Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

Adam and Sylvia Spector purchased a home in 2000. The home was built by a company called Bentley Homes. The record lists the Spectors’ home size in excess of 8,000 square feet. Fireman’s Fund Insurance Company provided insurance to the Spectors and to other homeowners in the area who also owned Bentley built homes.

At times, the Spectors noticed water on the inside of their window sills but did not report the water to the insurance company. The Court recognized the Spectors were not experts in moisture intrusion and understood the homeowner had to hire experts to help them determine the problem.

The insureds did not hire the experts at the first sign of water.

The Court’s record reads:

During heavy rain storms, Plaintiffs experienced some minor dripping problems which were limited to isolated areas, usually window sills. However, during dry seasons, there were many consecutive months where Plaintiffs had no water leakage problems.

It was not until 2006 when the window paint started to peel away that the insureds determined they needed help. First, they hired a construction consultant to inspect the home. This expert only did a visual inspection and then explained to the Spectors they should hire a stucco expert. A firm was then hired to evaluate the external stucco of the home. The firm tested the property with a moisture meter and found areas of concern, but, unsure of the problem, the firm recommended destruction of walls.

At this point, the Spectors also learned other Bentley built homes were experiencing serious problems due to water damage. However, after hiring two experts, they were still not sure if there was a problem or what was happening. Finally, the Spectors consulted a plaster expert who tested the property. In November of 2007, the plaster expert was able to provide the Spectors with information about the water damage he discovered.

After sending an adjuster and an engineer to evaluate the property, Fireman’s Fund denied the Spectors’ claim.

This policy, like many other policies for residential insurance, includes exclusion for water damage caused by repeated leakage or seepage. An exception in the policy does provide coverage for hidden or concealed damage reported to the insurance company within 30 days of detection or within 30 days of when the damage could have been detected.

I am sure many public adjusters have reviewed policies with similar language and have claims where the date of discovery or manifestation of the damage is at the heart of the adjustment.

In this case, the record indicates Fireman’s Fund sent an adjuster to the property to investigate the loss, and the Spectors testified the adjuster told them “the claim should be covered.” The record also reflects that during the same meeting the adjuster told the insureds to hire a lawyer for the claim, and even recommended a lawyer! Why would the insurance company’s adjuster encourage the insureds to hire a lawyer?

Perhaps this was because of the three other homes in the neighborhood with water damage claims against Fireman’s Fund. Or, maybe, it was the insurance company’s engineer’s influence -- the same engineer assigned to this claim found similar damage at another property and Fireman’s Fund paid.

The Court wrote a detailed Memorandum of fact findings from the trial. It discussed the other water damage claims against Fireman’s Fund and listed other insureds who were paid by Fireman’s Fund for similar damages. The insurance company expert appears to have determined the damages from the Spectors home were exactly the same as damages to the other Bentley homes. Fireman’s Fund paid more than $120,000.00, on the other claim.

The claim is complicated because Fireman’s also alleged the property damage was excluded because of construction defects. The insureds had replaced the roof of the home and many windows. The insurer stated it would not pay for the damages caused by the faulty or defective roof or windows,

The Court ultimately determined that the insureds were entitled to damages for the water damage which was hidden from view.

The Court wrote:

The exception requires that the insureds report the hidden or concealed damage within thirty (30) days…[t]he Court finds that the Policy provided allows an insured party a ‘rolling” thirty (30) day grace period each time new damage is discovered, or where there is an ongoing discovery of damage. (Emphasis added)

The Spectors had the burden to prove they complied with the 30 day rule and the Court agreed the applicable time period began when the third expert found the damage and ended when the claim was reported. This length of time was only a few weeks and qualified for coverage based on the wording of the policy.

The Court awarded $104,432.50 for water damages at the property.

At the same time the Court decided this breach of contract case, it also considered allegations of bad faith and deceptive business practices. The Court denied these counts because the insureds failed to establish by clear and convincing evidence the bad faith requirements—that the insurer lacked a reasonable basis for the denial and it used deceptive practices.

My sources tell me a public adjuster was not hired by the insureds to help with this claim. So, I am wondering if any public insurance adjusters have comments about how other claims are being handled with similar issues in Pennsylvania and elsewhere. And also, what services could have been provided to the Spectors if they had retained a public adjuster?

