Notice Of Claim To Insurance Company

Sometimes an insured in Weatherford, Aledo, Mineral Wells, Brock, Willow Park, Hudson Oaks, Springtown, Azle, or somewhere else in Parker County will have a claim they can make against their insurance company and not realize it. Well, what happens if they make that claim a long time after the loss occurs?
Here is a case that looked at that question. The style of the case is Prodigy Communications Corporation v. Agricultural Excess and Surplus Insurance Company. The case was decided in 2009, by the Texas Supreme Court.
Here are some of the facts in the case.
Prodigy was covered by a D&O policy issued by the Agricultural Excess. The policy contained a clause stating that “as a condition precedent” the insured had to give notice of a claim as soon as practicable, but “in no event later than 90 days after the expiration of the policy period.” Prodigy was named as a defendant in a class action lawsuit. Prodigy did not provide notice of the claim for almost a year after service of the suit, but within the 90 day period after the end of the policy period. Agricultural Excess denied coverage based on the late notice. Prodigy sued Agricultural Excess for breach of contract and Insurance Code violations. The trial court and the court of appeals held in favor of the carrier.
The Texas Supreme Court reversed the lower courts. In the case, PAJ, Inc. v. The Hanover Insurance Company, the Texas Supreme Court held that “an insured’s failure to timely notify its insurer of a claim or suit does not defeat coverage if the insurer was not prejudiced by the delay.” PAJ did not rest on the distinction between covenants and conditions precedent. PAJ followed the holding in Hernandez v. Gulf Group Lloyds, a 1994 Texas Supreme Court opinion, that “an immaterial breach does not deprive the insurer of the benefit of the bargain and thus cannot relieve the insurer of the contractual coverage obligation.” “In a claims-made policy, when an insured gives notice of a claim within the policy period or other specified reporting period, the insurer must show that the insured’s noncompliance with the policy’s “as soon as practicable” notice provision prejudiced the insurer before it may deny coverage. Here, it is undisputed that Prodigy gave notice of the … lawsuit before the ninety day cutoff. Even assuming that Prodigy did not give notice “as soon as practicable,” Agricultural Excess was not denied the benefit of the claims-made nature of its policy as it could not “close its books” on the policy until ninety days after the discovery period expired.” The insured’s duty to give notice was not a material part of the bargained for exchange under the claims made policy.
Another case, Financial Industries Corp. v. XL Specialty Insurance Co., also decided in 2009, said essentially the same.
The case was based on a question certified to the Texas Supreme Court by the Fifth Circuit Court of Appeals. The insured was sued for breach of contract and fraud. The insured did not give notice under its claims made policy until 7 months later. The policy stated that the notice must be given “as soon as practicable,” but did not have a clear cut deadline for reporting claims.
In its holding the court said an insurance company must show prejudice to deny payment on a claims-made policy when the denial is based on the insured’s breach of the notice provision, but the notice is given within the policy’s coverage period.
The lesson to be learned here, is to see an experienced Insurance Law Attorney right away if you have a claim denied where the insurance company says you were late in reporting the claim.