A recent decision by the New Jersey Supreme Court serves as a strident warning to commercial insureds to make prompt notice of claims under claims-made policies. In Templo Fuente de Vida Corp. v. National Union Fire Insurance Company of Pittsburgh, P.A., the claims-made D&O policy at issue required written notice of a claim “as soon as practicable … and … during the Policy Period.” The insured was served with an underlying complaint on February 21, 2006. It retained defense counsel and filed an answer, but did not provide notice of the claim to its insurer until August 26, 2006 — a delay of six months, yet still within the policy period. The insurer denied coverage for various reasons, including that notice was not provided “as soon as practicable.”
In a unanimous decision, the New Jersey Supreme Court affirmed the Appellate Division (and the Law Division), concluding that the policyholder had violated a “condition precedent” to coverage by failing to report the claim to the insurer “as soon as practicable.” Because of that breach, the insurer may disclaim coverage even though notice had been provided during the policy period. Moreover, the court concluded that the insurer was not required to establish it suffered any “prejudice” from the purported “late notice” in order to sustain the disclaimer of coverage, emphasizing the long-standing distinction recognized in case law between “occurrence”-based policies – where an insurer must establish it suffered a likelihood of prejudice to prevail on late notice defense in Gazis v. Miller – and “claims-made” policies – where the “appreciable prejudice” doctrine has “no application whatsoever to a ‘claims made’ policy that fulfills the reasonable expectations of the insured with respect to the scope of coverage.” Zuckerman v. National Union Fire Ins. Co.