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A Victory For Insurers Who Deny Coverage Based Upon Late Notice

Blogs, Insurance Coverage

Templo Fuente De Vida Corp., et al. v. National Union Fire Insurance Co., (A-18-14) (074572) (N.J. February, 2016). In an important decision for insurers and insureds in New Jersey, the state’s Supreme Court ruled that an insurer disclaiming coverage under a claims made policy issued to a “sophisticated” insured is not required to establish prejudice resulting from delayed notice of the claim. In a unanimous decision, the New Jersey Supreme Court affirmed an appeals court’s ruling that National Union Fire Insurance Co. of Pittsburgh, Pa., doesn’t have to cover policyholder First Independent Financial Group’s settlement of a suit accusing it of backing off from commitments to provide funding for a church and day care center to buy a property. Under decades-old New Jersey precedent, insurers must present evidence of prejudice to disclaim coverage based on a policyholder’s late notice under “occurrence”-based policies, which cover claims arising out of events that occurred during the policy period, regardless of when a claim is made. The New Jersey justices refused to apply that rule to First Independent’s “claims made” directors and officers policy, which provided coverage for claims made against the company during the policy period. Despite the fact that First Independent notified National Union of the underlying suit within the policy period, it didn’t provide notice “as soon as practicable,” as required by the policy, according to the opinion. The one olive branch insureds can grasp is the fact that Supreme Court emphasized that First Independent was “sophisticated insured” who should have known to provide early notice as soon as practicable.