No Coverage Where Insured Failed to Provide “Prompt” Notice, Fifth Circuit Decides

The U.S. Court of Appeals for the Fifth Circuit, affirming a district court’s decision, has ruled that an insurance company was not obligated to cover a property damage claim where the insured had failed to provide “prompt” notice as required by the policy.

Background

In July 2009, a hailstorm in Dallas, Texas, allegedly caused damage to the Dallas Plaza Hotel, owned by Hamilton Properties.

Hamilton took no action until November 2010, when it hired an inspector to assess the damage. In February 2011, Hamilton emailed an insurance agent with American Insurance Company (“AIC”), which had issued a policy that covered the property at the time of the hailstorm, about the damage. The agent responded that it was no longer Hamilton’s broker of record and could not accept or report the claim on Hamilton’s behalf.

In October 2011, Hamilton filed a claim with AIC.

AIC denied coverage, explaining that because so much time had passed and because there had been multiple hailstorms both before and after the July 2009 hailstorm, AIC could not determine what had caused the damage or when the claimed damage had occurred, including whether the damage had occurred during the coverage period of February 16 to September 24, 2009.

Hamilton sued AIC. The district court granted AIC’s motion for summary judgment, and Hamilton appealed to the Fifth Circuit.

The Fifth Circuit’s Decision

The Fifth Circuit affirmed.

In its decision, it first found that, even assuming that Hamilton had notified AIC in February 2011 (when Hamilton emailed an incorrect AIC agent and was notified that the agent could not file Hamilton’s claim), Hamilton had not provided any excuse for waiting 19 months to give AIC notice of the damage. The damage, the circuit court pointed out, “was not hidden.”

It then agreed with the district court that because the delay had occurred “without explanation,” Hamilton’s notice to AIC had not been prompt as a matter of law.

The Fifth Circuit next ruled that AIC had demonstrated that it had been prejudiced as a matter of law by Hamilton’s unreasonably late notice. Because of Hamilton’s delay, AIC had lost access to “critical evidence.” Also, its ability to determine whether and to what extent the July hailstorm had damaged the property had been “limited.”

Accordingly, the circuit court concluded, AIC’s obligations under the policy had been discharged by Hamilton’s unreasonably late notice.

The case is Hamilton Properties v. American Ins. Co., No. 15-10382 (5th Cir. April 14, 2016).