October 29, 2012
“When in doubt, provide notice” to preserve and protect a Claim to Insurance Coverage. This universal rule will once again come into play as Hurricane Sandy and potential Catastrophic Damages approach the Northeastern United States.
Florida law represents one point of view about the effect of Late Notice on the availability of Insurance Coverage whether Notice is arguably “late” under a Property Insurance Policy as under a Liability Policy. The general rules were outlined and applied in detail in a Hurricane Wilma case decided under a Property Insurance Policy this month, Slominski v. Citizens Property Insurance Corp. The Policyholders in that case argued that they believed that the cost of repairing the damage would not exceed their deductible as their justification for allegedly late reporting of their claim. Citizens’ Motion for Summary Judgment was granted because the Policyholders did not rebut the presumption of prejudice to Citizens which accrues from Late Notice.
Another view of the Late Notice Coverage Defense makes Late Notice always prejudicial, not simply a rebuttable presumption as in Florida or where, under New York law, the insurer must prove prejudice at least in the reinsurance context. However, the parties may change the law in their insurance contracts.
In something of a change of pace, a recent decision on Late Notice of a Catastrophic Loss was made under New York Law by a Federal Appeals Court in Pennsylvania. Adding to the change of pace, the Late Notice Defense was successfully raised by a Reinsurer, in the case of Pacific Employers Insurance Co. v. Global Reinsurance Corp. of Am. New York Law otherwise would have applied in this regard, but the parties agreed to alter it in their reinsurance contract.
The Third Circuit panel announced the parties’ Reinsurance agreement as to notice, at the beginning of its opinion in this case as follows:
[Under the Reinsurance Certificate notice condition,] PEIC must provide Global with a definitive statement of loss (“DSOL”) on a subset of claims or occurrences, specifically those that involve a death, serious injury, or lawsuit. When must PEIC do this? We believe it is promptly after someone reports such a claim or occurrence to it, not promptly after it demands indemnity from Global. If PEIC dawdles, the consequences can be severe. PEIC’s compliance with this provision is a condition precedent to Global’s duty to reinsure ….
Pacific Employers Insurance Co. v. Global Reinsurance Corp. of Am., Applying the contract provision that the parties to this Reinsurance Certificate themselves put in their agreement, the Third Circuit held that there was Late Notice in violation of the quoted contract provision and remanded in favor of Global Reinsurance Corporation.
As was said in the beginning, so it is still a universal ‘best practice’ in presenting Insurance Claims: “When in doubt, provide notice”.