For a claims-made policy, the policy holder is to provide notice of a claim: (1) during the same policy period in which the policyholder received the claim and (2) “as soon as practicable.” Otherwise, the claim may be denied because of late notice. New Jersey has determined that six months or more is not “as soon as practicable.”

Holding:  The Superior Court of New Jersey, Appellate Division, held in Templo Fuente de Vida Corp. v. National Union Fire Insurance Company of Pittsburgh, P.A., that: (1) notice of a claim was not provided "as soon as practicable" when sent six months after service on the insured of the underlying complaint and (2) an insurer on a claims-made policy does not have to show that it was prejudiced by the late notice.

Underlying facts:  In 2005, Templo Fuente de Vida Corp. and Fuente Properties, Inc. (jointly, "Templo") filed a lawsuit against Morris Mortgage, Inc. and its affiliates (jointly, "Morris") regarding a failed real estate purchase. After being served with the complaint, Morris waited more than six months to provide notice of the lawsuit to its Directors and Officers ("D&O") insurance carrier, National Union Fire Insurance Company of Pittsburgh, P.A. ("National Union"). National Union disclaimed coverage on multiple grounds, including that Morris did not provide notice "as soon as practicable" as required under the D&O policy.

In June 2009, Templo and Morris settled their dispute for approximately $3.6 million. Morris paid Temploy approximately $100,000 and assigned to Templo their claims against National Union for coverage under the D&O policy regarding the remaining $3.5 million.

Templo then sued National Union. The trial court granted summary judgment to the insurer. The trial court found that coverage was barred under New Jersey precedent holding that a 5 ½-month delay was not "as soon as practicable." The trial court ruled that the insurer did not have to show that it was prejudiced by the late notice.

The New Jersey Appellate Division affirmed the trial court's ruling and held that, for a claims-made policy, notice of a claim must be provided both: (1) within the policy period and (2) as soon as practicable. Because Temple did not meet the second requirement, coverage was properly denied. 

The New Jersey Appellate Division followed the New Jersey Supreme Court’s ruling in Zuckerman v. National Union Fire Insurance Co. and ruled that an insurer issuing claims-made policies does not need to show that it was prejudiced by the insured’s failure to provide notice as soon as practicable.

Lesson: This ruling would likely have been different in other jurisdictions, such as New York (for certain New York policies issued after 2009) or California. This ruling is also limited to a claims-made policy. Thus, the jurisdiction and the type of policy are significant factors regarding whether coverage was properly denied.  For a claims-made policy, an insured must promptly provide notice to its insurer in order to protect coverage under the policy.