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The two steps are reasonableness in the delay and prejudice in the lateness of the notice.
These are the steps summarized by the Supreme Court of Appeals of West Virginia in a recent case involving questions of late notice under a liability insurance policy. The Court summarized its long-standing rules on this subject into the aforementioned two steps:
Thus, it is apparent that a two-step inquiry determines whether late notice precludes coverage. First, we must consider the length of the delay and whether the delay was reasonable. If the delay was not reasonable, the inquiry ends, and coverage will be foreclosed. However, if the delay was reasonable, then the burden shifts to the insurer under the second part of the analysis. If the insurer can demonstrate prejudice from the late notice, coverage is precluded. If the insurer cannot show that it was prejudiced by the late notice of its insured’s claim, though, coverage is not barred by the insured’s failure to provide timely notice.
Travelers Indem. Co. v. U.S. Silica Co., ___ S.E.2d ___, 2015 WL 7045391, under the Court's heading, "III. Discussion" (W.Va. November 10, 2015)(page numbers not provided by Westlaw before citation). [Emphasis added.]
The Court left no doubt in this case that its two-step analysis of late notice is progressive, meaning that if the first step of this condition precedent is not satisfied, that ends the matter and the second step is never reached in such a case. The case at bar was such a case, the Court said:
In the case sub judice, we conclude that U.S. Silica has failed to demonstrate that its explanation for its significant delay in notifying Travelers of the silica claims was reasonable—both because the delay was substantial and because its proffered reason to excuse its delay, i.e., that it was unaware of the subject policies, is not reasonable. Absent a demonstration of reasonableness, the burden does not shift to the insurer to prove that it was prejudiced by the delayed notice, and the inquiry necessarily ends with a finding that coverage is precluded by the insured’s failure to comply with the policy’s notice provision.
Travelers Indem. Co. v. U.S. Silica Co., ___ S.E.2d ___, 2015 WL 7045391, see concluding paragraphs at the end of the Court's "III. Discussion" (W.Va. November 10, 2015)(page numbers not provided by Westlaw before citation). [Italics by the Court.]
Please Read The Disclaimer. ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements). See in particular § 5:14, "Coverage or Policy Defenses" to Bad Faith Settlement Claims, § 5:24 "Coverage or Policy Defenses" to Wrongful Refusal or Failure to Defend Claims, and § 5:49 "Coverage or Policy Defenses" to Inadequate Defense Claims. All rights reserved.
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