(Article from Insurance Law Alert, July/August 2023)
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Holding
A Missouri federal district court denied an insurer’s summary judgment motion seeking to establish that it had no duty to indemnify, finding that while the policyholder’s late notice was unreasonable, the insurer did not establish prejudice as a matter of law. New Prime, Inc. v. Federal Ins. Co., 2023 U.S. Dist. LEXIS 123307, (W.D. Mo. July 18, 2023).
Background
Chubb Insurance Company provided coverage to New Prime, excess to a self-insured retention of $3 million. The policy required notice “as soon as practicable of any occurrence or offense that may result in a claim” and specified that if a claim does not reasonably appear to involve the policy, but “later develops into a claim or loss to which this insurance applies, the failure to report it . . . will not violate this condition, provided the insured gives us immediate notice as soon as the insured is aware that that this insurance may apply.”
During the policy period, a New Prime employee allegedly drove into another vehicle, resulting in injuries to the car occupants. In ensuing litigation, the injured claimants sought “monetary relief over $200,000 but not more than $1,000,000” and made numerous settlement demands, some of which were less than the self-insured retention but one of which was $6 million. The case proceeded to trial and a jury awarded the claimants $12.45 million in damages. Following the verdict, New Prime notified Chubb of the suit.
Decision
The court ruled that New Prime’s notice to Chubb was unreasonable as a matter of law because the $6 million settlement demand “clearly implicated the notice provision.” Notwithstanding this ruling, the court held that Chubb did not establish prejudice as a matter of law. In particular, the court explained that while Chubb presented deposition testimony that it was denied the opportunity to investigate claims, participate in the defense of the underlying action and settlement negotiations, or retain counsel in the underlying suit, such statements amounted to “bare conclusions” of prejudice, insufficient to establish prejudice as a matter of law.
Comments
While the court’s decision leaves open the possibility of a finding of prejudice by the finder of fact, it appears to set a bar for establishing prejudice under Missouri law that requires particularized factual evidence of precisely how an insurer was harmed by the delay in notice, above and beyond an insurer’s inability to participate in the underlying defense or settlement negotiations. Courts in other jurisdictions have found prejudice as a matter of law where an insurer is not notified of an underlying claim until after judgment has been issued against the policyholder.