Prompt Notification of Claim

Grand Prairie insurance attorneys and those in Irving, Fort Worth, Dallas, De Soto, Cedar Hill, Duncanville, and other places in the Dallas – Fort Worth area would want to know about the following case.
This case deals with the issue of notifying the insurance company promptly when a claim arises. The case ruling was issued May 10, 2012, by the Houston Division, Southern District of Texas, United States District Court. The style of the case is, Centaurus GF Champions, LLC D/B/A La Jolla Champions Apartments v. Nutmeg Insurance Company, Scottsdale Insurance Company, Cramer, Johnson Wiggins & Associates, Inc. and Ted W. Allen & Associates, Inc.
Here is some background:
Centaurus owed the LaJolla Apartments in Houston, Texas. Nutmeg and Scottsdale issued a commercial policy covering the apartments from May 6, 2008, to September 20, 2008. Hurricane Ike made landfall in September of 2008. Centaurus submitted a Property Loss Notice on July 23, 2010, for damages to the apartments. A comment on the Notice of Loss stated that the insured had not been aware that the total damage would exceed the deductible, and provided an estimate of damages over $2,000,000.
The insurers denied the claim based on the affirmative defense of late notice. The insured sued for violations of the Texas DTPA and the Insurance Code. The insurers filed a motion for summary judgment based on the late notice defense.
In discussing this case, the court pointed out that it is well settle law that “an insured must notify his insurer whenever a claim is made against the insured.” In this case, the insured was notified twenty-two months after the loss.
There was argument about communications made after the hurricane and whether those communications put the insurers on notice of the claim / loss. One note in evidence was the insured’s insurance agent had been notified shortly after the hurricane. There is evidence of communications and actions in 2008 and 2009. The insurance agent stated in an affidavit:
Following September 13, 2008, the date Hurricane Ike struck Southeast Texas, a representative from …]Centaurus] informed me that the property located at 15530 Ella Boulevard, Houston TX 77090 sustained damage following Hurricane Ike. My office subsequently made a claim under the Policy with Nutmeg Insurance Company approximately one week later.
The insured’s had other properties as well that claims had been submitted for. In this regard the insurer pointed out policy conditions they claim were not followed. These conditions were as follows:
In its Conditions section, the policy states that the “insured shall as soon as practicable report in writing to the Company or its agent every loss, damage or occurrence which may give rise to a claim under this policy and shall also file with the Company or its agent … a detailed sworn proof of loss.” Under Duties in Event of Loss, the insured is responsible for giving notice of the loss, including a description of the property; description of how, when and where the loss or damage occurred; and a sworn statement.
In this case the policy at issue did not define the term “prompt.” The court noted that under Texas law, where a policy requiring prompt notice of claims fails to define the term “prompt,” it is to be construed “as meaning that notice must be given within a reasonable time after the occurrence.”
The court then discussed the distinctions between claims under a claims made policy and an occurrence policy and how the late notice provision in a policy is interpreted.
In Texas, the court pointed out that failure to give timely notice did not defeat coverage unless the insurer was prejudiced by the delay because the timely notice provision was not an essential part of the bargained for exchange under an occurrence based policy.
The insurers argued that they were prejudiced here because the loss incurred increased due to lost rents and had they been notified earlier of the loss, then they might have been able to limit the on going loss.
Ultimately, the court seemed to agree with the insurers that they had been prejudiced by an untimely notice of the loss but then said the insured had also raised an issue of fact as to whether its Notice of Loss was untimely in the first place. Thus, the court denied the insurers motion for summary judgment.