Is it likely that our insurance company is going to decline coverage if we did not give them timely notice of lawsuit?
Question Details:
We are a janitorial company. In 11/09 a lawsuit was filed against us for injuries in a slip and fall case. The individual has a good case. Our insurance company has notified us that they are reserving the right to deny general liability coverage for the claim because we failed to give them promp notice of the lawsuit. They received notice in 02/10. Their claim is that information gathered to date indicates that we may have been served this lawsuit in 11/09 and also received a tender of defense from the customer we were working for.
An insurance company may decline coverage if the insured fails to provide timely notice of a claim. There is much litigation over this issue. The bottom line is that the insurer is required to show that they suffered UNFAIR PREJUDICE as a result of the untimely notice. I suggest that you hire a lawyer to look into the specific facts of this case as each case is different. Unfair prejudice is a very difficult standing to prove and therefore, the insured should battle the insurer on the issue as it can be very expensive to pay out of your pocket. I suggest that you hire a lawyer immediately. Most lawyers will meet with you for free initially. Explain the facts of the case and bring all the documents.
I'm afraid that this is a very real possibility. I don't have to read your insurance policy to know that it has a very specific provision that requires you to give them timely notice of a lawsuit against you; the letter reserving the right to deny coverage almost certainly refers to that provision.
However, there are some limits to that. The law tends to favor coverage against non-coverage, and the question that often decides cases like this is whether or not the delay in notification has damaged (in legalese, "prejudiced") the insurance company's ability to defend the case.
It sounds as if the company is going to go ahead and hire an attorney to defend the case for you, which would be a good thing, because that will make it harder for them to deny coverage if the plaintiff wins. But whether or not this is the case, I think you really need to talk to an attorney of your own, because you may have to fight the insurance company on this one.
