Notice, notice, notice. This should be your mindset when it comes to notifying your insurance carrier of a potential claim or loss. I get it. Notice means opening up a claim number and the potential increase in insurance premiums. Yet, untimely notice could mean fighting with your insurance carrier as to whether you provided them prompt notice. Thus, I operate with the “notice, notice, notice” mindset in providing notice of a potential claim or loss that could trigger duties or obligations under the policy. It is the better safe than sorry approach and avoids the needless notice fight.
The property insurance opinion in SFR Services, LLC v. Hartford Insurance Company of the Midwest, 2022 WL 2340519 (S.D.Fla. 2022) illustrates this “untimely notice” fight and, importantly, how certain policy language can change the dynamics of this fight. Here, notification of a hurricane roof damage claim was provided by the insured to the property insurer almost three years after the hurricane. In the interim, the insured had their roof repaired on multiple occasions. Finally, the insured notified the property insurer and the claim was denied. The insured sued the property insurer for coverage and the insurer moved for summary judgment arguing the insured failed to provide it timely notice as required by the policy.
“[N]otice is a condition precedent to coverage, and an insured’s failure to provide ‘timely notice of loss in contravention of a policy provision is a legal basis for the denial of recovery under the policy.” SFR Services, supra, at *2 (citation omitted).
However, just because an insurer claims it did not receive timely notice does not end the discussion. There is a two-step process. “First, the Court must determine ‘whether the insured provided timely notice.’ Second, ‘if notice was untimely, prejudice to the insurer is presumed, but that presumption may be rebutted.’” SFR Services, supra, at *2 (citations omitted).
Step 1- Whether the Insured Provided Timely Notice
Whether the insured provided timely notice employs a reasonable person standard. “[N]otice is necessary when there has been an occurrence that should lead a reasonable and prudent man to believe that a claim for damages would arise.” SFR Services, supra (citation omitted).
Step 2- If Notice is Untimely and Prejudice is Presumed, that Presumption may be Rebutted
If notice is untimely, prejudice is presumed; but, this presumption may be rebutted by the insured.
To carry this burden, an insured must show that the insurer was able to inspect the property in the same condition it was in right after the loss by presenting evidence creating a genuine dispute of fact as to ‘(a) whether better conclusions could have been drawn without the delay in providing notice, (b) whether those conclusions could have been drawn more easily, (c) whether the repairs to the affected areas that took place in the interim would complicate and evaluation of the extent of the damage or the insured’s efforts to mitigate its damages, or (d) whether an investigation conducted immediately following the occurrence would not have disclosed anything materially different from that disclosed by the delayed investigation.’”
SFR Services, supra, at *3 (citations omitted).
The Twist
But in this case, there is a twist. And it is a crucial twist to this two-step process.
The Court looked at language in the property insurance policy that provided the insurer had “no duty to provide coverage under this policy if the [Insureds’] failure to comply” with their duties “is prejudicial to [Defendant].” SFR Services, supra.
The insured argued that this policy language removes the presumption of prejudice in favor of the insurer and shifts the burden on the insurer to PROVE prejudice, i.e., that the insured’s failure to comply is prejudicial to the insurer. There is a huge difference between prejudice being presumed because of untimely notice (which has to be rebutted by the insured) and the insurer required to prove the prejudice. The Court found that under this language in the policy, the insurer is actually required to show prejudice:
Upon careful consideration, the Court must reject the body of precedent within this district that a presumption of prejudice may arise when a policy provision requires that an insured’s failure to comply with an enumerated duty be prejudicial to the insurer. Because there is no presumption of prejudice, a genuine issue of material fact remains as to whether the Insureds’ failure to timely notify Defendant was prejudicial, and the Motion must be denied. To hold otherwise would create a regime under which an insurer may obtain a different result in federal court than that required by the new line of cases in Florida state court.
SFR Services, supra.
This “twist” changes the dynamic of the “untimely notice” fight all due to policy language that basically says that the insurer has no coverage obligations if the insured’s failure to comply with his/her/its duties is prejudicial to the insurer. The Court’s ruling is ultimately saying that the insurer cannot hide behind the presumption of prejudice requiring the insured to rebut the prejudice because the policy, itself, puts that burden on the insurer. Big difference.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.