LAW NOTES from the Law Offices of
Kay & Andersen, LLC
June, 2014
What Every Insurer Should Know . . . . . . . . . . . . . . .
ABOUT PREJUDICE TO AN INSURER FOR AN UNTIMELY NOTICE OF CLAIM
Kay & Andersen, LLC
June, 2014
What Every Insurer Should Know . . . . . . . . . . . . . . .
ABOUT PREJUDICE TO AN INSURER FOR AN UNTIMELY NOTICE OF CLAIM
Disclaimer: The information contained on this page is not legal advice. The information provided on this website is for general informational purposes and is not necessarily updated to account for changes in the law. You should consult with an attorney for legal advice regarding your individual circumstances.
Insurance policies typically have provisions requiring timely notice of claims. The question of when an untimely claim can preclude coverage recently surfaced in Anderson v. Aul, 2014 WI App 30, 353 Wis. 2d 238, 844 N.W.2d 636 (February 19, 2014). In this case, clients of an attorney became dissatisfied with the attorney’s representation of their interests in a real estate transaction and issued a demand letter on December 23, 2009, seeking $117,125.00. The attorney’s malpractice policy had a period of April 1, 2009 through April 1, 2010, but the carrier was not notified of the demand letter until March 9, 2011. When the clients subsequently filed suit against the attorney on March 2, 2012, the malpractice carrier intervened and moved for summary judgment, arguing that the clients’ claim was not covered under the policy because the claim was not timely reported. The circuit court ruled in favor of the carrier, finding that the claim was not timely reported and the Court did not need to address prejudice because notice was not reasonably prompt. In a published decision on appeal, the Court of Appeals concluded that both Wisconsin insurance statutes and case law make clear that a circuit court must determine whether untimely notice prejudiced an insurer because a finding of untimeliness is not solely dispositive. Id, ¶11. Here, the circuit court failed to address the issue of prejudice, which is generally a question of fact. However, when the material facts are not in dispute, an appellate court may determine prejudice, or lack thereof, as a matter of law. Id, ¶13. The Court of Appeals rejected the carrier’s only argument on prejudice that requiring coverage would make the carrier pay a claim for which it did not bargain. The claims-made policy’s notice requirements did not trump the court’s conclusion that the carrier’s ability to investigate, evaluate, or defend the claim was not impaired, particularly when discovery on the merits in the underlying lawsuit had not started. Id, ¶14. The Court of Appeals concluded that the carrier was in the same position it would have been in with respect to the clients’ underlying claim or the attorney’s claim for coverage if the attorney had given timely notice. Id, ¶16. Consequently, the Court of Appeals reversed the circuit court and the case was remanded for further proceedings. The lesson carriers should take from this case is that if they intend to dispute coverage on the basis that notice of the claim was untimely, they should be prepared to demonstrate prejudice in defending the merits on a claim.
Law Offices of Kay & Andersen, LLC is recognized for securing favorable verdicts and settlements for insurance companies and their insureds and has received an AV rating from Martindale-Hubbell. We are also proud to be listed in Best’s Directory of Recommended Insurance Attorneys and Adjusters. Feel free to contact us with any of your insurance defense needs.
Law Offices of Kay & Andersen, LLC is recognized for securing favorable verdicts and settlements for insurance companies and their insureds and has received an AV rating from Martindale-Hubbell. We are also proud to be listed in Best’s Directory of Recommended Insurance Attorneys and Adjusters. Feel free to contact us with any of your insurance defense needs.