{"id":904702,"date":"2025-08-20T14:25:17","date_gmt":"2025-08-20T20:25:17","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=904702"},"modified":"2025-08-20T14:25:19","modified_gmt":"2025-08-20T20:25:19","slug":"late-notice-when-is-really-too-late","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/late-notice-when-is-really-too-late\/","title":{"rendered":"When Is Late Notice Really Too Late?"},"content":{"rendered":"\n

Janet Tolbert | Wilson Elser<\/a><\/p>\n\n\n\n

The Western District of Texas Declines to Impose a Prejudice Requirement on a Fixed-Time Notice Provision in a Commercial Property Policy<\/em><\/p>\n\n\n\n

Texas is considered a \u201cnotice-prejudice\u201d state, meaning that as a general rule an insurer is required to demonstrate it was prejudiced by an insured\u2019s late notice<\/a> of a claim before it can deny coverage, with some notable exceptions. In this context, Texas law is well established on certain points. However, a recent case from the Western District of Texas highlights one area of uncertainty in this body of law.<\/p>\n\n\n\n

By way of background, Texas courts distinguish between \u201cclaims-made\u201d and \u201coccurrence\u201d policies when construing notice provisions, finding that prejudice may not be required under claims-made policies but that it is generally required under occurrence policies. Texas courts further distinguish between claims-made-and-reported <\/em>policies and claims-made policies that contain no specific reporting period, finding that a showing of prejudice is not required for the former but is required for the latter. The basis for this distinction is the language of the notice provisions \u2013 even though notice provisions are considered by Texas courts to be a \u201ccondition precedent\u201d to coverage, courts will examine the specific policy language to determine if the breach of such condition is material. Breaches of material conditions do not require a showing of prejudice while breaches of non-material conditions do require a showing of prejudice.<\/p>\n\n\n\n

As to the specific language, claims-made policies generally require that notice be given \u201cas soon as possible\u201d or \u201cas soon as practicable.\u201d Claims-made-and-reported policies, on the other hand, typically include the same \u201cas soon as possible\u201d or \u201cas soon as practicable\u201d language, but additionally require that, in any event, notice must be provided by or before a specified time. The key factor in examining the language, according to the courts, is whether the notice condition is \u201can essential part of the bargained-for exchange,\u201d the breach of which is a material, as opposed to a non-material, breach. <\/p>\n\n\n\n

In construing notice provisions in occurrence-based policies, Texas courts and the Fifth Circuit have required that an insurer demonstrate prejudice from the insured\u2019s failure to comply with the prompt notice \u201cas soon as possible\u201d and\/or \u201cas soon as practicable\u201d requirements typically found in these types of policies.1<\/sup>Texas courts have therefore generally treated occurrence policies the same as claims-made policies, viewing the breach of a notice condition as a non-material breach. It therefore seems to be well established in Texas that, as a general rule, a late notice defense under an occurrence policy is subject to a prejudice requirement.<\/p>\n\n\n\n

In RC Mgmt. v. Third Coast Ins. Co<\/em>., the Western District of Texas considered whether a notice provision in an occurrence-based commercial property insurance policy issued to RC Management, Inc. (RC) allowed Third Coast Ins. Co. (Third Coast) to deny coverage without a showing of prejudice.2<\/sup> The policy included an endorsement that amended the Prompt Notice Provision and provided that for losses \u201ccaused by or resulting from Windstorm (including hail),\u201d such as the one at issue, the Duties in the Event of Loss or Damage section was amended as follows (the Prompt Notice Provision endorsement):<\/p>\n\n\n\n

In addition to your obligation to provide us with prompt written notice of loss or damage, with respect to any claim wherein written notice of the claim is reported to us more than one year after the reported date of loss or damage, this Policy shall not provide coverage for such claim.<\/p>\n\n\n\n

The Court first concluded that the policy\u2019s Prompt Notice Provision endorsement was a \u201ccondition precedent\u201d to coverage, and then considered whether Third Coast was required to show prejudice. Third Coast relied on two uncontested facts for its argument that summary judgment could be granted in its favor \u2013 first, the Prompt Notice Provision endorsement required the insured to provide prompt written notice of a loss or damage and further provided that the policy \u201cshall not provide coverage\u201d for a claim reported more than one year after the reported date of loss or damage. Second, the date of loss was May 27, 2020, and the insured failed to submit a claim for damages until April 14, 2022.<\/p>\n\n\n\n

RC responded by arguing that Texas courts require a showing of prejudice to deny coverage under a Late Notice Provision.<\/p>\n\n\n\n

The Court framed the relevant issue as follows:<\/p>\n\n\n\n

The issue before the Court is whether, under Texas law, an insurer must show prejudice to deny coverage based on an insured\u2019s failure to comply with a condition precedent in an insurance contract that establishes a specific time limit for the insured to give notice of a claim. This precise issue has not been decided by Fifth Circuit or the Texas Supreme Court; nonetheless, several cases are instructive.<\/p>\n\n\n\n

First citing Matador Petroleum Corp. v. St. Paul Surplus Lines Ins. Co.<\/em>, the Court recognized the distinction between claims-made and occurrence policies \u2013 finding \u201cthe former required a showing of prejudice while the latter did not.\u201d3<\/sup> At issue in Matador<\/em> was a 30-day notice requirement in an endorsement that provided a limited exception to the policy\u2019s absolute pollution exclusion. The Matador<\/em> court focused on the \u201cnature of the bargain\u201d made between the parties, finding that the endorsement \u201csupplemented the basic agreement and constituted additional bargained for coverage\u201d and therefore \u201cunder the plain language of the endorsement, timely reporting of the claim constituted one of the events necessary to trigger coverage.\u201d4 <\/sup>The Matador <\/em>court found prejudice was not required.<\/p>\n\n\n\n

The RC Mgmt.<\/em> court next referenced other Texas and Fifth Circuit cases where courts discussed the importance of focusing on the notice language in the policy to determine the nature of the bargain between the parties, finding that the appropriate inquiry is whether the notice provisions are \u201can essential part of the bargained-for exchange.\u201d5<\/sup><\/p>\n\n\n\n

The Court then focused on Blanco West Properties, LLC v. Arch Specialty Ins. Co<\/em>., where, in a short per curiam<\/em> opinion, the Fifth Circuit rejected an insured\u2019s prejudice argument under an endorsement in a commercial property policy requiring notice within a specific time frame and pointed out the \u201csignificant distinction\u201d between such provisions and provisions that required \u201cprompt\u201d or \u201cas soon as practicable\u201d notice.6<\/sup> The RC Mgmt.<\/em> court pointed out that although the Blanco<\/em> opinion is unpublished and therefore is not precedent, it is \u201cpersuasive, and, thus, applicable to the present case.\u201d<\/p>\n\n\n\n

Finally, the Court cited a few additional cases that it believed to be instructive: <\/p>\n\n\n\n