Better Late Than Never: California Law Regarding Reporting Your Claim To Your Insurer

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Insurance policies generally require prompt notice to be provided by the insured to the insurance company when they have suffered a loss or event and want to make an insurance claim.  Timely notice is a basic condition in all or nearly all kinds of insurance.  Indeed, one California insurance statute provides that the insured must give the insurance company “written notice . . . of any loss without unnecessary delay.” (California Insurance Code §2071(a).)   Failure to provide timely notice of a claim alone can result in a denial, and the loss of otherwise payable benefits. (Earle v. State Farm Fire & Cas. Co. (N.D. Cal. 1996) 935 F. Supp. 1076, 1082.)

There are many reasons that insurance claims are not immediately reported after a loss or event for which insurance coverage may be available.  These include not understanding the severity of damage, not understanding that a policy provides coverage for a loss, or confusion over which policies provide coverage.  The good news is that the notice requirement is liberal in many circumstances under California law.  A denial of a claim based on lack of notice is suspect unless the circumstances are egregious.

First, the notice requirement is not triggered until there is “appreciable damage.”  (Prudential-LMI Com. Ins. v. Superior Court (1990) 51 Cal. 3d 674, 685.)   Appreciable damage is more than “wear and tear,” and what constitutes enough damage to trigger the notice requirement is a question of fact for a jury.  (Id. at 687.)  There is often room for debate as to when the duty to provide notice of an insurance claim is triggered.

Even where an insured makes a late claim, in order to deny the claim based on untimeliness, the insurance company must prove it suffered “substantial prejudice” from the late notice. (Campbell v. Allstate Insurance Co. (1963) 60 Cal.2d 303, 305.) This is a very high burden which insurance companies are frequently unable to meet. Moreover, the question of whether the insurer suffered substantial prejudice from late notice “is ordinarily one of fact” for the jury.  (Northwestern Title Sec. Co. v. Flack(1970) 6 Cal. App. 3d 134, 141.)  Thus, practically speaking it is very difficult for an insurance company to defeat a case before it reaches a jury on the assertion that the claim was reported late, and that warrants denial.

In addition, where an insurance company denies a claim based on a lack of coverage, “it waives any claim that the notice provisions of the policy have not been complied with.” (Comunale v. Traders & Gen. Ins. Co. (1953) 116 Cal.App.2d 198, 202-203.)  This means once an insurance company denies a claim for lack of coverage, it cannot later go back and complain of late notice if its coverage position turns out to be incorrect.

Late notice is a frequently cited reason, usually among others, for denial of a claim.  It is among the weaker grounds for denial, and there are many viable grounds under California law to challenge it.