Writing the check for a company’s premium payment for its Comprehensive General Liability Policy (“CGL policy”) can seem like a lost cost year after year – that is, until a lawsuit hits. But having a CGL policy in force that covers the claim is not enough to trigger coverage when the insured fails to provide sufficient notice to its carrier and the carrier is prejudiced.
Because it is the carrier’s right to conduct a prompt investigation, participate in the defense of claims and to set realistic reserves, notice of a claim is precedent to coverage. Inadequate notice may result in a denial of coverage, even where the claim would have been covered, if the carrier is prejudiced. Consequently, it is imperative that the insured submit timely notice in the manner and form required in its CGL policy directly to its carrier. While oral notice may be sufficient, prudent practice dictates that the insured submit all claims in writing by certified mail with return receipt requested.
A common pitfall occurs when the insured believes that its carrier is on notice through the broker or a third party, but the carrier has no knowledge of the claim. In many cases, the insured contacts its broker to submit a claim, but the broker fails to do so. While an insurance broker may be of some assistance when a claim arises, an insured must not rely upon the broker. Notice to the broker is not notice to the carrier. If the broker fails to properly and timely submit your notice for any reason, coverage may be lost.
Generally, a CGL policy holder must submit its claim within a “reasonable time,” while excess coverage generally requires notice when the insured reasonably concludes that the occurrence may impact excess coverage. Review of timely notice requires the courts to make a fact specific inquiry considering what a reasonable person under similar circumstances would have done. As a result, late notice is occasionally excused. For example, courts have excused late notice under certain circumstances where the insured lacked knowledge despite due diligence, the insured had a reasonable belief that it was not liable, or the insured had a reasonable belief that no coverage was available. Nonetheless, the process to convince a court of a reasonable excuse for the insured’s failure to submit a claim is best avoided.
Even a timely claim may be rejected if it does not contain sufficient information. CGL policies generally require that the insured submit sufficient information to identify the insured and all information reasonably known to the insured regarding the time, place and circumstances of the occurrence. Some policies require more information, such as a list of witnesses together with their contact information.
Keeping only a declaration page may cause a great delay in submitting sufficient notice in the event of an occurrence. The insured should have full and complete copies of all CGL and excess policies stored in an accessible location and marked with a placeholder on the pages covering the timing and form of notice. As soon as an occurrence takes place that may trigger coverage, the insured should immediately seek legal analysis of coverage under the policy and submit its claim to all carriers as dictated by each policy to avoid loss of coverage due to lack of notice.