In this blog series, I have written about the possibility of an insurer’s breach of contract excusing the insured’s performance with policy conditions.1 But what if there is something that renders it impracticable or impossible for the insured to perform a policy condition (e.g., an insurer’s claim handling or an act of God)? Does the insurer get to deny coverage based on the insured’s lack of performance under such circumstances?
No need to reinvent the wheel … here is what a well-respected legal treatise says about the impracticability / impossibility of performance contractual doctrine:
As has previously been seen, it is generally true that if a condition precedent to one party’s duty to perform does not occur, that party’s duty to perform does not become absolute, and he or she will be excused from further performance under the contract, even when the nonoccurrence is itself excused as the result of impossibility or impracticability. However, if the condition is of only minor importance, its happening is a mere technicality, and a forfeiture will result by insisting upon its occurrence, the nonoccurrence as a result of impossibility or impracticability will be excused, and the duty that was subject to the condition’s occurrence will become absolute despite its failure to occur. … [And] with the advent and widespread adoption of the Uniform Commercial Code and its sections codifying the doctrine of … impracticability, there is little doubt that most courts today would not hesitate to apply the principle. Thus, for example, … where an insurance policy makes notice of an accident within one week of its occurrence an express condition precedent to the insurer’s duty to pay, and the insured, though giving notice as soon as he or she is able, fails to comply exactly with the time provision because of serious injuries sustained in the accident, the failure of the condition to occur is excused and the insurer’s duty to pay becomes absolute despite the untimely notice, since the giving of notice within the time specified is not a material part of the agreed exchange and a forfeiture would otherwise result.2
In sum, the insured’s failure to comply with a policy condition due to impracticability or impossibility will only be excused if the policy condition is immaterial, technical in nature, and a forfeiture will result by insisting on compliance. In my opinion, the last prong is easily satisfied in the insurance context – losing benefits is a forfeiture. And, in my opinion, a lot of policy conditions are mere technicalities. So, similar to the materiality of the insurer’s breach of contract being the primary focus of a judge’s (or jury’s) excuse of performance assessment, the judge’s (or jury’s) assessment of the insured’s lack of compliance due to impracticability or impossibility will revolve mostly around materiality of the condition that was not complied with.
To read previous posts in my series on insurance policy conditions, click here.
2 14 Williston on Contracts § 43:14 (4th ed.) (West, May 2012) (internal citations omitted).