Christina Phillips | Property Insurance Coverage Law Blog | April 27, 2019
As any contributor on this blog will tell you, the first step in assessing any claim is to read the Policy. Policy language is ever evolving and changing, especially when it comes to notice requirements. The purpose of a notice requirement in an insurance policy is to enable the insurer to make a timely and thorough investigation.1 Many policies however contain language which provides that notice is to be provided “as soon as practicable,” “promptly,” “immediately” or “within a reasonable time.”
In States where there is not an automatic rebuttable presumption of prejudice in favor of the insurer,2 or where the time limit is expressly defined, i.e., within one year of the date of loss, courts will typically assess five factors in determining the reasonableness of notice under an insurance policy. The factors are:
- The specific language of the policy’s notice provision;
- the insured’s sophistication in commerce and insurance matters;
- the insured’s awareness of an event that may trigger insurance coverage;
- the insured’s diligence in ascertaining whether policy coverage is available; and
- prejudice to the insurer.3
While arising in the liability context, the Moje case provides a good analysis of the factors a court will look at in determining the reasonableness of the notice provided.
The court reminds us in Moje that slight differences in policy language can have a big impact on when notice needs to be provided. Policy language requiring “immediate” are typically construed strictly and interpreted as requiring notice to be provided “expeditiously.” Whereas language requiring notice “as soon as practicable” can often require a more fact intensive review of the remaining four factors noted above.4 Regardless of the specific language, the court does remind us that notice language is typically “mandatory.” And does not allow the insured to pick and choose between reporting minor and major events it may or may not want the insurer knowing about.5
In assessing the insured’s sophistication, the court will consider such factors as the insured’s history with insurance claims, what the insured had been specifically told about the policy’s requirements, whether the insured had any insurance training, and/or whether the insured had read the policy.
The third factor is the insured’s awareness of an event that may trigger insurance coverage. Was the insured aware of the injury? In the property context this can be a little more convoluted—for instance, hail damage. One such factor a court may look at is if an insured’s car was in the driveway at the time of the hail storm and became damaged, that fact might support that the insured should have been aware of an event which might trigger insurance coverage for his or her home.
Closely related is the fourth factor of the insured’s diligence in ascertaining whether policy coverage was available. Again, courts will look to whether the insured had made similar claims before, or if they read and reviewed the policies it believes may provide coverage.
Lastly, courts will evaluate whether the insurer was prejudiced by the notice provided. It is important to note that Illinois law considers prejudice as a factor in decision whether reasonable notice was given. In the property insurance context, the court may look at such factors as whether the insurer was able to conduct an investigation, or if the condition of the property changed substantially from the date of loss.
In determining whether the notice provided as “prompt,” “reasonable,” “practical” or the like, courts will typically consider all these factors in assessing the totality of the circumstances. In other words, no one factor trumps any other.6 Therefore, in a situation where there are questions about the promptness or the notice, one should undertake this same factor analysis to predict how a court may decide the issue.
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1 US Fidelity & Guarantee Co. v. Maren Engineering Corp., 82 Ill.App.3d 894 (1st Dist. 1980).
2 See generally Tri-Etch, Inc. v. Cincinnati Ins. Co., 909 N.E.2d 997 (Ind. 2009) (holding Indiana is one such state where prejudice is presumed).
3 Moje v. Federal Hockey League, LLC, 2019 WL 1399966 (N.D. Ill. March 28, 2019).
4 Id. at *6-7.
5 Id. at 6 citing State Auto Prop. and Cas. Ins. Co. v. Brumit Services, 877 F.3d 355, 358 (7th Cir. 2017).
6 Moje, 2019 WL 1399966 at *6.