May an Insurance Company Refuse to Provide Coverage if it Gets Late Notice of a Claim but is not Harmed by the Late Notice?
All insurance policies require a policyholder to provide notice to the insurer, and the policyholder should always provide prompt notice in writing to the address and in the form the policy requires. The consequences of failing to provide timely notice, however, depend on the type of policy.
A “claims-made-and-reported” policy provides coverage for a claim brought against the insured during the policy period and which is reported by the insured to the insurer within a short period after the expiration of that policy period (usually 90 days). If the insured misses that deadline, the insured is out of luck, even if the insurer has actual notice of the lawsuit through some other means (for example a phone call or through the press) and even if the late notice does not cause the insurer harm. This was the result in a recent case involving Harvard University and Zurich Insurance. Harvard provided notice well after it was required to, and Zurich did not have to provide coverage. [Insert link here]
In an “occurrence” based policy, on the other hand, coverage is triggered by when the event that causes damage occurred (typically property damage or personal injury). In these types of policies, while prompt notice is required, to get out of coverage, the insurer must prove that it was prejudiced by the late notice. That can happen where the policy does not provide notice until a case is well under way and either evidence is lost or the insured has been held liable before the insurer has a chance to hire a lawyer to defend.
- By David Mack