Insurance companies require that insureds provide them with timely notice of claims. The notice requirement may vary from policy to policy, and it’s important to comply with the specific provisions detailed in your policy. Failure to do so can have disastrous consequences for your company’s bottom line.
The Notice Requirement
Notice requirements are in place to protect insurance companies’ interests. Insurers want to know about claims or anticipated claims as early as possible so they can prepare for potential liability. They also want to be able to mount appropriate and effective responses, including conducting investigations while witnesses are still available and memories of what occurred remain clear.
A commercial general liability (CGL) insurance policy protects businesses against claims of property damage, bodily injury or personal injury brought by third parties. All CGL policies require prompt notice when someone asserts a claim against your business. In addition to actual claims, most CGL policies also require that you promptly inform the insurer of accidents or occurrences that may result in a claim. For instance, if a customer sustains an injury after slipping and falling on your business premises, you must put the insurer on notice. Notice requirements typically dictate that you must provide the insurer with certain relevant information, such as the time and place where the incident occurred and the names and contact information of the injured party and any witnesses. Once a claim is made or a lawsuit is brought against your company, you must immediately forward to the insurer all demands, notices, summonses, and other process documents you receive.
Beyond CGL policies, other types of business insurance policies also have notice requirements. For instance, some businesses have excess liability insurance policies, which also require prompt notice of claims or occurrences that may trigger coverage. Commercial property insurance and other “first-party” insurance policies (which cover losses suffered by the policyholder) also require timely notice of losses that may lead to claims.
How to Provide Notice
When you are faced with a claim, or you suffer a loss or an occurrence that could result in a claim, consider which of your insurance policies could potentially be affected. Review all your applicable policies for their notice provisions, and provide notice accordingly. Notice typically must be in writing and tendered to a proper representative of the insurance company. Unless the policy requires direct notice to the insurance company, it’s typically sufficient to give notice to an authorized agent of the insurer. Notice should contain all relevant details necessary to allow the insurer to respond to and investigate the claim or to determine whether a claim is likely to be asserted against you.
When to Give Notice
Policies typically require timely notice, but the requirement often does not list a specific length of time. For instance, a policy may require that notice be given “immediately” or “as soon as practicable.” While such terms may be open to interpretation, courts will judge whether timeliness was sufficient based on the “reasonableness” of the notice – as in, what a reasonable insured would have done in similar circumstances.
What Factors May Excuse Late Notice
Courts may excuse late notice under certain circumstances. For instance, if the insured was unaware of the occurrence or loss, this may affect what is considered reasonable and in some cases may excuse the delay. In a small number of cases, insureds have been excused for failing to give timely notice because they believed they were not liable for the occurrence or injury, and the court considered this belief to be objectively reasonable. It is also possible that courts will excuse late notice if the circumstances surrounding the occurrence provided no reasonable basis for the insured to believe liability would result. Sometimes, insureds fail to give timely notice because they errantly believe the loss falls outside the scope of the policy’s coverage. If this belief is deemed reasonable, and the policyholder gives prompt notice after becoming aware that the claim could be covered under the policy, courts may deem it justifiable. However, failing to familiarize yourself with your policies and what they cover is not a valid defense for late notice.
The Consequences of Late Notice
Failing to comply with the insurer’s timely notice requirements can have dire consequences for your business. In some cases, the insurance company may be excused from all liability.
Therefore, if you are faced with a claim or an occurrence that may lead to a claim, do not take any chances. Promptly review your policies for notice requirements and provide notice in compliance with the policy.
If you have failed to provide timely notice of a claim or if you are involved in a dispute with your insurance company, contact us. We have the expertise, experience, and tenacity to make insurance companies keep their promises to you and your businesses.