Can My Insurance Company Deny My Claim Because I Reported It Late?

Every insurance policy requires the insured to notify the insurance company of a loss or lawsuit in accordance with the policy conditions. Michigan courts treat the provisions differently depending on their specific language: Where the policy requires notice within a specified number of days, Michigan courts will strictly enforce that language and bar coverage if the deadline is missed. Conversely, if the policy uses language such as as soon as practicable or immediately, Michigan courts construe it to require notice within a reasonable time and bars coverage only if the insurance company proves it was prejudiced by the late notice.

Michigan courts have explained that the purpose of notice provisions is to allow the insurer to make a timely investigation in order to evaluate claims and defend against fraudulent, invalid, or excessive ones. Mere delay does not forfeit coverage. Absent a specified time period to provide notice, prejudice to the insurer is a material element in determining whether notice was reasonably given, and the burden is on the insurance company to demonstrate that prejudice. An insurer suffers prejudice when the delay materially impairs its ability to contest its liability to the insured or the liability of the insured to a third party.

Courts consider whether the delay materially impaired the insurer's ability to: 1. Investigate liability and damage issues to protect its interests; 2. Evaluate, negotiate, defend, or settle a claim or suit; 3. Pursue claims against third parties; and. 4. Contest the liability of the insured to a third party or its own liability to its insured.

There are situations where delay is fatal to coverage. In Koski v Allstate Ins Co, the Michigan Supreme Court held that an insured's failure to notify the insurer of a lawsuit until after a default judgment had been entered prejudiced the insurer and barred coverage. By the time the insurer learned of the suit, three months after the default judgment‚ its ability to defend the case was essentially gone.

If you are served with a complaint, your insurance company needs the suit papers immediately and where there is a specified deadline, no later. Giving notice of the original accident or occurrence does not relieve you of the separate obligation to provide notice of a lawsuit that follows. Unless your policy contained a specific deadline you missed, the insurer must prove the delay materially impaired its position. If your claim was denied for late notice, that denial deserves scrutiny from counsel who represents policyholders.

Kutinsky PLLC exclusively represents policyholders, insureds, and claimants in disputes with insurance companies throughout Michigan.