Where Notice Of Claim Is Untimely, Get A Signed Non-Waiver Agreement Before Begining Your Investigation

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Insurance policies require that an insured give the company notice of a claim as soon as possible.  This gives the company the chance to investigate the claim, gather information, and determine whether coverage is appropriate while the evidence is still available.

Where notice of a claim is untimely, some courts accept excuses for the delays, such as, a diligent insured who simply didn’t discovery the loss or an incapacitated insured.  See Columbia Union Nat. Bank v. Hartford Acc. and Indem. Co., 669 F.2d 1210 (8th Cir. 1982) and Pikey v. General Acc. Ins. Co. of America, 922 S.W.2d 777 (Mo. Ct. App. E.D. 1996).

However, where timeliness of the notice is unexcused, courts generally take one of three views as to whether the claim should be paid.  One view is that timely notice is a condition precedent to coverage.  An unexcused delay automatically results in a loss of coverage.  See United Services Auto Ass’n v. Allstate Ins. Co., 662 P.2d 1102 (Colo. Ct. App. 1983).  The second view is that late notice generally avoids coverage unless the insured can show that the insurance company suffered no prejudice because of the late notice.  See Grinnell Mut. Reinsurance Co. v. Jungling, 654 N.W.2d 530 (Iowa 2002).  The third view is that unexcused untimely notice results in a loss of coverage only if the insurer can show that it has been prejudiced by the delay.  See Zuckerman v. Trans America Ins. Co., 133 Ariz. 139, 650 P.2d 441 (1982).

The Nevada courts considered the issue of late notice of a claim in the case of Havas v. Atlantic Ins. Co., 96 Nev. 586, 641 P.2d 1 (1980).  Havas did not specifically deal with the question of what excuses Nevada courts would accept to forgive a late notice.  Nor does the opinion explain the position that the Nevada Supreme Court will take as to which of the three views Nevada will follow, whether an unexcused delay in reporting will automatically end the claim or whether prejudice or a lack thereof will have to be demonstrated by either the insured or the insurer

Rather, the Havas decision deals with the question of whether the insurance company waived the late notice issue.  In Havas, the homeowner suffered water damage due to a leaking water softener.  The homeowner’s excuse for a 16 month delay was that he believed that he would be able to recover from the water softener manufacturer.  Apparently the Court considered the excuse insufficient but the opinion does not state why.

In spite of the late notice, the insurance company opened a claim, investigated and denied the claim on grounds other than timeliness.  However, before it did that, the carrier had the insured sign a non-waiver agreement regarding the late notice issue.  The insured argued that because the company opened a claim and investigated, that it had waived the late notice question.  The court disagreed.  It said that because the company had protected itself with a signed non-waiver agreement, that the company could continue to rely on late notice as a basis for the denial, in spite of the fact that it opened a claim and investigated.  This signed non-waiver agreement effectively preserved the late notice issue, even though the company decided it should do additional investigation.

The lesson learned from Havas is simple.  If the company determines that it is going to open a claim, in spite of late notice (and often that is a wise decision to make), the company needs to get a non-waiver agreement signed by the insured before it opens that claim and conducts that investigation.  If you have questions about the timeliness of notice on a claim, please feel free to contact Mills and Associates to discuss Nevada law on this topic and any other coverage issues you may have.