In Vision I, a homeowner’s association in Palm Beach County sustained damage to its property from hurricane Wilma on October 24, 2005. The association’s insurance policy required that it provide “prompt notice” of damage to the insurer. The association gave verbal notice of a lesser loss to the insurer about eight months after the hurricane, but did not give written notice of property-wide damage until August 2007, some 22 months after the loss. The association filed suit after the insurer did not pay, and the insurer filed a motion for summary judgment, arguing a defense of late notice.

The insurer argued that prejudice should be presumed, given the nearly two year delay between the hurricane and the notice given by the insured. The association argued that the calculation for any delay should be between discovery of the damage and notice given to the insurer. The Southern District Court sided with the association on the calculation for delay in a late notice claim.

“Under Florida law, a failure to provide timely notice of loss in contravention of a policy provision is a legal basis for the denial of recovery under the policy. See Waldrep, 400 So.2d at 785 (‘Notice is necessary when there has been an occurrence that should lead a reasonably prudent man to believe that a claim for damages would arise.’). Indeed, Florida law provides that the failure to give timely notice creates a rebuttable presumption of prejudice to the insurer. ‘If the insured breaches the notice provision, prejudice to the insurer will be presumed, but may be rebutted by a showing that the insurer has not been prejudiced.’ Macias, 475 So.2d at 1216. The ‘determinations of (I) whether the notice provision was complied with and (ii) what is a reasonable time under the surrounding circumstances are questions of fact.’ Bray & Gillespie IX, LLC v. Hartford Fire Ins. Co., 2009 WL 1513400, at *6 (M.D.Fla.2009) (citing Waldrep, 400 So.2d at 785). In order to prevail on a late notice defense, ‘a party must therefore show that there are no genuine issues of material fact regarding 1) what the Policy required with respect to notice, 2) when notice was provided, within the meaning of the Policy and Florida law, 3) whether notice was timely, and 4) whether prejudice exists, either by operation of the unrebutted presumption or otherwise.’ Id. The Court concludes that [the insurer] cannot carry that burden on this record.

The Bray court faced a similar scenario to the present facts-that is, the insurer argued that the insured provided late notice in violation of the policy provision requiring notice ‘as soon as practicable.’ Id. The court held that under Florida law, application of this specific policy language is for the jury, as such language means that ‘notice is to be given within a reasonable time in view of all the facts and circumstances of each particular case.’ Id. at *7 (citing Morton v. Indemnity Ins. Co. of North America, 137 So.2d 618 (Fla. 2d DCA 1962), State Farm Mut. Auto. Ins. Co. v. Ranson, 121 So.2d 175 (Fla. 2d DCA 1960)). The Bray court concluded that the ‘surrounding circumstances’ of that case were ‘replete with factual disputes’ regarding when notice was required to be given and the manner in which notice was provided. Id. For example, the court noted that the plaintiff ‘presented evidence which, if credited, shows that [the plaintiff] did not know the extent of the claimed damage would implicate the [insurer's] policy until 2005, after certain reports were concluded.’ Id. at *7, fn. 9. The court emphasized that since ‘the duty to provide notice arises when a reasonable person, viewing all available facts and information, would conclude that an award implicating the policy is likely,’ the insurer could not establish for purposes of summary judgment, when the duty to notify the insurer first arose. Id. (citing See Harbor Ins. Co. v. Trammell Crow Co., Inc. 854 F.2d 94, 99 (5th Cir.1988)). Therefore, the court concluded that ‘[a]bsent a finding as to exactly when the duty to notify arose, the [c]ourt cannot determine that notice was untimely as a matter of law,’ precluding the granting of summary judgment on the issue of late notice. Id.”

While this case is not binding on all Florida courts, it does cite Florida state case law in its analysis and offers some excellent reasoning as to why late notice claims should be evaluated based on the date the damage was discovered rather than the date of the event that initiated the loss.

In all areas of law, it is important to understand parties’ respective burdens of proof. Understanding and correctly applying the burdens of proof is particularly important in first party property insurance. At times, insurance carriers misconstrue the burdens of proof, usually to their advantage.

