Knowledge is Power: Investigation into the Insured's Knowledge for a Late-Notice Defense
Late notice is a familiar, well-known defense in the coverage world. Under Georgia law, an insured’s failure to provide timely notice may excuse an insurer from providing coverage if the policy’s notice provision is a valid condition precedent to coverage and the insured cannot provide a legal justification for the delay. Perhaps due to the familiarity of late-notice provisions, insurers often stop short of investigating the other half of the defense — whether the insured has “legal justification” for the delay. The insured’s justification frequently involves fact-based inquiries into the insured’s knowledge of the loss and the policy. Thus, it is critical for adjusters to gather information to ensure a late-notice defense is airtight before disclaiming coverage based on the insured’s failure to provide timely notice. The following are three examples of how the insured’s knowledge can impede a late-notice defense and how an adjuster can address these issues.
Knowledge of the Loss, but Not the Damage
Under Georgia law, an insured’s duty to provide notice is triggered when an “insured actually knew or should have known of the possibility” that a claim existed. 105 R.R. St., LLC v. Great Lakes Reinsurance (UK) SE, 2016 WL 9454412, at *4 (N.D. Ga. Dec. 21, 2016). Often, the insured will allege they did not know about a loss until shortly before they submitted the claim. This is a particularly common justification for insureds submitting storm-related roof damage or leak claims several months after a storm. While this may seem like a reasonable justification at first, the inquiry should not stop there. Insurers should determine whether the insured had other storm-related claims, reason to know about potential storm damage or a duty to maintain the property as a landlord or otherwise. In cases like these, a carrier may have facts to argue the insured had constructive notice of a claim. 105 R.R. St., 2016 WL 9454412, at *4-5 (holding that a landlord-insured’s alleged ignorance of storm damage did not justify his delayed notice in light of his real-estate experience, his duty to maintain the property and his lease of the property to a new tenant). In other words, the circumstances may show the insured’s delay was unreasonable based on other known facts.
Knowledge of the Loss, but Not the Severity
In contrast to first-party claims involving storm, fire or other property damage, Georgia courts may be more lenient in third-party cases involving personal injuries. If the insured had knowledge of a loss, but the severity of the injury was not obvious until later, the reasonableness of the insured’s delayed notice may be a question of fact for the jury to determine. Rucker v. Allstate Ins. Co., 390 S.E.2d 642 (Ga. App. 1990) (holding insured’s late notice posed a jury question where insured did not know the extent of a claimant’s injuries until he submitted a demand letter). Still, insurers should obtain information about the insured’s recollection of the incident. For example:
- How did the claimant appear?
- Did the claimant mention that he was suffering from injuries at an earlier time?
- Did the insured consider hiring an attorney at an earlier point?
- Did the insured have any conversations with family members or otherwise that suggest the insured understood the seriousness of the situation? If so, the fact that an injured claimant did not threaten litigation until recently may not be enough to justify the insured’s failure to notify his insurer of the occurrence.
Knowledge of the Loss, but Not the Policy or Insurer
Generally, an insured’s claimed ignorance about his insurer or an insured’s mistaken belief about his coverage is not enough to justify delayed notice, particularly when the insured makes no effort to verify the lack of coverage. Regent Ins. Co. v. Bravo Food Serv., Inc., 2014 WL 2442791, at *3 (S.D. Ga. May 29, 2014); Snow v. Atlanta Int’l. Ins. Co., 354 S.E.2d 644 (Ga. App. 1987) (delayed notice to employer’s insurer was not justified when employee knew his employment contract provided for insurance coverage but he failed to ask about it); Milwaukee Ins. Co. v. Powell, 132 S.E.2d 95 (Ga. App. 1963) (delayed notice due to ignorance of insurer’s identity was unreasonable where insured could have asked another insurance agency employee about the identity earlier on).
If the insured contends he did not know the identity of the carrier or had a mistaken belief about the coverage, the insurer should assess the reasonableness of this contention.
- What did the insured rely upon to form this mistaken belief?
- Did the insured take any steps to confirm this belief?
- What sources (e.g., email, mail, family members) did the insured investigate?
- Was there a source from which the insured could have found more information? If so, did the insured utilize this source?
The answers to these questions may reveal critical information that invalidates the insured’s justification. “An insured cannot be heard to say it did not know when it did not inquire. The insured must use due diligence and take appropriate steps to make an informed judgment[.]” Evanston Ins. Co. v. Stonewall Surplus Lines Ins. Co., 111 F.3d 852, 861 (11th Cir. 1997).
While the foregoing examples are not exhaustive of excuses offered by insureds in late-notice cases, these examples highlight the importance of investigating the insured’s excuse for failing to provide timely notice and whether the excuse is reasonable.
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Christine H. L. Russell