"I Didn’t Know I Had Insurance" is No Excuse for Late Notice of a Claim
On November 10, 2015, the Supreme Court of Appeals of West Virginia concluded in The Travelers Indemnity Company v. U.S. Silica Company that the satisfaction of the notice provision in an insurance policy is a condition precedent to coverage. The Court also found that an insured’s lack of knowledge of its own insurance policies is an insufficient justification for untimely notice to its insurer.
In cases where the timeliness of an insured’s notice is called into question, courts are to utilize a two-step inquiry to determine whether late notice precludes coverage. First, the courts must consider the length of the delay and whether the delay was reasonable. If the delay was not reasonable, the inquiry ends, and coverage will be foreclosed. If the delay was reasonable, the second part of the analysis shifts the burden to the insurer to demonstrate prejudice caused by the delay. If the insurer can demonstrate prejudice from the late notice, coverage is precluded. However, if the insurer cannot demonstrate prejudice, the delay alone will not preclude coverage.
In this case, Travelers insured U.S. Silica over a span of several decades. During that time, the ownership of U.S. Silica changed hands on several occasions. During a review of its insurance policies, U.S. Silica discovered certain policies from Travelers which U.S. Silica believed provided coverage for several claims that had been paid out through the years. Travelers contended, among other things, that U.S. Silica failed to give timely notice of the claims for which it sought coverage. The policy language at issue stated that “[i]f a claim is made or suit is brought against the insured, the insured shall immediately forward to the [insurer] every demand, notice, summons or other process received by him or his representative.” Based on this language, the Court found that U.S. Silica was required to notify Travelers of such claims when it first received them. U.S. Silica argued that it failed to provide timely notice to Travelers because it was not aware of the existence of the policies at the time the claims were made. The Court concluded that, while normally a question of fact, U.S. Silica’s 30 year delay in notifying Travelers of the claims was unreasonable as a matter of law, both because the delay was substantial and because U.S. Silica’s excuse for the delay was not reasonable. U.S. Silica’s failure to provide timely notice to Travelers because it was not aware that its policies might have provided for the payment of defense and settlement costs did not justify late notice of the claims. "Thus, an insured’s loss of its own insurance policy, or its failure to thoroughly search its own files to ascertain whether it might have a policy of insurance that provides coverage for a particular loss, does not excuse the insured of its duty to notify its insurer of claims for which it seeks coverage, particularly when such notice is a condition precedent to coverage.” Travelers, 14-0343, slip op. at 17 (W. Va. Nov. 10, 2015). Accordingly, the Court held that U.S. Silica was not entitled to coverage under the subject Travelers policies.