The Indiana Supreme Court clarified in a December ruling that timely notice is a requirement for coverage in a commercial general liability insurance policy and also that prejudice is, in fact, presumed toward the insurer in the event that notice is not timely.
In Sheehan Construction Co. v. Continental Casualty Co., No. 49S02-1001-CV-32, the Court reconsidered its opinion by rehearing a previous decision in which the Court ruled in favor of the insured parties. The question in that case was whether the insurance policy covered faulty workmanship by a subcontractor. The Court ruled that it did, but did not address the timeliness of the insured party’s notice to the insurer. The Court reopened its opinion in order to address this question.
The trial court granted summary judgment in favor of the insurers and the Indiana Supreme Court agreed. The Court reasoned that the basis for the timely notice of claims is to allow the insurer ample time to investigate the claim. In circumstances where the insured party fails to give notice in a timely manner, the Court presumes prejudice. The burden then shifts to the insured party to prove that the insurer was not prejudiced by the failure to report. In the case, the insured parties admitted their notice was untimely and because they produced no evidence to support the contention that the insurer was not prejudiced, the Court granted summary judgment for the insurance company.