Late notification of loss leads to rejection in Florida at a very high rate. The insurers claim that they are prejudiced and that a presumption of prejudice arises in the event of late termination. A federal court has questioned senior legal authority as to whether a presumption exists and whether the insurer bears the burden of proving prejudice based on policy language.1
The first rule is to read the policy language. In this case, the policy states that the late notice must be “harmful” to the insurer:
The plaintiff primarily claims that the defendant has no presumption of prejudice in this case because the language of the defendant̵7;s agreement with the insured places the burden of showing prejudice on the defendant. Resp. at 2-3. The plaintiff specifically points to the provision stating that the defendant is not obliged to provide coverage under this insurance if [Insureds’] failure to fulfill its obligations is detrimental to [Defendant]’and argues that the presumption of injury does not arise in a case where the parties’ agreement contains that language. Id. at 2. A large number of district precedents would indicate that this argument misses the mark; in fact, this district has on several occasions maintained that the presumption of prejudice arises under policy provisions identical to those in this case. See e.g. Battat v. QBE Specialty Ins. Co.no. 21-60326, 2022 WL 1642296, on * 1 (SD Fla. 31 January 2022) (to find a presumption of prejudice) …
The court has since analyzed recent cases in Florida on the issue:
The Florida Fourth District Court of Appeal recently analyzed whether the presumption of prejudice arises in the policy language that is relevant here. Godfrey v. People’s Trust Ins. Co., No. 4D21-901, 2022 WL 1100490 (Fla. 4th DCA April 13, 2022). There, as here, the insurance stated that “the insurer was not obliged to provide cover under this insurance if failure to fulfill the following obligations is to the detriment of [the insurer].’… Among the “following obligations” was that the insured submitted an affidavit of damage. Id. The insurer contested the insured’s claim for failure to fulfill this obligation. Id. The Court found that, due to the proviso “if failure to comply with the following obligations is to our detriment”, the policy expressly requires[d] a display of prejudice. ‘ Id. Consequently, the Court held that “[a]n factual question remains[ed] about whether [the insured’s] Failure to submit sworn evidence of loss was “harmful” to [the insurer] in the sense of the policy. ‘ Id. In a similar case concerning the same language, the court found that “failure to comply with the terms of the insurance requires the insurer to be injured in order for that failure to constitute a material infringement and allow an insurer to refuse coverage for a claim. Whether the insurer has prejudices is a matter of fact.” Arguello v. People’s Trust Ins. Co., 315 So. 3d 35, 41–42 (Fla. 4th DCA 2021).
The federal judge found that recent Florida case law changed the burden of proof and the presumption of prejudice:
After careful consideration, the court must reject the precedent in this district that a presumption of prejudice may arise when an insurance provision requires that an insured’s failure to fulfill an enumerated obligation is to the detriment of the insurer. Since there is no presumption of prejudice, a real question of essential facts remains as to whether the insured’s failure to notify the defendant in time was harmful, and the claim must be rejected. Holding otherwise would create an arrangement under which an insurer can obtain a different outcome in federal court than that required by the new set of cases in Florida State Court.
For policyholders, it is best to report a loss. It is no excuse to say that the loss does not exceed the deductible. By doing so, even this prejudicial issue does not arise. But if a problem with late notification arises, it is important to read the policy language to see what standard of proof will be.
We can not help everyone, but everyone can help someone.
1 SFR Services v. The Hartford Ins. Co. in the MidwestNo. 21-cv-81330 (SD Fla. June 29, 2022).