Lawsuits are almost always unwelcome surprises. Combined with the regular daily stresses
Board members face for their communities, it's a relief knowing you have proper
insurance in place, right? So, when the
insurance company denies the claim saying you didn't report it quickly enough,
you reach for the heartburn medicine.
Unlike in Georgia, many other regions of the country are
lenient when it comes to missing reporting deadlines. In these States, the thinking is that only
material breaches relieve obligations under a contract. Insurers should not benefit if they haven't
suffered an actual disadvantage due to late notice. And as one court said, "It would also
disserve the public interest, for insurance is an instrument of a social policy
that the victims of negligence be compensated."
A century ago, insurance policies were truly private
contracts and judges avoided altering them.
Many courts now recognize that insurance policies are no longer fully
negotiated agreements. Instead, these
are based on standardized forms with conditions dictated by the insurance
company. Since these forms are now used
industry wide, there really aren't alternatives for the consumer to tap into. But we live in a pro-insurer state, so let's
dig a little into this whole "notice" thing.

The claims-made version can be either "general claims
made" (discovery policies) or "claims made and reported
policies" (reporting policies). A
general-claims-made policy may say something like, "The Insurer shall pay on behalf of the
Insured on account of any claims first made during the Policy
Period." A claims-made-and-reported
policy may be something like, "The Insurer shall pay on behalf of the
Insured all sums which the insured shall become legally obligated to pay
because of any claim or claims first made and reported to the Insurer during
the policy period."
See the difference?
General-claims-made versions often give you a longer window to place a
claim. While Georgia courts usually side
with the insurer when it comes to determining the notification period, on
occasion something known as the "prejudice" rule comes into
play. In this arena, prejudice means
that delaying notification to your insurance carrier placed it at a
disadvantage. It needs time to
investigate, set aside reserves, and control or participate in negotiations if
it hopes to have the best outcome possible.
If the insurance company can show prejudice, it avoids
covering the situation even if there is a question about the late notification.
