If you have insurance, you need to know about the “notice-prejudice” rule!

Insurance denial, ERISA denial, claim denied

Every insurance policy requires that you give notice of your claim for benefits to the company before benefits can be paid.  It doesn’t matter if the claim is for medical services, disability benefits, life insurance, fire, flood, theft, etc. Obviously, notice and information about your claim is necessary before the insurance conpany can process and pay the claim. Policies also usually require that notice of a claim be given within a specified time period following the loss, for example, “30 days,” or “as soon as practicable,” or “as soon as reasonably possible,” etc.  Again, this is fair because evidence related to the claim is fresh, and most readily available nearer the time of the event.

But, what happens if you can’t, or don’t comply with the policy notice requirement?  What happens if don’t give notice until months, or even years after your claim accrued?

Good questions.

The answer is that many insurance companies might be inclined to simply deny the claim as untimely. But, you should fight back!

The notice-prejudice rule was recognized by the California Supreme Court over 50 years ago for the very purpose of protecting insureds from a failure to give timely notice, when such notice does not cause harm, or “prejudice” to the insurance company. [Campbell v. Allstate Ins. Co. (1963) 60 Cal.2d 303, 305; Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 881–83 (Failure by insured to comply with a cooperation clause or a notice clause cannot be a valid defense to denying a claim unless the insurer was substantially prejudiced thereby)].

Furthermore, the simple fact notice is given late is NOT sufficient to establish prejudice. The burden is on the insurer to show actual prejudice, not the mere possibility of prejudice. Ways in which an insurance company might show prejudice include the destruction or unavailability of evidence due to the passage of time; or, a change in circumstance such that original circumstances can no longer be examined.

The notice prejudice rule is so fundamental to our laws that it applies even after an insurance policy has lapsed or expired, so long as the loss or claim accrued at the time you were insured.

So, the bottom line is, don’t let an insurance company get away with telling you it won’t pay your claim just because you didn’t give them timely notice. Challenge any such denial and make the company show why the delay has caused it prejudice!



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