marylandOne of the recurring battles in the continuing wars about whether or not a policyholder’s late provision of notice of claim precludes coverage is the question whether or not the “notice prejudice” rule applies. The notice prejudice rule specifies that the insurer can assert late notice as a coverage defense only if the delayed notice prejudiced the insurer. But if the notice prejudice rule applies, what constitutes “prejudice”? In an April 14, 2016 decision (here), the Fourth Circuit, applying Maryland law, addressed this issue and held that where the policyholder did not provide notice until after a $98.5 million default judgment had been entered in the underlying claim, the insurer was prejudiced and coverage under the policy was precluded. As discussed below, the ruling raises a number of interesting questions and also has wording implications for policy notice provisions.
Continue Reading O.K., The Notice Prejudice Rule Applies, But What Constitutes “Prejudice”?