Insurance companies require that policyholders provide proper notice of a claim and, in many cases, an occurrence that may lead to a claim. Failure to comply with the notice requirement may result in the insurer being excused from all liability. Therefore, if you are faced with a claim or an occurrence that could result in a claim, it is important to review all of your business insurance policies that may be impacted to understand your obligations with regard to giving notice.
Why Insurers Require Proper Notice of Claim
Insurers include notice provisions in their policies to protect their interests. They want to be able to adequately investigate and respond to claims. Prompt notice of a claim or an occurrence that could lead to a claim allows an insurer to conduct an investigation while witnesses are still available and memories are still fresh.1 It also allows insurers to gather necessary information to determine whether a claim is fraudulent, to correct dangerous conditions that could lead to more liability, and to establish adequate reserves against potential liability.2
What Constitutes Proper Notice?
Notice must be both sufficient and timely in accordance with the policy language, which varies from policy to policy. Most general commercial liability (CGL) policies require that the insured provide proper notice of not only claims, but all occurrences that could reasonably result in a claim. For instance, if a customer falls and gets injured on your premises, the insurer will want to be put on notice. Some incidents may impact more than one policy, such as both CGL and workers’ compensation. In these cases, notice provided under one policy does not constitute notice under the other policy, even if both policies are issued by the same carrier.3 Different policies will have specific requirements as to what constitutes sufficient and timely notice.
Sufficient Notice
Generally speaking, notice must be provided in writing to a proper representative of the insurance company. Unless the policy requires direct notice to the insurance company, it is generally acceptable to provide notice to an authorized agent of the insurer. You generally must provide particulars to the time, place and circumstances of the occurrence, the names and addresses of the injured and available witnesses, and other relevant information to allow the insurance company to investigate the claim or determine if an occurrence is likely to lead to a claim. 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 documents you receive. If the notice provided is not sufficient, the insurer has a good faith obligation to notify you within a reasonable time and give you a chance to correct the deficiencies.4
Timely Notice
While policy provisions require timely notice, the wording typically does not specify an amount of time. Rather, the time requirement is expressed in terms such as “immediately,” “as soon as practicable,” “promptly,” or “within a reasonable time.” Judgment of whether notice is deemed sufficiently timely is typically based on what a reasonable insured would have done in similar circumstances. Generally speaking, courts will examine the facts and circumstances of each particular case in assessing the reasonableness of the notification.5
Factors Affecting the Reasonableness of Notice
Certain circumstances may excuse an insured’s failure to provide timely notice. If the insured was unaware of an occurrence or a loss, this may excuse a delay in filing notice. Less commonly, an insured may be excused for failing to give timely notice because they had a good-faith belief they were not liable for an occurrence, and the court deemed the insured’s belief to be objectively reasonable. It is also possible that an insured’s failure to give timely notice will be excused if the court finds the insured had a reasonable belief that the loss fell outside the scope of the policy coverage, as long as the policyholder exercised due diligence in examining their policies. As one court stated, “[T]he insured must not have been negligent and must have at least made a reasonable effort to discover the existence of coverage.”6
If you are involved in a dispute with your business insurance company, contact us. We have the expertise, experience, and tenacity to make insurance companies keep their promises to you and your business.
1 P.R. Mallory & Co., Inc. v. American Cas. Co. of Reading, Pa., 920 N.E.2d 736, 748 (Ind. 2010)
2 West Bend Co. v. Chiaphua Indus., Inc., 112 F. Supp. 2d 816, 822 (E.D. Wis. 2000)
3 Sorbara Construction Corp. v. AIU Ins. Co., 11 N.Y.3d 805, 868 N.Y.S.2d 573, 897 N.E.2d 1054 (2008)
4 Crumly v. Travelers Indem. Co., 225 Tenn. 667, 676, 475 S.W.2d 654, 658-59 (1972).
5 State Farm Fire and Cas. Co. v. Walnut Ave. Partners, LLC, Nos. A08A2059, A08A2139, A08A2146, at *2 (Ga. App. Mar. 16, 2009)
6 Grinnell Mut. Reins. Co. v. Jungling, 654 N.W.2d 530, 542 (Iowa 2002)
