As anyone involved in the liability insurance claims knows, late notice of claim is a recurring problem. When policyholders’ notice of claim is late, liability insurers will often contend that the late notice precludes coverage. However, many jurisdictions have a so-called “notice prejudice” rule, specifying that insurers can deny coverage for late notice only if the late provision of the notice prejudiced the insurer. One of the states imposing the notice prejudice rule is Maryland, where the rule is statutory. Even where the notice prejudice rule applies, there is still the question of what must be shown in order for the rule to apply.
A January 27, 2017 decision by the Maryland Court of Appeals (the state’s highest court), held that a non-profit organization D&O insurer was not prejudiced by, and therefore could not deny coverage for, the policyholder’s two-and-a-half year delay in providing notice of claim, where the underlying lawsuit had been stayed almost the entire time and where the insurer could not have done anything to avoid the adverse factual determinations in a related but separate proceeding. The court’s ruling underscores the importance of the notice prejudice rule in protecting policyholder’s rights under liability insurance policies. The Maryland Court of Appeals’ opinion in the case can be found here. A February 6, 2017 post about the court’s ruling on the Hunton & Williams law firm’s Insurance Recovery Blog can be found here.
Continue Reading D&O Insurance: Over Two-Year Notice Delay Does Not Bar Coverage Where Delay Did not Cause Prejudice