The New Jersey Supreme Court recently issued its decision in Templo Fuente Vida Corp., et al. v. National Union Fire Ins. Co., (No: A-18-14)(074572), which may prove to deprive unwary insureds of valuable insurance coverage rights under their claims-made policies. The Templo Fuente court held that where a claims-made policy requires notice of the claim “as soon as practicable,” the insurance carrier need not prove prejudice to deny a claim based on late notice, even if the notice was given during the policy period.
The court’s analysis focused predominately on the difference between “claims-made” and “occurrence” policies. Relying on its 1985 opinion in Zuckerman v. National Union Fire Ins. Co., 100 N.J. 304 (1985), the court held that, if notice under a “claims-made” policy is late, there is no coverage, even if the insurer does not prove it was appreciably prejudiced. The court recognized that Zuckerman dealt with notice after the policy had expired, but found the analysis to be equally applicable under an “as soon as practicable” standard. The court rejected the appreciable prejudice rule it had previously adopted for “occurrence” policies, holding that “claims-made” policies are more often negotiated by sophisticated insureds and are not contracts of adhesion.
Because the insured in Templo Fuente offered no explanation for the six-month delay in providing notice, the court found there to be no dispute that the notice was not “as soon as practicable.” The court declined to provide guidance on when notice is “as soon as practicable,” leaving substantial uncertainty as to when an insured can be deemed to forfeit coverage based solely on the timing of the notice it provides to its insurance carrier.
In the wake of Templo Fuente, it is now even more critical that companies very carefully monitor and timely report claims and potential claims under claims-made insurance policies.