A recent decision by the U.S. Court of Appeals for the First Circuit highlights the importance of insurance notification provisions, especially when dealing with insurance claims.
In June 2023, Harvard University made headlines as the named defendant in two high-profile cases before the U.S. Supreme Court. In November 2014, the political advocacy group Students for Fair Admissions filed separate lawsuits against Harvard University and the University of North Carolina to ban the use of race in higher education admissions. The Supreme Court agreed to hear the case in 2022 after a lower court ruled in the university’s favor. On June 29, 2023, the Supreme Court ruled that Harvard University’s race-sensitive admissions policy violated the Equal Protection Clause. Amendments to the U.S. Constitution.
Harvard vigorously defended its admissions program in this lawsuit, incurring significant legal costs and attempting to recover through insurance. Harvard entered into a lead agreement with her AIG and purchased excess insurance from Zurich American Insurance Company. AIG’s insurance policies provided “claims coverage,” which required prompt notification of claims made within the policy period and within 90 days after the end of the policy period. Period of insurance. Zurich’s excess policy stipulates:[a]Preconditions for exercising rights under [the] Harvard University was required to provide written notice in the same manner as required by the General Policy. In other words Within 90 days after the end of the insurance period.
Harvard promptly notified its lead insurer, AIG, of the lawsuit, but did not formally notify Zurich until 2017. Zurich rejected the report on the grounds that Harvard University did not provide timely notice. Harvard University sued Zurich for a declaratory judgment stating that it was entitled to compensation and damages.
On August 9, 2023, the First Circuit issued the following opinion: Harvard University President and Fellows v. Zurich American Insurance Company The district court then confirmed that it would grant summary judgment against Zurich.
Harvard University held that the district court required strict compliance with the policy’s notice provisions because the University of Zurich had actual or constructive knowledge of the litigation because it had been widely reported in the media. They argued that the law had been misapplied. The First Circuit rejected this argument, calling Harvard’s position “nothing more than gaslighting.”
The First Circuit distinguished between occurrence-based and claims policies and distinguished the different purposes served by the notification requirements in each situation. In occurrence-based insurance, notification requirements allow the insurance company to investigate the facts quickly and effectively. If the insurance company is still able to effectively investigate the claim, it is not biased and it would be unfair to revoke coverage based on late notification. In contrast, in the case of insurance claims, notification provisions are important in ensuring fairness in rate setting. If a claim is brought outside of the notice provisions, it would “defeat the primary purpose of insuring the claim rather than the occurrence.”
new york state insurance law
Although, Harvard University This case demonstrates that Massachusetts law and New York law are similar in many respects, and that this case provides policyholders with a clear understanding of the distinction between occurrence-based and claims-based insurance contracts, as well as the potential This serves as an important reminder of the importance of timely notification of all insurance policies that may result in a loss. related to complaints.
New York State has long followed the minority view that an insured’s failure to comply with a policy’s notification provisions without good cause can result in complete revocation of coverage. In 2008, New York State amended its insurance law, joining the modern trend in favor of “notice and prejudice” rules, stating that late notice alone is not sufficient to support a denial of coverage, and requiring insurance companies to comply with insurance law. It must be shown that there was prejudice due to the Sorry for the late notice.
Therefore, New York Insurance Law § 3420(a)(5) provides coverage for late notification of a claim in a liability insurance contract unless the insurance company can prove that the late notification caused harm. It stipulates that it shall not be invalidated. Additionally, under Insurance Law § 3420(c)(2), if an insurance company alleges that it has been prejudiced by late notification, the insurance company must file a claim at least two years after the time the notification was required by law. Unless the information was provided after a certain period of time has elapsed, the burden of proof will be on the person to prove that there is any disadvantage. policy.
However, the “notice bias” rule applies only to occurrence-based policies. Strict compliance with notification requirements remains the rule for insurance claims policies. “However, with respect to insurance claims policies, such claims may be defined as follows.” will do shall be made during the policy period, its renewal or extended reporting period. ” Insurance Law § 3420(a)(5) (emphasis added).
Consideration for policyholders
of Harvard University This case serves as a reminder to policyholders that they need to be mindful of the notice provisions in their insurance contracts, especially in the case of insurance claims.
Businesses filing claims should take particular care to ensure that all insurance companies, including excess insurance companies, are provided with written notice of the claim. One way to ensure this is to formalize your company’s internal claims reporting policies and procedures to ensure that the person or team responsible for managing insurance claims can track notifications and responses from the insurance company. That’s it.
Additionally, you should consider regularly reviewing your company’s claims activity. Consider doing such a review at least once a year, approximately 60 days before your policy’s expiration/renewal date. This gives you the opportunity to review all your claims from the previous year and ensure that everything was properly reported to your insurance company within your insurance policy’s claims reporting period. If you notice a missed claim, you can notify your insurance company before the end of your coverage period.
Finally, when in doubt, report a potential claim to your insurance company. You can discuss whether the accident rises to the level of a “claim” that must be reported under the insurance policy, or whether the claim is serious enough to bother reporting to the insurance company. You may be doing it. For example, you may initially believe that a claim is a minor claim that falls within your deductible, but later discover that the claim is much more significant than you originally believed. The safest option is to report the claim to your insurance company first to avoid late notification and the risk of future deductibles.
The above advice is also important when it comes to occurrence-based insurance, and there are important benefits to notifying your insurance company of a claim quickly. The “forewarning bias” rule May Although this rule protects insureds who are late in notifying their insurance company of a claim, this rule does not mean that the insurance company cannot prove bias (or attempt to prove bias). No policyholder wants to spend time and money litigating with an insurance company over the potential disadvantage to the insurance company as a result of late notification. By following well-documented claims processing procedures, you can avoid headaches and the risk of exclusion from coverage.
Ryan A. Lema is a partner at Phillips Lytle LLP and a member of the firm’s insurance coverage practice team. You can contact him at: [email protected] or (716) 504-5790.