The typical Florida insurance policy obligates the policyholder to produce documents and information requested by the insurance carrier and may contain a provision requiring the policyholder to cooperate with the insurer in its investigation of the claim. The cooperation requirement is intended to help the insurance carrier to determine liability once notice of a claim has been given and to protect the insurance carrier from fraudulent claims.

The Florida Supreme Court has explained that a different presumption applies to a policy cooperation clause because a failure to cooperate defense “sometimes relieves an insurer of liability. . . .[a] failure to cooperate is a condition subsequent and it is proper to place the burden of showing [substantial] prejudice on the insurer.”

Where an insured cooperates to some degree with document production, but the insurance carrier denies the claim because every single document was not produced, the issue of whether there has been a material breach of the insurance policy that would relieve the insurance carrier of its payment obligation is a question of fact for a jury. Schnagel v. State Farm Mutual Automobile Ins. Co., 843 So.2d 1037 (Fla. 4th DCA 2003); Haiman v. Fed. Ins. Co., 798 So.2d 811 (Fla. 4th DCA 2001).

It is important to note the difference between these presumptions for policyholders in Florida, particularly given insurance carriers’ aggressive approach in defending hurricane and other claims, based on a failure to cooperate defense. Insurance carriers argue the failure to cooperate almost as an absolute defense to claims, citing a policyholder’s failure to produce every single item of information and documentation. As Chip Merlin and Corey Harris have previously noted in their posts Cooperation Clause Does Not Require Policyholder’s Slavish Obedience and The Limits Of An Insured’s Obligations To Cooperate, if a policyholder cannot produce every single document requested by the insurance carrier, but they comply to the extent possible, it is unreasonable for the insurance carrier to continue to hold open the policy post-loss conditions and demand the documents that the policyholder is unable produce. The claims handling process must go on. Particularly where policyholders are in substantial compliance with the insurer’s requests, the insurer has a high burden under Florida law. Policyholders should not be strong-armed by insurance carriers that misconstrue their burden of proof and treat a failure to cooperate defense as an absolute bar to recovery.

Supplemental Claims

As Shaun pointed out last week, there is no clear definition of what is a “supplemental” claim, and there is no case law in Florida that is directly on point. The dictionary definition of a supplement is an addition. As Shaun explained last week, other states’ case law requires a supplemental claim to be an addition in the type of damage rather than the amount of damage. Those cases are not binding on Florida courts, but if found persuasive by a Florida court, here is an example of what a supplemental claim might look like in a hurricane damage case.

Hurricane A hits Florida in 2005 causing damage to Homeowner B’s house. Homeowner B timely notifies Insurance Company C, which timely inspects the damage. After a thorough inspection, Insurance Company C finds damage to the doors and roof. Insurance Company C then pays Homeowner B the benefits due under the insurance policy to make the necessary repairs to the doors and roof. Homeowner B makes the repairs. In 2009, after several seasons of relatively quiet windstorm activity in Homeowner B’s part of the state, Homeowner B decides to clear out the birds’ nests accumulating in his hurricane shutters. He notices that some of the shutters have been damaged and do not close properly. He contacts a licensed contractor to inspect, who attributes the damage to the last major windstorm to pass through this area, Hurricane A in 2005.

When Homeowner B contacts Insurance Company C about the damage, Insurance Company C is likely to open up a supplemental claim for damage to the windows and shutters that was not previously addressed in the 2005 claim. This supplemental claim for newly discovered damage would now subject to coverage defenses, including failure to provide timely notice.

Reopen Claims

Based on the same persuasive cases outside of Florida from Shaun’s post last week, a reopened claim would look similar, but notice the distinction between the type and amount of loss that are claimed.

Hurricane A hits Florida in 2005 causing damage to Homeowner B’s house. Homeowner B timely notifies Insurance Company C, which timely inspects the damage. After a cursory inspection, Insurance Company C finds damage to the doors and roof. Insurance Company C then pays Homeowner B to replace one door and fifteen tiles on the roof. Homeowner B makes the repairs recommended and paid for by Insurance Company C. In 2009, several years after Hurricane A, Homeowner B goes up into the attic to dig out some old photo albums she hasn’t looked at in years. Homeowner B finds leaks, mold, and rotten roof trusses. Homeowner B contacts a licensed contractor to inspect, who attributes the damage to the last major windstorm to pass through the area, Hurricane A in 2005. The contractor finds that in order to repair the roof properly, it should have been completely replaced rather than repaired with fifteen new tiles.

