Christina Phillips | Property Insurance Coverage Law Blog | August 6, 2019
Policy language varies when it comes to how and when an insured is required to give notice of a claim. Some policies have a definitive time frame setting forth when notice must be given, but others use terms such as “prompt,” “immediate” or “as soon as practicable.” When the policy does not provide a definitive timeframe, the question of whether an insured’s notice complied with the policy’s notice requirement can be questioned. In such situations, courts will look to various factors to determine whether the insured’s notice was “reasonable.”
In that regard, I recently wrote a blog, Assessing the ‘Reasonableness’ of Notice, which addressed the various factors a court will look at to determine whether notice of a claim is reasonable. Two recent cases from the Northern District of Illinois demonstrate exactly how the application of these factors to the facts of a given case can result in differing outcomes.
By way of recap, there are five factors an Illinois state or federal district court will look at in determining the reasonableness of notice under an insurance policy:
- 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 coverage is available; and
- Prejudice to the insurer.
In Huntington Chase Condominium Ass’n v. Mid-Century Insurance Company,1 the board became aware that its property may have sustained hail damage in August 2014. At that time, it was reported by a resident that storm damage might have occurred on May 12 or 20, 2014. Huntington did not report the claim to its carrier until November 2014.
Mid-Century argued that it had been prejudiced because sometime after the storm event and before notification Huntington had replaced 12 of the 53 roofs. The court ultimately concluded that there was no prejudice to Mid-Century where it was not responsible for paying the replacement cost of those 12 roofs and was able to inspect and reach conclusions about the purported hail damage to the remaining 41 roofs.
The court also looked at the sophistication of Huntington. The court ultimately concluded that while it was not a bank or insurance company, Huntington, as a corporate entity, was to be considered sophisticated. However, despite the fact that it was “sophisticated,” the court noted that its relative sophistication in the fields of commerce and insurance did nothing to show that it should have been made aware of the event earlier or moved faster to verify that a hail storm had taken place.
Noting that the that the board took prompt action after becoming aware of the potential damage to retain a roofer to investigate and file a claim, the court concluded that the board’s delay in notification between August 2014 and November 2014 was not unreasonable.
In contrast, the court in Towne Place Condominium Ass’n v. Philadelphia Insurance Company,2found that the association’s delay in reporting damage from the same May 20, 2104, storm was unreasonable.
Town Place originally reported its claim on July 24, 2014, as having an April 12, 2014, loss date. In connection with its claim, Towne Place noted that it did not know if it had “damage from any other storms.” Philadelphia investigated the claim and ultimately denied coverage on September 17, 2014, stating that the buildings did not sustain damage from “this year’s storms.” Nine months later, Philadelphia was advised that Towne Place had retained counsel. In October 2015, Towne Place’s counsel hired a meteorologist to investigate whether the damage was caused by a different storm date. On December 3, 2015, Towne Place notified Philadelphia that it was now asserting a May 20, 2014, date of loss.
Noting that the policy required Towne Place to give notice “[a]s soon as possible,” including a “description of …when” the damage occurred, the court concluded that Towne Place’s initial July 24, 2014, notification which included the statement “[w]e don’t know if we’ve had damage from any other storms” was insufficient to given notice of the May 20, 2014, loss. As such, the court assessed whether the December 3, 2015, notice was reasonable.
In assessing the factors, the court found that three factors weighed heavily against reasonableness. First, the court concluded that as a corporation managing a large property, with access to various experts including legal counsel, Towne Place was a sophisticated business entity when it came to homeowners’ insurance claims.
Second, it concluded that the insured’s awareness of an event that may trigger insurance coverage also weighed heavily against reasonableness. In that regard, the court noted that the insured was conclusively aware of an event at least as of July 24, 2014, that caused damage.
Third, the court found that the insured’s diligence weighed against reasonableness. In part, the court focused in on the time frame after Philadelphia denied the claim, noting that Towne Place did not perform any investigation during the nine-month period after the denial.
Notwithstanding the fact that Philadelphia admitted that it did not suffer any prejudice from Towne Place’s delay as it was able to investigate the loss, the court reasoned that the insured’s delay in reporting the claim eighteen months after the event, sixteen months after it placed the original claim, and over fourteen months after Philadelphia denied the claim was not insignificant and ultimately granted summary judgment in favor of the insurer. Notably, in its analysis the court in Towne Place did not cite or appear to consider the Huntington decision. One wonders if it had, whether it would have changed its conclusion.
The Towne Place and Huntington decisions highlight that the facts of a given case have a great impact on the way the reasonableness factors are applied. In other words, here, both insureds were making a claim related to the same storm date. One set of facts supported that the notice was reasonable, one did not. Regardless of the difference in conclusions, the Towne Place and Huntington decisions highlight the fact that when it comes to assessing reasonableness, condominium associations are considered sophisticated entities in insurance related matters.
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1 Huntington Chase Condominium Ass’n v. Mid-Century Ins. Co., 397 F.Supp.3d 687 (N.D. Ill. March 29, 2019).
2 Towne Place Condominium Ass’n v. Philadelphia Ins. Co., 2019 WL 3287837 (N.D. Ill. July 22, 2019).