Last week my colleague, Denise Sze, wrote about delayed notice in California and did a great job explaining California’s “notice-prejudice rule.” In several states, including California, an insurer cannot deny a claim unless it can demonstrate actual prejudice resulted from delayed notice of a loss.
The South Dakota Supreme Court explained the reasoning behind the “notice-prejudice rule” in Auto-Owners Insurance Company v. Hansen Housing, Inc.:
The modern view of notice requirements focuses on the purpose for the requirement and realizes that it is not to provide a technical escape hatch to allow the insurance company to deny coverage. The modern view does not belittle the need for notice to the insurer, but instead puts the notice requirement in its proper perspective. “The clear purpose of the notice provision is to protect the ability of the insurer to prepare a viable defense by preserving its ability fully to investigate the accident.” (Citation omitted.)
604 N.W.2d 504 (S.D. 2000).
Unfortunately for policyholders in Florida, Florida courts have not followed suit.. Instead, Florida courts place the burden on the policyholder to prove the insurer was not prejudiced by late notice.
In American Fire & Casualty Company v. Collura, Florida’s Second District Court of Appeal held that the claim will not be barred for the policyholder’s failure to submit timely notice, but the Court also stated the burden was not on the insurer to prove prejudice.
In Florida, if notice of a claim is untimely, then a presumption of prejudice exists. This means the burden is on the policyholder to prove the untimely notice did not prejudice the insurer’s investigation of the claim. Id. It is akin to the “notice-prejudice rule” in not barring recovery, but is different because it places the burden on the policyholder to prove that prejudice did not result from the untimely notice.
From the policyholders’ perspective, the “notice-prejudice rule” has it right because it focuses on the purpose and intent of the notice provision. If a policyholder fails to give timely notice of a claim, and this tardiness results in spoliation of evidence or the inability to discover pertinent information, the insurer may have the right to deny the benefits due under the policy. On the other hand, if no prejudice ensues, the claim should not be barred.
The law is ever changing and the law is different from jurisdiction to jurisdiction. To protect your interests under the policy, policyholders need to comply with all the duties under their policy, including the notice provision to the best of their ability.