It happens every year. A clearly covered loss occurs and for one reason or another, the policyholder delays in notifying its insurer of the loss. Usually, the cause for the delay is innocent. It may even appear to be justified, such as where the insured prioritizes steps to save its property, inventory or assist dependent customers. But no matter the reason, insurers can be hard-lined in their refusal to accept an untimely claim. This is especially true in states that presume prejudice to the insurer, or where the insurer need not show prejudice at all.

In LMP Holdings, Inc. v. Scottsdale Ins. Co., (Case No. 20-24099-CIV) (S.D. Fla.), a twenty-seven-month delay in notifying the insurer of damage from Hurricane Irma proved fatal to the claim. LMP owns a building in Miami, Florida insured under an all-risk commercial property policy issued by Scottsdale. On September 10, 2017, Hurricane Irma struck South Florida and caused extensive damage to LMP’s building, including punctures to the roof and water damage. LMP identified the damage shortly after the storm. Then, in 2018, LMP identified other storm-caused damage, including a water stain on the ceiling. It again identified additional storm damage in 2019. LMP submitted a claim to its insurer on December 10, 2019—about twenty-seven months after it first noticed the damage. Scottsdale agreed to inspect the property but reserved its rights to deny coverage based on late notice. On July 10, 2020, Scottsdale denied coverage for the damage to the property.

LMP sued Scottsdale for breach of contract and declaratory judgment. The policy required that LMP provide “prompt” notice in the event of loss or damage to covered property. LMP argued that it gave prompt notice. The court disagreed. It explained that whether notice is timely is generally a question of fact for the jury unless the record shows notice is so late that no reasonable juror could find it timely. Under such circumstances, Florida courts will consider the notice untimely as a matter of law, which is what it did here. The court reasoned that because LMP knew of damage to the building since September 2017, but waited more than two years before notifying Scottsdale, its notice was untimely as a matter of law.

The court looked to Florida decisions involving similar notice requirements, where courts held that periods of six months or less constitute untimely notice. See, e.g., Morton v. Indem. Ins. Co. of N. America, 137 So.2d 618, 620 (Fla. 2d DCA 1962) (no coverage based on a six-and-a-half-month delay); Ideal Mut. Ins. Co. v. Waldrep, 400 So.2d 782, 785 (Fla. 3d DCA 1981) (no coverage after a two-month delay in reporting following airplane accident); Deese v. Hartford Acc. & Indem. Co., 205 So.2d 328, 329 (Fla. 1st DCA 1967) (no coverage after a four-week delay); see also PDQ Coolidge Formad, 566 Fed. App’x at 849 (upholding district court’s finding that six-month delay in reporting property damage is late as a matter of law); and Soronson v. State Farm Fla. Ins. Co., 96 So.3d 949 (Fla. 4th DCA 2012) (no coverage for a three-year delay in reporting damage caused by Hurricane Irma). Thus, the court found LMP’s twenty-seven-month delay untimely.

Because Florida presumes prejudice, the court had to determine whether LMP rebutted the presumption that its untimely notice prejudiced Scottsdale. LMP offered an expert to meet its burden of rebutting the presumed prejudice. But, Florida courts have held that such opinion, without more, is insufficient. Rather, the court found that Scottsdale had been prejudiced because LMP repaired some of the damage before filing the claim. The court explained that although Scottsdale’s engineer had an opportunity to inspect the property after the claim was filed, Scottsdale was denied inspection prior to the repairs and was denied any opportunity to participate or consult in the repairs. Having found late notice and prejudice, the court awarded summary judgment to the insurer, foreclosing recovery of otherwise covered damage and loss.

LMP is a cautionary tale for policyholders. Among other things, it highlights the importance of inspecting property after a suspected loss event, assembling a qualified claim team in the event loss occurs, including knowledgeable coverage counsel, and having an action plan in place before a loss occurs. This is especially necessary for businesses susceptible to widespread loss events like hurricanes, which may disrupt communications and transportation for extended periods. Policyholders should understand their insurance policies, including the applicable timing limitations that may or may not be expressly stated in the policy. These and other precautionary steps taken before the next storm or other loss-causing event occurs will help mitigate the loss and help to expedite restoration and recovery.