Recently, in Minasian v. IDS Property Casualty Insurance Company, the United States Court of Appeals for the Second Circuit affirmed an adverse ruling against two policyholders over their claim to recover loss resulting from the theft of personal property.[1] Although there was no question that the policyholders suffered a covered loss under various policies, the insurers were able to successfully deny coverage based on the policyholders’ failure to provide them with notice in accordance with the policies’ terms. This case provides yet another example of why policyholders must be familiar with a policy’s notice provisions in order to avoid claim denial.

The background: In 2014, the policyholders’ New York apartment was burglarized.[2] Stolen were two watches, two bracelets, two rings, as well as some cash. The policyholders valued their loss at $191,900. After discovering the burglary, the policyholders notified the police and made a police report. Approximately three months later, when the police investigation concluded, the policyholders made claims under three separate insurance policies. While the language of each policy varied somewhat, all of them required notice “as soon as reasonably possible,” “immediate[ly],” and “as soon as practicable.” Because of the purportedly late notice, the insurers denied coverage.

Applying New York law, the trial court noted that timely notice was a condition precedent to coverage and that untimely notice could excuse an insurer’s obligation to provide coverage. The court noted that even a delay of one month is routinely found by New York courts to be unreasonable and that an untimely delay may be “inexcusable” as a matter of law if no excuse is offered or if the excuse is meritless. The court noted that the test for determining whether a notice provision is triggered is whether the circumstances known to the insured would have suggested to a “reasonable person” the possibility of a claim. In applying that law to the case of the Minasian policyholders, the district court found that the policyholders’ notice was untimely and their delay was inexcusable as a matter of law. The appellate court agreed.

The reason: On appeal, the court considered the policyholders’ arguments, which were (1) that their delay should be excused because they reasonably believed that the police investigation was ongoing and the jewelry might be located, and (2) they notified the insurers promptly once they learned that the policy investigation was closed. The court, however, was not persuaded. It looked at the policies’ notice provisions and found that the policyholders’ beliefs could not “form a reasonable—and thus excusable—basis for notice delay.”

The court also found that the polices were not ambiguous, such that the policyholders’ argument that they believed they did not have to provide notice until after the police investigation concluded justified a ruling in their favor. According to the court, the fact that the policyholders submitted claims at all proved that they recognized that the property stolen was a covered loss. The court also affirmed the district court’s reasoning that “[n]o reasonable person could interpret the [policies’] language to mean that a known theft of property only becomes a covered loss once the police cease to conduct an active investigation.” The court found all of the policyholders’ arguments to be without merit and affirmed the lower court’s ruling in favor of the insurers.

The takeaway: Not all states require that an insurer show prejudice resulting from a policyholder’s failure to provide timely notice. Furthermore, not all states have laws that are forgiving when notice is late. Thus, policyholders must do their best to understand and abide by a policy’s notice provisions to avoid giving an insurer a potential ground on which to deny coverage.