Notifying Insurance Company About A Claim

Weatherford Insurance Lawyers and those in Aledo, Azle, Mineral Wells, Willow Park, Hudson Oaks, Springtown, Millsap, Brock, and other places in Parker County need to make sure their clients promptly turn claims in to their insurance company.
The United States Court of Appeals for the 5th Circuit issued an opinion in August that illustrates the need for doing this. The style of the case is, Berkley Regional Insurance Company, as Subrogee of Venus Rouhani and as Assignedd/Subrogee of the Tower of Town Lake Condominium Association, Inc. v. Philadelphia Indemnity Insurance Company. Here is some relevant background and facts:
This is an appeal from a summary judgment granted in favor of Berkley.
The underlying liability case involved a 2004 slip-and-fall by dentist Venus Rouhani (“Rouhani”) on the premises of the Towers of Town Lake Condominiums (“Towers”). Towers had general liability coverage in the form of a primary policy issued by Nautilus Insurance Company (“Nautilus”) with a policy limit of $1 million per occurrence, and excess/umbrella coverage through Philadelphia with a policy limit of $20 million for liability exceeding the primary policy’s coverage. Rouhani sued Towers which submitted the case to Nautilus to provide a defense. The parties agreed that Philadelphia did not receive notice of the Rouhani lawsuit at that time.
Rouhani’s injuries were substantial. Expert reports put Rouhani’s damages at $800,000 or $1.25 million. The parties, however, contested liability, yielding a situation where Rouhani made various settlement demands. Rouhani’s initial settlement demand was $800,000. At a mediation, the parties reached an impasse with Rouhani’s “bottom” offer at $215,000 and Towers/Nautilus’s “top” offer at $150,000.
The case went to trial, and the jury awarded Rouhani $1,654,663.50. The day of the verdict, Towers demanded that Philadelphia pay the amount in excess of the primary coverage amount. Philadelphia contends this was the first time it had notice of this suit. When the appeals were exhausted, Nautilus paid what it concluded it owed under the primary policy, and Berkley paid the remaining $709,738.89. Through a series of complex assignments, Berkley owned whatever rights Rouhani, Towers, and Nautilus had against Philadelphia.
In the district court, both sides moved for summary judgment. The only issue pertinent is whether the failure to give Philadelphia notice prior to the jury verdict forfeits coverage it may otherwise owe. In support of its position that coverage had been forfeited, Philadelphia argued that its policy requires prompt notice of any occurrence involving, inter alia, “permanent disabilities,” “any coverage issue which may trigger a reservation of rights or coverage declination,” and any “incurred exposure of $500,000 or above.” In addition, Philadelphia pointed out that its policy further provides that “[w]hen [Philadelphia] believe[s] that a claim may exceed the ‘underlying insurance’, [it] may join with the insured and the ‘underlying insurer’ [Nautilus] in the investigation, settlement and defense of all claims and ‘suits’ in connection with such ‘occurrence’ . . . . In such event, the insured must cooperate with [Philadelphia].” According to Philadelphia, the circumstances surrounding the underlying litigation triggered the notice requirement, and the lack of notice prior to the adverse jury verdict caused prejudice, thereby precluding coverage.
The district court, however, rejected Philadelphia’s position, concluding instead that, as a matter of law, Philadelphia was not prejudiced by the lack of notice prior to the adverse jury verdict.
This appeals court then got into a long discussion involving the review of other cases and made it’s ruling saying:
Indeed, when an insurer must prove it was prejudiced by the insured’s failure to comply with the notice provisions, the recognized purposes of the notice requirements form the boundaries of the insurer’s argument that it was prejudiced; a showing of prejudice generally requires a showing that one of the recognized purposes has been impaired. Against that backdrop, the rights afforded the insurer by the notice requirement–including, but not limited to, the rights to “join in” the investigation, to settle a case or claim, and to interpose and control the defense–are considered valuable rights that if deprived, may prejudice the insurer. Prejudice from failure to notify timely arises from inability to investigate the circumstances of an occurrence to prepare adequately to adjust or defend any claims, not merely to prepare for trial.
Whereas certain contractual obligations in a general liability policy, such as the duty to defend and the duty to indemnify, protect the insured, other obligations protect the insurer. For example, generally, under a liability policy, the insured must notify the insurer of an occurrence or claim for which damages within coverage of the policy may be sought and/or a resulting suit, and it must give notice to, or obtain consent from, the insurer prior to settling any such case or claim. In this way, the insurer protects, at minimum, its right to participate in the underlying liability litigation, and it also preserves the opportunity to minimize its losses. Notice requirements thus afford valuable rights. Nevertheless, it is likewise clear that in order for an insured’s breach to defeat coverage, the breach must prejudice the insurer in some tangible way.
Defining the contours of prejudice from the breach of a notice requirement, however, is not always easy. It is true that when an insurer first receives notice of a suit after a default judgment has been entered, prejudice exists as a matter of law. An insurer that is not notified of suit against its insured until a default judgment has become final is prejudiced as a matter of law.
Moreover, once the case is “over,” notice is clearly too late. In the pending case, however, the additional insured’s notice was not merely late; it was wholly lacking. Under the circumstances presented in the instant case, wholly lacking notice, as opposed to merely late notice, supports a finding of prejudice as a matter of law.
Philadelphia was not just notified “late,” it was notified after all material aspects of the trial process had concluded and an adverse jury verdict was entered. It lost the ability to do any investigation or conduct its own analysis of the case, as well as the ability to “join in” Nautilus’s evaluation of the case.
Most importantly, however, Philadelphia lost a seat at the mediation table. Mediation, by nature, is a dynamic process, and for that very reason, parties are expected (and usually ordered) to appear ready to negotiate and with “full” settlement authority.
This case points out the necessity to inform the insurance company immediately when a claim is made or needs to be made.