In this case, a dispute exists about the amount of damage to the roof. This claim for roof damage has already been afforded coverage and partially paid. This type of dispute over the amount of damage makes the case ripe for appraisal. Insurance Company C may classify the reopened claim as a supplemental or “additional” loss because more than the original fifteen tiles are being claimed, but this would be a mischaracterization of the claim. This type of mischaracterization could eventually slip by to result in a denial of the claim that has already been decided was covered.

While there is not a Florida case directly on point with regard to what exactly is a “supplemental claim,” cases from other states shed some light on this issue. A “supplemental claim” is for new or additional damages not previously disclosed or adjusted in an insurance claim. See D.C. Concrete Mgmt, Inc. v. Mid-Century Ins. Co., 39 P.3d 1205 (Colo. App. 2001) (the initial claim was for theft of several items from a job site; while the supplemental claim was for new damage for lost profits never before claimed); Rossmanith v. Union Ins. Co. of Providence, 2001 WL 1451050 (Iowa App. 2001) (the initial claim was related to exterior and interior damage from a hailstorm; while the supplemental claim involved mold damages never before mentioned); Basuro v. 21st Century Ins. Co., 108 Cal. App. 4th 110, 114 (Cal. App. 2d Dist. 2003) (the initial claim was for damage related to the Northridge earthquake in 1994; there were supplemental claims for subsequent roof problems, asbestos damage and cracks in the foundation and moisture damage to the wood floors).

Most insurance policies do not mention or define “supplemental claim.” The question often arises in situations where the insurance carrier is simply attempting to mischaracterize the parties’ disagreement over the amount of loss as a “supplemental claim” in an effort to delay the resolution of the claim, particularly when the insurance carrier has already reached its claim determination and issued payment previously.

If the re-open claim seeks new damages never before claimed, then it may in fact be a “supplemental claim.” That situation is distinguishable from the situation where there is a re-open of a hurricane claim involving roof damage that was not adequately addressed initially or in which there could now be a simple disagreement over the amount of loss. This becomes important: Is the issue one concerning coverage for the loss or is it simply a disagreement over the amount of loss? For help in answering these fact specific questions, consult coverage counsel.

Corey’s posts for the most part address the question of when notice is timely, noting that the answer to the question of when notice is timely depends on the facts and circumstances of each case. This week, I’d like to discuss a little more about the policy reasons behind the timely notice insurance contract provisions. In other words, I hope to answer the question of why timely notice is required. Knowing why timely notice is required is the key for an insured to prepare to rebut an insurance company’s assertion, or worse, a presumption, that notice was untimely.

“The purpose of a provision for notice and proofs of loss is to enable the insurer to evaluate its rights and liabilities, to afford it an opportunity to make a timely investigation, and to prevent fraud and imposition upon it.” State Farm Mut. Auto. Ins. Co. v. Ranson, 121 So. 2d 175, 180 (Fla. 2d DCA 1960); see also, 13 Couch on Ins. § 186:14. The notice provision is also “designed to enable the insurer to ... assess whether it should settle or litigate the claim, if litigation is determined to be the best course of action, to prepare an adequate defense….” 16 Williston on Contracts § 49:109 (4th ed.).

As Shaun and Corey previously stated, in Florida, untimely notice that prejudices the insurer could possibly result in a denial of coverage. Bankers Ins. Co. v. Macias, 475 So.2d 1216 (Fla. 1985). Courts often use the purpose of the notice provision to determine whether a delay in notice has prejudiced the insurer, holding that a frustration of the purpose of the notice provision results in prejudice to the insurer. See e.g., American Mut. Liability Ins. Co. v. Beatrice Companies, Inc., 924 F. Supp. 861, 871 (N.D. Ill. 1996). Thus, an infringement on an insurance company’s right to investigate, protect itself from fraud, determine its liability, prepare an intelligent estimate, or plan for litigation, may result in prejudice to the insurer.

