The United States District Court for the Southern District of Mississippi, applying Mississippi law, has held that noncompliance with a 30-day notice provision in an asset protection policy does not bar coverage unless the insurer can prove prejudice. Brit UW Ltd. v. D.S. Ladner Holdings LLC, 2023 WL 4881380 (S.D. Miss. Jul. 31, 2023).
The insureds, two real estate holding companies, purchased asset protection policies for their real estate portfolio. During the policy period, a hurricane struck the insureds' properties and caused damage for which the insureds sought coverage. Due to the limited availability of the insurance agent's field adjuster, the insurance agent approved the submission of damages after the end of the policies' 30-day reporting period. That reporting provision states, in relevant part, that the insureds "shall immediately report in writing, to the Underwriters, a description of every claimed loss or damage which occurs and may become a claim under this insurance immediately after it becomes known to the [insured]. [The insured] may make a claim for loss or damage covered under this policy/ certificate if you notify Underwriters, but in no case, later [sic] than 30 days following the date of loss or damage." The policies also contain a breach of warranty provision which states, in relevant part, that "[i]f a breach of any warranty, duty, . . . . or condition in any . . . . part of this insurance shall occur, such breach, by the term of such warranty, duty or condition, shall operate to void this insurance."
The insurer filed a declaratory judgment action against the insureds regarding whether late notice barred coverage for the untimely submitted claims. Both parties filed competing summary judgment motions. The insurer argued that there was no coverage for the claims filed after the end of the 30-day reporting period because the provision is an essential term of the policies similar to claims-made and reported policies. The insured contended that the notice requirement is a condition subsequent to coverage and, therefore, the insurer must show prejudice.
The court held that the insurer must establish prejudice to deny coverage for late notice. The court also held that the asset protection policies were not claims-made and reported policies in which notice was required during the policy term. Further, the court held that the notice provision was not a condition precedent to coverage because it did not expressly state that failure to comply with the provision would result in forfeiture of coverage. Finally, the court determined that the notice provision was a condition subsequent, which requires proof of prejudice, because the policies' coverage was triggered by the loss and not timely notice.
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