Legal Affairs
Late notice
Ohio appellate court clarifies obligation to provide notice to excess insurers
By Paul Rose
Smart Business Akron/Canton | December 2002
The Ohio Ninth District Court of Appeals in September announced a decision that clarified the obligation of a policyholder to provide notice to its excess insurers.
In The B.F.Goodrich Company v. Commercial Union Ins. Co., et al., a case Brouse McDowell handled for the policyholder, the court made it clear that the duty to notify excess carriers can arise much later than the duty to notify primary carriers of the same claim.
The court observed, "The holder of a primary insurance policy typically has the duty to notify its insurer as soon as it realizes that it is liable ... " Contrastingly, "An insured's duty to notify its excess insurance carrier ... is not triggered until the insured has reason to believe that its ... liability will exhaust its coverage under its primary policies."
For a policyholder to have a notice obligation under an excess policy, therefore, the court noted, "It must have knowledge not only of potential liability but it must also have reason to believe that the extent of its liability will exceed the coverage limits of its primary insurance policy."
Although these principles generally are understood by insurance professionals and often find support in the express language of excess policies, before the Goodrich decision, there was little consideration of this issue by Ohio courts. The decision, however, squarely addressed the issue and significantly limited the ability of excess insurers to raise successfully "late" notice defenses.
In addition, the court reaffirmed that the "late" notice issue is typically one for the jury. It held that the trial court erred in granting summary judgment to the excess insurers in the face of evidence from the policyholder that notice was timely as to such insurers.
Particularly in regard to large claims such as the environmental claims at issue in Goodrich, insurers have incentive to raise as many issues as they can. "Late" notice may be raised with little or no justification under the law, which can be quite complex in regard to such matters.
As the Goodrich case demonstrates, courts sometimes take a very different view than do insurers.
Policyholders and their brokers, therefore, can be well served to seek the advice of experienced coverage counsel on such matters.
Brouse McDowell provides experienced counsel to policyholders, insurance agents and brokers on all aspects of insurance claims, insurance coverage disputes and insurance recovery. For additional information, contact Paul Rose in Akron at (330) 535-5711 or prose@brouse.com
