On March 28, 2018, a federal judge in Atlanta excused Fulton County’s insurance company from paying more than $6.5 million. Valuable insurance coverage was lost because the County failed to provide timely notice to its liability insurance company.
Insurance policies are contracts between the insurance company and the insured. Those contracts require the insured to take various actions after an accident. Two of the most important are to give the insurance company notice of an accident and to send any potentially covered lawsuit to the insurance company. Coverage may be lost if the insurance company has included language in the policy stating that a failure to provide notice will result in a forfeiture of coverage or that the notice provision is a condition precedent to coverage. Put more simply, late notice may excuse the insurance company from paying, as it did Fulton County’s insurance company.
The notice clauses enable insurance companies to promptly learn of the accident so they may investigate the circumstances, determine whether it is prudent to participate in negotiations, or, if negotiations are not successful, to ensure the lawsuit is properly defended. Courts recognize the importance of prompt notice and will enforce clearly stated consequences of late notice.
The insured’s duties and the consequences of the insured’s failure to give prompt notice depend on the nature of the coverage, the language of the policy, and the law of the state whose statutes and cases are used to construe the policy. Insurance policies may be personal or commercial, they may be “first party” or “third party.” They may be “occurrence” or “claims made.” They may be “primary” or “excess.” These variations are critical but are beyond the scope of this brief article.
Here, we focus on a few of the principles common to almost all insurance contracts. For example, liability policies require that notice of an occurrence (an event that could give rise to a claim) be given to the insurance company “immediately” or “promptly” or “as soon as practicable.” In addition, most policies require the insured to notify the insurance company if a claim is made or, if suit is brought, to forward the suit papers to the insurance company. A typical notice provision follows:
Duties In The Event Of Occurrence, Offense, Claim Or Suit
a. You must see to it that we are notified as soon as practicable of an “occurrence” or an offense which may result in a claim. To the extent possible, notice should include:
(1) How, when and where the “occurrence” or offense took place;
(2) The names and addresses of any injured persons and witnesses; and
(3) he nature and location of any injury or damage arising out of the “occurrence” or offense.
b. If a claim is made or “suit” is brought against any insured, you must:
(1) Immediately record the specifics of the claim or “suit”’ and the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the claim or “suit” as soon as practicable.
As indicated by this language, policies generally impose two duties: (1) a duty to notify the insurance company of an incident, accident, occurrence, or claim; and (2) an independent duty to notify the insurance company of a lawsuit.
The duty to give notice of an incident, accident, occurrence, or claim arises when the insured has reason to know of the possibility of a claim, regardless of whether the insured believes that he or she is liable, or that the claim is valid. Under Georgia law, the duty to provide notice to an insurance company is triggered when an insured actually knew or should have known of a possibility that it might be held liable for the occurrence.
In determining if there is a possibility of a claim that should be reported to the insurance company, a prudent insured will consider, for example: whether the insured is aware a person is injured; whether the insured is aware the injuries require treatment; and whether the insured is aware of the extent of related damage to property such as a vehicle (suggesting the severity of the collision).
Even Short Delays Can Avoid Coverage
Under Georgia law, while the “as soon as practicable” language affords some leeway as to timing, courts applying Georgia law have held that short delays can nonetheless result in the loss of coverage. Where no valid excuse exists, the failure to give notice for a period as short as three months has been found to be unreasonable.
Late Notice May Result In Loss Of Coverage
If an insured unreasonably fails to give timely notice, the insurance company is not obligated to provide either a defense or coverage:
- An insured’s own determination of its lack of liability is not an excuse. The insured may not justify failure to provide notice by claiming that it determined that it had no liability for the incident.
- The insured’s duty to give notice arises upon actual knowledge of a claim; however, the insured’s duty may also arise in the absence of actual knowledge. The insurance company – and then a court – will look at all of the facts and circumstances to determine whether the insured had enough information that he or she “should have known” a claim was possible. For example, where insured heard that someone had fallen from a fire escape and that someone was observed taking photographs of the scene, it was unreasonable for insured to delay five months before giving notice.
Similarly, a failure to promptly forward suit papers may result in loss of coverage:
- The failure of an insured to forward a complaint to an insurance company until 46 days after its receipt breached a provision of a policy requiring prompt forwarding of suit papers, and allowed the insurance company to avoid both of its obligations – to defend the suit and to pay for any resulting judgment.
The policy language is critical. Where notice to the insured is not a condition precedent to coverage, the insurance company may void coverage only if the insurance company is able to show that it was prejudiced by the late notice. On the other hand, where the policy language indicates timely notice is a condition precedent, Georgia cases hold that the insurance company need not prove that it was prejudiced by the delay.