Hurricane damage, like any kind of property damage, may be readily apparent or may not manifest itself until well after the storm has passed. When claims are presented to the insurance company months or years after the storm, the insurance company’s typical response is to assert prejudice due to untimely notice. This response may only be accurate if the insured indeed knew about the damage and waited to report it. If damage is not manifest until months or years after the storm, an insured can argue that prejudice should not be found as long as the insured gives timely notice of the newly discovered damage.

In many cases, the insured promptly notifies the insurance company of damage after a storm, but the insurance company does not do a thorough inspection to find all of the damage to repair. In these cases, the insurance company may be found to blame for any prejudice it asserts. The insured gave the insurance company timely notice of the loss, gave the insurance company an opportunity to investigate, to protect itself from fraud, determine its liability, prepare an estimate, and plan for litigation at the time the loss was initially reported.

The notice provision puts the burden on the insured to provide timely notice of a loss to the insurance company. In hurricane “reopen” cases where prejudice is asserted, the insurance company may be misrepresenting the facts and the law. By asserting prejudice in a hurricane reopen case, the insurance company may be attempting to require the insured to not only provide timely notice of a loss, but also to conduct a thorough investigation, protect the insurer against fraud, and evaluate the rights and obligations of the insurance company. That type of burden shifting is not contemplated in the insurance contract or case law interpreting the contract.

If an insurance company is asserting prejudice due to late notice on a particular claim, especially a hurricane reopen, more than likely you need competent legal representation that has proven experience in dealing with these types of issues.

This post addresses the burdens of proof when a late notice issue arises, when it is undisputed that the first reporting of the claim has been late, and not the unrelated situation where the initial reporting of the claim was timely, but the insured notified the insurance carrier of their disagreement over the claim adjustment several years later. The second scenario will be the subject of another post.

The Florida Supreme Court has held that a presumption of prejudice to an insurer arises where an insured fails to give timely notice of the loss. Bankers Ins. Co. v. Macias, 475 So.2d 1216 (Fla. 1985). This means that when it is undisputed that the first reporting of the claim has been late, a Court will presume that the insurance company’s investigation into the cause and damages associated with the loss was prejudiced. Policyholders can rebut this presumption by showing that the insurer was not prejudiced by the late notice. Macias, 475 So.2d at 1218.

Becoming familiar with the test the Florida Supreme Court announced for these late notice situations is crucial to advise policyholders of their rights under Florida law. Depending on the circumstances, late notice may or may not be an absolute defense to coverage as many insurance carriers argue, particularly to Hurricane Wilma claims.

A policyholder who reports a Hurricane Wilma claim late will certainly receive a letter from the insurance carrier stating it reserves all of all rights under the policy and Florida law regarding the insured’s failure to timely report the claim. Then the insurance company “investigates” the claim for damages through records requests, inspections and examinations under oath. Many of these late notice Hurricane Wilma claims result in a denial of coverage from the insurance carrier, despite evidence of damage in documents, information and photographs presented by the policyholder.

Many questions arise in these situations: what is timely notice; how has the insurer been deprived of the opportunity to investigate the facts; what evidence does the insured need to come forward with to rebut the presumption of prejudice, among many others. Tune in to this weekly Hurricane Law post for discussion on these issues.

In reviewing my own practice and various treatises on this area of insurance law, there is a consensus that the following strategies will most likely result in a fair resolution of a business interruption claim:

1. Review the policy - it does not matter if you can quote coverage forms by memory, the best practice is to review the policy, along with any applicable endorsements, to note all the various categories of losses and expenses that are covered, or not, as well as to recognize and execute all duties and obligations under the policy.

2. Give notice - almost every policy requires that an insured give notice of the loss, “promptly,” “as soon as practicable,” “immediately,” “within a reasonable time,” or within some other time period specified under the policy. Failure to comply with this policy condition may result in a claim denied. If this happens, the claim will inevitably have to be litigated. In Florida, a denial for failure to give timely notice will unfortunately create a rebuttable presumption that the carrier has been prejudiced as a result thereof. Tiedke v. Fidelity & Cas. Co. of New York, 222 So.2d 206 (Fla. 1969). Therefore, if the insured decides to litigate the claim denial, the insured has the burden of presenting enough factual evidence to overcome this presumption and the court must determine if the time between the loss and the notice was reasonable under all of the facts and circumstances of the case. See, Employers Cas. Co. v. Vargas, 159 So. 2d 875, 877 (Fla. 2d DCA 1964). Also, when giving notice of a claim, avoid making any verbal or written statements regarding coverage, the requirement to give notice, is just that; a duty report the loss in a timely fashion.

