The Eleventh Circuit affirmed a Georgia district court ruling that an insurer’s delay in filing a declaratory judgment action against its policyholder did not result in a waiver of coverage defenses. OneBeacon America Ins. Co. v. Catholic Diocese of Savannah, 2012 WL 1939104 (11th Cir. May 30, 2012).
Georgia courts have held that under certain circumstances, an insurer waives its coverage defenses by failing to immediately seek declaratory relief. In recent years, however, Georgia courts have, as the district court noted, “softened this stance” and focused the waiver inquiry on whether the policyholder suffered prejudice as a result of a delay in the filing of a declaratory judgment action. Here, the Eleventh Circuit agreed with the district court that the policyholder failed to establish prejudice sufficient to justify a finding of waiver, noting that the insurer had provided a defense in the underlying suit prior to initiating the declaratory judgment action.
Ruling on a separate issue, the Eleventh Circuit also reinforced Georgia law on the issue of late notice/ prejudice. The court held that under well-established state law, notice provisions that are express conditions precedent to coverage are valid and enforceable, and that a failure to comply with such provisions results in a forfeiture of coverage and defense. In this context, the court also held that the burden of showing justification for a delay in notice rests with the policyholder and that the policyholder’s twenty-one month delay was unreasonable as a matter of law. Finally, the court ruled under Georgia law, an insurer need not show prejudice resulting from a delay in late notice in order to deny coverage on that basis.