The defense of late notice has increasingly been used as a technical defense to preclude coverage for covered losses caused by covered perils. While some states have issued bulletins (targeting these strategies,1 often the determination of whether coverage will be afforded will depend upon whether a particular state requires that an insurance company demonstrate that the untimely notice caused prejudice in the investigation of the claim. While it would seem the denial of coverage due to an action that has no material effect on the insurer would further the purpose of having insurance, several states still apply a traditional notice rule that does not require a showing of prejudice.2
Fortunately, Montana does not believe that untimely notice should always allow an insurance company to escape coverage where the reason behind the notice condition has not been frustrated, i.e., whether a lack of prejudice could have compelled a different result. The Montana Supreme Court has made it clear that an insured should not lose insurance coverage based solely on a technical or inconsequential violation of the timely notice provision of an insurance policy which does not cause the insurer to suffer any prejudice.3
Every violation of a notice provision should not excuse an insurer of its duty to indemnify an insured. Whether an investigation conducted immediately following an occurrence would have disclosed anything materially different from that disclosed by the delayed investigation will depend upon the specific circumstances of each claim. Such considerations could include whether the insurer lost the opportunity to investigate or locate witness; whether better conclusions could have been drawn without the delay in providing notice; whether an insurer can come to a coverage decision; or whether the repairs to the affected areas that took place in the interim would complicate an evaluation of the extent of the damage.
In Montana, prejudice is central to a determination of whether coverage will be afforded when there is concern if notice was given as soon as practicable. An insured should be prepared to provide all information available which would assist the insurer in fully investigating the claim regardless of the untimely notice. The likelihood that an insurer attempts to avoid payment for late notice in Montana is decreased by demonstrating that the outcome of the insurer’s investigation would not have been different had the notice of the loss been received timely.
1 See, Should Late Notice of Windstorm and Hail Claims Be a Valid Defense When the Insurer Is Not Prejudiced? Property Insurance Coverage Law Blog. Sept. 7, 2020.
2 See, The Importance of Promptly Providing Notice of Loss. Property Insurance Coverage Law Blog. Feb. 10, 2018.
3 Estate of Gleason v. Central United Life Ins. Co., 350 P.3d 349, 356 (Mont. 2015); Atlantic Cas. Ins. Co. v. Greytak, 350 P.3d 63, 67 (Mont. 2015).