3. Cooperation - After a claim is reported, a carrier will begin its adjustment or investigatory phase. During this period of time, the insured is required by the contract to provide as much information as reasonably possible to assist the insurer in its investigation of the claim. Many business owners and managers raise their brows at the type of information that sometimes is requested in support of a BI claim. Rightfully so. At times, the information requested may infringe on trade secrets or information that fuels the business’ competitive advantage. If this is a concern, an insured should consider retaining an attorney, not only to openly discuss these concerns without fear of publicity, but also to consider the possibility of drafting and entering into a Confidentiality Agreement with the insurer, which, most of the time, is merely seeking to quantify a claim and will not oppose such an agreement.

4. Mitigation - Many policies cover only those losses that could not be avoided through reasonable post-loss mitigation efforts. With respect to business interruption coverage, an insured is often required to exercise due diligence to repair covered property damage and resume operations. Therefore, after a loss, an insured should quickly evaluate whether there are reasonable steps it can take to avoid additional business or property losses. To the extent possible, an insured may want to consider informing its insurer of its mitigation efforts to provide an opportunity for input and to avoid dilemmas after the fact.

5. Cost Tracking - In general, a policyholder bears the burden of measuring, documenting, and establishing its claim. Most businesses have internal accounting programs and systems that organize its ingress/egress functions. Hopefully, these systems operate remotely and will survive a catastrophic loss. Otherwise, the insured will face the daunting task of reconstructing its pre-loss costs and post-loss projections from scratch.

6. Document everything - if there is one thing that people can learn from lawyers is the practice of documenting every relevant communication with all relevant parties. Many business owners and managers already engage in this type of practice, but in times of distress and anxiety about survival, many forget to maintain this important practice. I always say, there is nothing more powerful than those green cards at the post office; this practice simply makes life easier.

A small theft claim, for instance, may not seem like something that must be reported to the police, however, it is always better to be safe than sorry. Sure, many times the items stolen may be worth less than the policy deductible, but what happens if more items come up missing later? Often, policyholders do not notice that some items are missing until long after a burglary or theft, and failing to notify the police could create issues with the insurance company covering the loss.

Policyholders should also make sure to understand that notifying the police of a loss does not relieve them of their duty to report the loss to the insurer. As discussed in previous posts, if the insurer is not given notice of the loss, coverage could be denied.

The best practice when dealing with a potential theft loss is to immediately notify the police and insurance company. Most insurers closely evaluate theft claims many with an eye towards fraud. If notice is not given to the police or is unreasonably late, the insurer will likely take a more skeptical view. This can cause substantial delays, even if coverage is ultimately not denied.

With that said, this will conclude my posts on Notice of Loss. I have received some great questions and comments both on this blog and by email. I really appreciate those of you who take time to read my posts. While I will be moving on to other post-loss duties, if anyone has any questions about notice or any other topic I cover, please do not hesitate to contact me.

To make an initial determination that notice is late in Florida, a court generally must look at whether the policy provisions for notice have been complied with and whether the timing of the notice was reasonable under the circumstances of the case. See Waldrep at 785.

If it is determined that notice is late, it does not always provide a valid reason for not paying the claim. In Florida, late notice must prejudice the insurer in order to deny coverage. If the insurer has not been prejudiced by the late notice, the claim should be paid.

While this requirement does provide some protection for policyholders, proving that there is no prejudice is not always as easy as it seems. In Florida, late notice creates a rebuttable presumption of prejudice to the insurer. Bankers Ins. Co. v. Macias, 475 So.2d 1216 (Fla.1985). This means that from the beginning, the insurer is presumed to have been prejudiced by the late notice and the burden is on the policyholder to prove otherwise.

The main prejudice that an insured must overcome occurs when the late notice substantially affects the insurer’s ability to investigate a claim. For instance, if a policyholder does not notify the insurance company of damage to a roof, passing time may worsen the condition and the insurer can argue that any repairs deprived the insurer of an opportunity to fully investigate the cause of the loss.

