The Notice-Prejudice Rule Doesn’t Always Apply
Claims made and claims made and reported policies contain a date certain notice requirement. In Colorado, the Colorado Supreme Court found:
“The notice-prejudice rule does not apply to a date-certain notice requirement in a claims-made insurance policy. In a claims-made policy, the date-certain notice requirement defines the scope of coverage. Thus, to excuse late notice in violation of such a requirement would rewrite a fundamental term of the insurance contract.” (Craft v. Philadelphia Indemnity Insurance Company, 2015 CO 11, 343 P.3d 951)
The conceptual differences between occurrence and claims-made liability policies lie at the core of this case. The Colorado Division of Insurance defines an occurrence policy as ‘an insurance policy that provides liability coverage only for injury or damage that occurs during the policy term, regardless of when the claim is actually made.’ (3 Colo. Code Regs. 702–5:5–1–8 (2014).)
Claims-made policies typically contain a second type of notice requirement not found in occurrence policies: the requirement that the insured provide notice of a claim within the policy period or a defined reporting period thereafter. Such a date-certain notice requirement fulfills a very different function than a prompt notice requirement.
Where a prompt notice requirement serves to allow the insurer to investigate the claim and negotiate with the third party asserting the claim, the date-certain notice requirement defines the temporal boundaries of the policy’s basic coverage terms.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves 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 handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
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