Insurer Prejudice Is Not Required To Assert Late Notice Defense:

Alert Category: Illinois

In the recent decision of Country Mutual Insurance Company v. Livorsi Marine, Inc., 222 Ill.2d 303 (2006), the Illinois Supreme Court held that an insurer is not required to show that it was prejudiced by the failure of the insured to provide timely notice of suit before the insurer may rely on late notice as a defense to coverage. The Court stated that a policy condition requiring that the insured notify the insurer of any claim or suit against the insured “as soon as practicable,” is interpreted to mean “within a reasonable time.” Overruling one line of cases, such as Rice v. AAA Aerostar, Inc., 294 Ill.App.3d 801 (1998), which required that the insurer actually be prejudiced by the insured’s failure to provide timely notice in order to successfully assert the defense, the Illinois Supreme Court held that the presence or absence of prejudice to the insurer is merely one factor in determining whether a policyholder has provided reasonable notice. The Court also stated that “once it is determined that the insurer did not receive reasonable notice of an occurrence or a lawsuit, the policy holder may not recover under the policy, regardless of whether the lack of reasonable notice prejudiced the insurer.”