Most insurance policies require the insured to give the carrier notice of a claim “as soon as practical,” or words to that effect. For the past 24 years, in order to avoid denial of their claims, Connecticut has required policyholders to demonstrate that their insurance company was not prejudiced on the ground of late notice. The Connecticut Supreme Court recently reversed itself to the extent prior law allocated to the insured the burden of disproving prejudice. In so doing, Connecticut joins the vast majority of states that require carriers to prove prejudice as a result of late notice of claims in order to deny coverage on that ground.
Arrowood Indemnity Co. v. King, 304 Conn. 179 (2012) arose from an insured’s son towing a friend on a skateboard behind an all-terrain vehicle. The friend fell and was severely injured. The respective families continued to socialize and there was no mention of the commencement of litigation as a result of the incident.
Nearly a year later, the insured got a not-so-friendly letter from the attorney representing the friend’s family informing them of a potential lawsuit. Then, and only then, did the insured’s family report the incident to their insurance company. The insurance company declined coverage, in part, on the basis of an untimely claim. Under preexisting law, in order to obtain coverage, the insured would have to prove that the carrier was not prejudiced by the delay.
Burden of Disproving Prejudice
The Connecticut Supreme Court used Arrowood as an opportunity to overrule its 1988 decision that allocated to the insured the burden of disproving prejudice to the insurance company. The Court had earlier opined that a strict litmus test of delayed notice (without regard to actual prejudice) would likely result in the forfeiture of insurance coverage.
Now, post-Arrowood, the burden of proving prejudice from delay is on the insurer. As a practical matter, it is the insurer that is best able to assess and prove any prejudicial effect of delay on its investigation of a claim or the mounting of a legal defense. The result should be better informed trial court decisions on the existence or extent of prejudice to carriers from delayed notice. Connecticut policyholders are better off as a result as they are more likely to be able to access the insurance coverage for which they have over years paid premiums.
The commercial litigation attorneys in the Westport, Connecticut office of Maya Murphy, P.C. have extensive experience in the negotiation and litigation of all sorts of insurance-related disputes and assist clients from Greenwich, Stamford, New Canaan, Darien, Norwalk, Westport and Fairfield in resolving such issues. Please contact our Westport office by phone at (203) 221-3100