By Emily E. Garrison, associate, Reed Smith, LLP
Few states follow the minority rule that an insured’s failure to give reasonable notice of a claim to its insurer will defeat the right of the insured to recover under a policy. In determining whether notice was or was not reasonable, some states that follow the minority rule, including Illinois, will consider prejudice to the insurer as a factor in making such determination.
This article discusses West American Ins. Co. v. Yorkville Nat’l Bank, a recent Illinois Supreme Court opinion applying a five factor analysis to determine whether notice was given by the insured within a reasonable time. The five factors identified by the Court that “may be considered in determining whether notice to an insurer has been given within a reasonable time,” were: (1) the specific language of the policy’s notice provision; (2) the insured’s sophistication in commerce and insurance matters; (3) the insured’s awareness of an event that may trigger insurance coverage; (4) the insured’s diligence in ascertaining whether policy coverage is available; and (5) prejudice to the insurer.
The Court placed particular emphasis on the prejudice to the insurer factor in its reasonableness of notice analysis in West American. In fact, the Court ultimately held that a twenty-seven month delay was not unreasonable despite the fact that it essentially ignored the first factor, specific language, and found the next two factors, the insured’s sophistication and the insured’s awareness, to weigh in favor of unreasonableness.
Lexis.com subscribers can access the complete commentary, Reed Smith on An Analysis of West American Ins. Co. v. Yorkville Nat'l Bank:Twenty-Seven Month Delay Not Unreasonable Notice According to Illinois Supreme Court. Additional fees may be incurred. (approx. 3 pages)
If you do not have a lexis.com ID, you can purchase this commentary on the LexisNexis Store or you can access this commentary and additional Emerging Issues Analysis content through lexisONE Research Packages.
Emily Garrison is an associate in Reed Smith's Insurance Recovery Practice Group. She received her JD from Northwestern University School of Law in 2008.
For more information about LexisNexis products and solutions connect with us through our corporate site.