October 2, 2013
Insurance 101 for Contractors – What You Should Know
Part 2 of a 5-Part Series on Insurance Issues Concerning Contractors
Providing Timely Notice of a Claim to Your Insurer is Critical
Upon receipt of a claim for property damage or bodily injury, it is imperative that you provide notice of the claim promptly to every insurer that may possibly provide coverage for the loss. Failure to provide timely notice of a claim to an insurer could result in denial of your claim.
For a general contractor on a construction project, the policies available will likely include: (1) the general contractor’s Commercial General Liability (“CGL”) policy; (2) the Builder’s Risk policy for the project; and, (3) the CGL policy for any subcontractor, whether or not the general contractor is listed as an additional insured. Notice of the claim should be mailed directly to the insurer if the insurer’s name is known. The Certificates of Insurance of those involved will identify the names of the insurers and the internet is a valuable tool for identifying the correct address to which the claim notice should be directed.
Like many other states, Massachusetts and Connecticut law both provide that in order for an insurer to properly deny a claim for late notice, the insurer must prove that it was prejudiced by the late notice. M.G.L. c. 175 § 112; Johnson Controls, Inc. v. Bowes, 381 Mass. 278 (1980); Arrowwood Indem. Co. v. King, 304 Conn. 174 (2012). This means that in Court, the insurer has the burden of making this showing of prejudice. This standard is favorable to the insured. On the other hand, other jurisdictions hold that it is the insured who must prove that its notice was timely and the courts do not even consider whether the insurer was prejudiced by the late notice. This standard obviously favors the insurers. The point here is that when the timeliness of notice to an insurer is called into question, it is important to know that each state treats late notice claims differently.
When a claim comes in the door, do not hesitate to provide notice to all potential insurers. Despite advice from your broker or some other source that coverage may not exist, send the notice anyway. We have secured coverage in several instances when others initially thought none existed. There is no significant downside to putting the insurer on notice, whereas failing to provide notice may cause a coverage dispute that otherwise would not have existed had notice been promptly sent.
If you have any questions, please do not hesitate to contact Andrew G. Wailgum at awailgum@murthalaw.com or 617.457.4006.
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