Does the Notice-Prejudice Rule Apply to Claim-Made Policies?

Originally published by Brandee Bower.

There are occurrence and claims-made insurance policies. In both, there is a ‘prompt’ notice requirement. However, a claims-made policy has a ‘date-certain’ notice requirement that effectuates the limits of coverage. Earlier Colorado court holdings had not addressed this and a recent Colorado Supreme Court opinion determined public policy concerns are not in favor of applying a notice-prejudice rule.1 Thus, the notice-prejudice rule does not apply to a date-certain notice requirement in a claims-made insurance policy.

In reviewing the notice-prejudice rule, the question is whether the insurance company is prejudiced by an insured’s failure to notify of a loss. Said another way, does the insured’s breach of the policy requirement defeat the purpose of the requirement? Other jurisdictions offer persuasive public policy justifications for applying the notice-prejudice rule, including “(1) the adhesive nature of insurance contracts, (2) the public policy objective of compensating…

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