notice is given as soon as reasonably possible, even if that is not within the time prescribed by the policy, courts will not find a breach on the part of the insured.
In order to win on a late notice defense, courts often require that the insurer demonstrate (1) that the notice provision in the policy was breached; and (2) that the insurer suffered "appreciable prejudice" as a result of that breach. Appreciable prejudice may be shown only if (1) substantial litigation rights have been irretrievably lost (i.e., unavailability of witnesses, physical changes in the scene, etc.); and (2) but for the insured’s delay in issuing notice, the insurer would have had a meritorious defense to the underlying action. Courts set a very high burden on insurers seeking to disclaim coverage for defense and indemnity coverage on the basis of late notice— requiring a likelihood of appreciable prejudice.
The key takeaway with noticing claims to an insurance company is simple - don’t procrastinate. Whether a policyholder has a claims-made policy or an occurrence-based policy, notice the claim right away. That way you can avoid losing the possible recovery from the insurance carriers of defense costs incurred.
Moreover, when the policyholder sends notice to the insurance carrier, draft the notice letter to include any and all known and unknown insurance policies issued by the insurance carrier. Also, send the notice letter by both email (many insurance carriers are requiring notice by email) and by certified mail or registered mail to track delivery.
With occurrence-based insurance policies, the notice provision often requires "prompt notice" or notice "as soon as practicable." In most jurisdictions, when an insurer seeks to deny coverage on the basis of "late notice", the insurer must show that it was prejudiced as a result. Many courts have adopted a strong policy against forfeiture of coverage based on a late notice defense. Thus, if notice is given as soon as reasonably possible, even if that is not within the time prescribed by the policy, courts will not find a breach on the part of the insured.
In order to win on a late notice defense, courts often require that the insurer demonstrate (1) that the notice provision in the policy was breached; and (2) that the insurer suffered "appreciable prejudice" as a result of that breach. Appreciable prejudice may be shown only if (1) substantial litigation rights have been irretrievably lost (i.e., unavailability of witnesses, physical changes in the scene, etc.); and (2) but for the insured’s delay in issuing notice, the insurer would have had a meritorious defense to the underlying action. Courts set a very high burden on insurers seeking to disclaim coverage for defense and indemnity coverage on the basis of late notice— requiring a likelihood of appreciable prejudice.
The key takeaway with noticing claims to an insurance company is simple - don’t procrastinate. Whether a policyholder has a claims-made policy or an occurrence-based policy, notice the claim right away. That way you can avoid losing the possible recovery from the insurance carriers of defense costs incurred.
Moreover, when the policyholder sends notice to the insurance carrier, draft the notice letter to include any and all known and unknown insurance policies issued by the insurance carrier. Also, send the notice letter by both email (many insurance carriers are requiring notice by email) and by certified mail or registered mail to track delivery.
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