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A video that explains the rule of message prejudice when interpreting an insurance policy



See the full video at https://youtu.be/os_txgbtpu4 [1965653] The usually uncomplicated phrase "late notice" has become a target for courts that change clear and unambiguous into a situation of confusion and doubt. The prompt notification of claims is generally an explicit requirement for insurance and fundamental for the efficient and predictable handling of claims. The modern trend from US courts and legislators has been to reduce "late notice" as a defense against coverage.

Specifically, many U.S. jurisdictions have moved away from strict application of the early termination requirement – that is, failure to report in a timely manner constitutes forfeiture of coverage – to one that requires the damage to be shown to the insurer before coverage is lost. Called the "notice-prejudice" rule, the basic premise is that unless the insurer has been affected by an insurance late notice, the coverage will not be forfeited. Recent disputes and legislation from across the country have taken the teeth out of the defense and made its viability uncertain, although some courts will use common sense when dealing with the precautionary rule.

An insured with both primary and excessive coverage, as General Practice should report to the excess insurer on losses where at least half of the primary limit is exposed by a third party claim. Failure to do so can be extremely costly and defeat the wisdom of buying surplus.

In Landmark American Insurance Company v. Deerfield Construction, Inc., and Shawn Graff v. Arthur J. Gallagher Risk Management Services, Inc. No. 18-2205, United States Court of Appeals for the Seventh Circuit (August 12, 2019) Deerfield's employee, Graff, had a car accident with Mr. Keeping.

Deerfield had a primary commercial car insurance through American that covered it for up to $ 1 million in liability. Deerfield's broker, Gallagher, also helped Deerfield get a surplus insurance from Landmark to kick in after Deerfield's liability exceeded $ 1 million. After Graff's accident, Deerfield informed American and Gallagher. No one reported landmark, not even after Keeping posted.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to employment as an insurance consultant specializing in insurance coverage, insurance claims management, insurance shortages and insurance fraudsters almost equally for insurers. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

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