These arguments by the insurer do not always succeed, however, they will take time away from the general goal of getting the claim paid and will cause headaches that may have been avoided. Having to overcome a prejudice argument can be difficult, and the consequences of not proving this argument in Florida may unnecessarily void coverage.

While many of these arguments will likely fail because the insurer was timely notified of the loss after the storm and simply did not perform a full investigation to determine the correct extent of the damages, these situations highlight the importance of timely notification.

In one way or another, most policies state that the insured has a duty to give prompt notice of any loss to the insurer. Some policies may actually list out the exact time in which the notice must occur, and some states even have statutes which cover this exact topic. While this may prove helpful to the policyholder and help answer any questions as what constitutes “prompt” or “timely” notice, these instances are the exception and not the rule. Thus, there has been, and continues to be, an abundance of litigation over what these clauses actually mean.

So how quickly must notice of a loss be given? The general rule of thumb is that you should give notice as soon as possible. The occurrence of a loss usually triggers the policyholder’s duty to inform the insurer and doing so immediately can help reduce or eliminate any argument of noncompliance.

When an issue of whether notice was prompt or timely arises, courts must assess the cases individually. The individual facts surrounding each situation are very important and some jurisdictions may be very strict while others may be more lenient. Courts must determine if the time between the loss and the notice was reasonable under all of the facts and circumstances of the case. Employers Cas. Co. v. Vargas, 159 So. 2d 875, 877 (Fla. 2nd DCA 1964).

In Texas, one court held that without extenuating circumstances, a 54 day delay in reporting a claim was not reasonable and allowed an insurer to deny coverage. McPherson v. St. Paul Fire & Marine Ins. Co., 350 F.2d 563 (5th Cir. 1964).

At the opposite end of the spectrum, the United States District Court for the Southern District of Florida held that notice was not necessarily untimely when given much later than 54 days after the loss, when an insured did not discover the damages until many months after a hurricane. Vision I Homeowners Ass'n, Inc. v. Aspen Specialty Ins. Co., 2009 WL 4927162 (S.Dist. Fla. December 22, 2009). As the Court noted in that case, “the Aspen policy created the possibility of this inherent ambiguity regarding notice by using the term “prompt notice” rather than a finite term, such as requiring notice within sixty or ninety days from the date of the loss.”

These cases show that there is a diverse range of findings that deal with prompt or timely notice of a loss. Some states require that an insurer be prejudiced by the late notice in order to avoid coverage. This is the law in Florida, however, there is a presumption that late notice has prejudiced the insurer and it is up to the policyholder to prove otherwise. While some states take the opposite stance and put the burden of proving prejudice on the insurer, the best way to avoid having to deal with these issues is to give notice as soon as possible. If you are having an issue with whether the notice was prompt, you should have a good understanding of the laws of your particular jurisdiction to determine how best to move forward.

The consequences of a finding that the policyholder did not provide the insurer with prompt notice of a loss can be severe, possibly resulting in complete denial of a claim. Providing notice as soon as possible will help prevent litigation over what constitutes “prompt” or “timely” notice and will move the claim along more quickly. It will also reduce the chances that a claim is denied because of noncompliance with the post loss obligations.

Many people rarely, if ever, have to submit a major insurance claim dealing with their property. The extent of their knowledge and involvement is sending in the premium check when due. Is it any wonder that the typical homeowner might be confused about who their insurance agent is and where they should send a notice of loss?

Possibly contemplating such confusion, some policies specifically state where the notice of loss should be sent. The language varies; it may be the home office or it may be the individual agent who sold you the policy. No matter who or where the policy designates, the policyholder should do their best to comply.

The situation becomes more complicated when the policy is silent or states that the notice should be given to an “authorized agent” of the insurer. Individuals who are authorized agents of an insurer have actual authority to conduct the business of the insurer. Therefore, notice provided to an authorized agent would normally be sufficient if the policy language allows as much. The appropriate authorized agent of an insurer may be spelled out in the policy or in some cases in relevant statutes, so reading and understanding these is always a good idea.

The plot thickens when the individual accepting the notice of loss is not an authorized agent of the insurer. Many times, direct employees of the insurer are not authorized agents and service of notice of loss on them may be ineffective. While this is never a good situation, the courts have provided some leeway when dealing with this type of case.

