Presenting Insurance Claims: Notice Under Property, Other First-Party Policies ...

   ... Continued.

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 This is the second in a series of posts on Presenting Insurance Claims.  The series begins with issues related to making Insurance Claims under Property and other First-Party Insurance Policies. This post is a very recent update of a Section from my Chapter on "Claim Handling Issues," in "CAT Claims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company)(COPYRIGHTED.  ALL RIGHTS RESERVED,  NO REPRODUCTION OR ANY OTHER USE OF THIS MATERIAL MAY BE MADE FOR COMMERCIAL PURPOSES.):

Asterisks (***) indicate material omitted for ease of reference:

CAT Claims: Insurance Coverage for Natural and Man-Made Disasters

Database updated November 2009--UPDATED FEBRUARY 2010

John K. DiMugno, Steven Plitt, Dennis J. Wall

 

Chapter

2. Claim Handling Issues

by Dennis J. Wall, Esquire

 

COPYRIGHTED MATERIAL.  NO USE OR REPUBLICATION OF THIS MATERIAL MAY BE MADE IN ANY FORM AND IN ANY MEDIUM WITHOUT WRITTEN ADVANCE PERMISSION.  ALL RIGHTS RESERVED.

 

§ 2:3.Notice as condition precedent, or not, to first-party property insurance coverage

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...Continued ...

 

Whether liberally construed or not, provisions for notice of loss have triggered a conflict among the courts in whether the insurance company can or must be proven to have been prejudiced where the notice is late. In one view, perhaps the majority view, breach of the notice of loss provision results in a presumption of prejudice to the insurance company, but the presumption is rebuttable:

 

If the insured breaches the notice provision, prejudice to the insurer will be presumed, but may be rebutted by a showing that the insurer has not been prejudiced by the lack of notice.[9]

 

A competing view among the courts requires the insurance company to prove prejudice resulting from an alleged breach of a provision requiring notice of a loss.[10]

 

Regardless of whether prejudice is proven or rebuttably presumed, “the total failure to comply with the notice and proof of loss conditions will excuse insurer liability due to the failure of a condition precedent.”[11] This holding has been applied in a case where the policyholder submitted a claim for earthquake damage in California, but withdrew the claim, and then presented the earthquake damage claim a second time—eight years later. In this case, the California appellate court treated the second presentation of the claim as though it had never before been presented, including the one and only notice of the loss which was given in this case eight years before.[12]

 

Finally, in some cases, judicial interpretation of the policy provision requiring notice of loss may also involve judicial interpretation concerning the substance of the given claim. For example, in a recent Texas case, an intermediate Texas appellate court held that a particular “first-party claim under a homeowner's insurance policy” was subject to a properly applied “manifestation trigger of coverage theory.” In other words, the claim in that case was governed, apparently, by when the damages first manifested themselves in the sense that they were easily capable of being perceived, recognized, and understood.[13] The loss in that case involved rot, mold, or fungi. The notice of loss provision was governed by the same “manifestation trigger” upon which the entire coverage claim depended, the Texas appellate court held in that case.[14]

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[FN9]Bankers Ins. Co. v. Macias, 475 So. 2d 1216, 1218 (Fla. 1985) (case involved policyholder's claim to personal injury protection benefits as a result of an auto accident). Accord in a third-party claims situation, i.e., under a liability insurance policy provision:  Assurance Co. of Am. v. Lucas Waterproofing Co., 581 F. Supp. 2d 1201, 1207 (S.D. Fla. 2008).

 

   Even then, there can be questions of fact which preclude the entry of summary judgment on late notice.  It was held, for example, in the case of Vision I Homeowners Ass'n v. Aspen Specialty Ins. Co., 2009 WL 4927162 *4 (S.D. Fla. Opinion Filed December 22, 2009):

 

In order to prevail on a late notice defense, "a party must therefore show that there are no genuine issues of material fact regarding 1) what the Policy required with respect to notice, 2) when notice was provided, within the meaning of the Policy and Florida law, 3) whether notice was timely, and 4) whether prejudice exists, either by operation of the unrebutted presumption or otherwise."  [Citation omitted.]  The Court concludes that Aspen cannot carry that burden on this record.

 

[FN10]See, e.g., Churchill v. Factory Mut. Ins. Co., 234 F. Supp. 2d 1182, 1190 (W.D. Wash. 2002) (claim by shopping center owner for mold and water intrusion damage): “In order for an insurer to rely on late notice as a defense, the insurer bears the burden of establishing that it suffered actual prejudice.” In this case, the defense of late notice was not successful; in this case, the defense was “dismissed.” Churchill v. Factory Mut. Ins. Co., 234 F. Supp. 2d 1182, 1190 (W.D. Wash. 2002).

 

[FN11]1231 Euclid Homeowners Ass'n v. State Farm Fire and Cas. Co., 135 Cal. App. 4th 1008, 1018, 37 Cal. Rptr. 3d 795, 802 (2d Dist. 2006).

 

[FN12]1231 Euclid Homeowners Ass'n v. State Farm Fire and Cas. Co., 135 Cal. App. 4th 1008, 1018, 37 Cal. Rptr. 3d 795, 802–03 (2d Dist. 2006).

 

[FN13]See Allstate Ins. Co. v. Hunter, 242 S.W.3d 137, 144 (Tex. Ct. App. Fort Worth 2007).

 

[FN14]Allstate Ins. Co. v. Hunter, 242 S.W.3d 137, 144 (Tex. Ct. App. Fort Worth 2007).

 

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Comments

[antonebraga]

When it comes to our property, what do we expect in case of loss (hurricane, tornado, earthquake, flood, fire, etc.)? The disaster itself is news. What happens after the dust settles is the story: the aftermath shock.

Insurance policyholders, and more importantly disaster survivors, need to be informed of access to equality--basic rights and information. The internet reaches far more people than anyone would have ever imagined, though difficult to gather those willing to pause, to inspect, to further...to think on their own. And yet, much is available gratis! It just takes looking.