Like other contracts, insurance policies outline the rights and responsibilities of the insured and the insurer. In most circumstances, insurance policies require notice of claims or potential claims against the insured. If the insured fails to timely notify the insurer of the claim or potential claim, then the insurer may decline to cover the claim.
In Williams v Travelers Property & Casualty Co. of America Rhonda Thompson slipped and fell on the plaintiffs’ property and was injured. The fall occurred in 2005. Three years later, Thompson sued the plaintiffs. Plaintiffs never responded to Thompson’s complaint and Thompson received a default judgment.
After receiving notice of default judgment, plaintiffs successfully moved to set aside the default judgment. In 2010, over five years after the accident occurred, plaintiffs notified the defendant insurance company. The insurance company refused to cover the claim. Plaintiffs filed suit against the defendant The requesting that the court rule that the defendant was required to defend the Thompson claim.
The Court of Appeals first noted that just because an insured fails to comply with an insurance policy’s notice provision does not mean that the insurer can automatically deny coverage. Rather, the insurer must establish that it was prejudiced by the insured’s failure to give prompt notice.
In order to determine whether an insurer was prejudiced by the delay, Michigan courts will look at how the timing of the notice affected the insurer’s ability to (1) investigate the accident and damages issues; (2) evaluate the claim and determine whether to settle the case; (3) to pursue claims against potential third parties; (4) to contest the liability of the insured against the injured party; and (5) to contest whether it is liable to the insured.
The Court of Appeals ruled that in this case the defendant was not required to defend the claim because the insurance company was not notified of the claim until five years after the incident occurred. The defendant was prejudiced because the defendant was unable to property investigate the accident. The Court noted that there was little documentary evidence of the incident surrounding the slip and fall. Additionally, there were no statements of other persons on the property, the responding officers to the accident, or the EMS personnel who responded to the scene.
Notifying your insurer of potential claims is important. Failure to promptly notify your insurer of potential claims may result in denial coverage. Whenever an accident occurs on your property, notify your insurer or you may be at risk of a denial of coverage.