Some types of insurance have their own, specific rules. For motor vehicle insurance, an insurance company seeking to avoid coverage due to late notice bears the burden of showing both that the delay by the insured was unreasonable and that this unreasonable delay prejudiced the insurance company’s ability to defend the case.
Giving Notice to the Insurance Company
Insureds should carefully read the policy and strictly comply with the notice requirements of the policy, both as to whom notice should be sent and the manner in which it should be sent.
Who May Give Notice?
Usually, the insured gives notice of a claim or sends copies of a lawsuit directly to the insurance company, Georgia law does not require that notice come only from the insured. Anyone who follows the policy language may give notice, as long as reasonable and timely.
Indeed, with respect to motor vehicle insurance, Georgia statutes specifically provide that a copy of a complaint and summons may be sent by a third party to the insurance company or to the insurance company’s agent by certified mail or statutory overnight delivery within ten days of the filing of the complaint.
To Whom Should Notice Be Given?
It is always safest to notify the insurance company directly, at the place indicated in the policy.
An insured may be accustomed to working with an independent insurance agent for most of their “day-to-day” insurance-related dealings. However, an insured should be aware that giving notice to an independent agent likely does not constitute valid notice to the insurance company. Under Georgia law, independent insurance agents or brokers are generally considered the agent of the insured, not of the insurance company.
However, under limited circumstances, an independent insurance agent may be considered an agent of the insurance company, such that notice to the agent is considered notice to the insurance company itself. For example, an independent insurance agent may be considered an agent of the insurance company if the insured can prove that the insurance company granted the agent or broker authority to bind coverage on the insurance company’s behalf. Alternatively, if an insurance company holds out an independent agent as its agent and an insured justifiably relies on such representation, the independent agent will be considered the agent of the insurance company. The insured will bear the burden of proving that the independent insurance agent is an agent of the insurance company. Gathering and presenting this evidence is expensive and time-consuming but may help to save coverage.
Late Notice May Be Excused
Not every late notice results in a loss of coverage. There are some circumstances in which courts have come to the rescue of insureds when the insurance company has denied the claim because of “late notice.” The insured has the burden of showing justification for a delay in providing notice. Some examples from Georgia cases include:
- Even though 19 months elapsed before the insured gave notice, the court properly let a jury determine whether the insured acted reasonably where the insured had no actual knowledge of an accident, there were no facts to show the insured should have known, and the insured notified the insurance company immediately when evidence of a claim came to its attention.
- Even though the insured was aware of an accident, its late notice may be excused because no one appeared to be injured in the accident and there was no significant property damage.
Gathering and presenting evidence that the insured’s delay was excusable under the circumstances is expensive and time-consuming but presenting and proving the grounds for an excuse may prevent the insurance company from denying coverage.
Call Your Lawyer, Provide Notice To The Insurance Company, And Forward Suit Papers
Whenever the insured is aware of an occurrence or a potential claim, the insured must promptly review the language of the applicable policy. The insured should not speculate there is no liability. Neither should the insured speculate there is no coverage. The insured should give notice even if the insured is unsure if the policy provides coverage.
Similarly, the insured must not assume that things can be “worked out” with the other party without involving the insurance company. An insured must not fail to give notice just because it believes the it has no liability or that the claimant or some other party was at fault. The other party or the other party’s insurance company may not agree.
The rules are complex, and the inquiry is very fact-specific. As the Georgia Court of Appeals recently stated:
We recognize that our jurisprudence on the question of what constitutes sufficiently prompt notice under an insurance contract … is not easily harmonized. Indeed, some of our prior decisions are difficult to reconcile with each other, as is not uncommon in an area that calls for a fact-specific inquiry.
In other words, call an experienced lawyer.
Because the consequences of failing to comply with the terms of an insurance policy could be fatal to coverage, a person or a business who becomes aware of an occurrence, or who receives a claim, demand letter, or lawsuit, should seek legal counsel as soon as possible. Ask about the specific rules applicable to the kind of policy at issue, about the details of when, by whom, and to whom notice must be given, and about the law of the state whose law will be used to construe the policy. And if the insured has failed to give prompt notice of an occurrence or claim, or to forward suit papers, the insured must consult a lawyer immediately to see if the delay may be excused so that the insured is not left facing liability without insurance coverage.
If we may be of assistance, contact Mike Reeves at mreeves@fh2.com or (770) 399-9500.