First, if the person accepting the notice would be deemed to be an authorized agent by a reasonable person, the individual may be deemed to have apparent authority to transact business on behalf of the insurer and, thus, the notice was effective. This apparent authority might come from the actions and representations of the insurer or the individual; either has the potential to impose apparent authority and cause the notice to be effective.

If a policyholder finds himself in a situation where he must submit a claim, he should read the policy first. Many times, the policy states specifically where the notice of loss should be sent. If it is not listed in the policy or the policy is ambiguous, it is never a bad idea to pick up the phone and call the insurance company. Your local agent might be able to help, and, if not, try the home office. Get an answer and follow up in writing to avoid any confusion later, and then send the notice to the designated person or place. Following these simple steps could prevent problems with the claim and keep the file from ever crossing an attorney’s desk.

Much like the reasoning behind a proof of loss, the duty to provide the insurer with notice that a loss has occurred is intended to put the insurer on notice and enable it to investigate whether coverage exists. One of the most fundamental issues in dealing with notice is who will be able to provide notice of the loss to an insurer.

Most policy language contemplates that notice of a loss will be given by the insured. The language of a notice of loss provision may state that “you” (meaning the insured) must give prompt notice of any loss. Others may state that “you or your representative” must give prompt notice of any loss. Generally, courts have held that notice provided by an agent or representative of the insured is sufficient, even if the policy language reads as “you,” as long the agent/representative is authorized by the insured to give notice. See Johnson v. Westhoff Sand Co., Inc., 62 P. 3d 685 (Ka. App. 2003), KPFF, Inc. v. California Union Ins. Co., 66 Cal. Rptr. 2d 36 (Ca. 1st Dist. 1997),

Courts have found a variety of instances where an individual other than the insured may give notice for the policyholder. For example, a policyholder’s attorney may provide notice of the loss to the insurer. Thomas v. Atlanta Cas. Co., 558 S.E.2d 432 (Ga. App. 2001)(holding notice from the insured’s attorney was sufficient as long as the notice was promptly provided and sufficient to notify the insurer with actual knowledge of a claim or suit).

In some circumstances, notice from another insurer may be enough to satisfy the notice requirement. For instance, in the case of excess insurance polices, notice by the first layer carrier to the excess carrier may be considered enough to fulfill the policyholder’s obligations. The determinative issues are usually whether the notice was enough to provide actual knowledge of the claim and whether the notice is sufficient under both the language of the policy and any relevant statute.

Also, courts have found that notice provided by one insured may be enough to fulfill the notice requirement for other insureds. The most common example of this occurs when a property is mortgaged. In such a situation, the mortgagor and any mortgagee have the right to provide notice to the insurer of a loss. It is not hard to imagine an instance where the mortgage company might provide notice of a loss to the insurer before the homeowner, or vise versa. In these situations, some courts have held that as long as the notice was timely and sufficient to give the insurer actual notice of the claim, notice provided by the first or even second mortgagee will provide notice for the other insureds, even if they do not notify the insurer themselves. Goodman v. Quaker City Fire & Marine Ins. Co., 241 F.2d 432 (1st Cir. 1957).

Finally, some jurisdictions have held that a loss report from the policyholder’s insurance agent or claims adjuster is sufficient to fulfill the requirement for notice, even if the policy specifies that notice be provided in writing by the insured. Security Ins. Co. of New Haven v. Dazey, 78 F.2d 537 (7th Cir. 1935). Relying on the insurance agent or claims adjuster can be dangerous, however, because some courts have held that their failure to provide timely notification to the insurer may bar recovery even though the policyholder relied on them to do so. American Mut. Liability Ins. Co. v. Beatrice Companies, Inc., 924 F. Supp. 861 (N.D. Ill. 1996).

While there may be recourse for the insured in a suit for negligence, this is a headache that is easily avoided if the insured does not rely on a third party to provide notice of the loss. In the end, providing notice of a loss to an insurer is very important to having your claim quickly and fairly adjusted and paid. A policyholder should always notify the insurer as soon as possible of any loss and, if possible, in writing. Even if written notice is not required or not possible, any verbal notices should be followed up in writing so that there is no question later about whether the notice was timely, sufficient, or even occurred at all. Taking a little extra time to do things properly can help the claim move towards a more favorable resolution.