Late Notice and Your Insurance Agent and/or Broker

THIS IS NOT LEGAL ADVICE—TALK TO AN ATTORNEY FOR THAT

If you’re in an insurance claim dispute with your insurance company because it denied your claim alleging you failed to provide it “timely” notice (known as a “late notice defense”), don’t give up. Did you tell your insurance agent or your insurance broker about the claim at all? If so, you may have coverage. 

The “late notice” defense is a big issue these days in Indiana. Insurance companies often cite “late notice” as a justification for issuing a claim denial letter. Ever since the Indiana Supreme Court issued Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904 N.E.2d 1267 (Ind. 2009), insurers have been attempting to expand the Supreme Court’s limited holding.  Want proof?  Check out Travelers Ins. Cos. v. Maplehurst Farms, Inc., 953 N.E.2d 1153 (Ind. Ct. App. 2011), trans. pending. But “pretender” costs (costs incurred before notice is provided) and an insurer’s ability to outright deny your insurance claim (subjects of Dreaded, Maplehurst, and others) will be a topic of another post. I’m sure you’ll wait with bated breath for that one.

Back to the topic at hand—insurers denying claims because of “late notice,” despite the fact you told your insurance agent and/or insurance broker about the claim. I had an insurance claims representative argue with me today that she had properly denied the claim. She didn’t seem to care that the policyholder had submitted the claim to the same insurance broker it used to buy the policy. The insurance claims representative was stuck on the fact that we didn’t have any proof that the insurance broker sent the claim on to the insurance company.  Under these circumstances in Indiana, actual notice to the insurer does not matter (whether the broker should have submitted the claim to the insurer is a different issue).

In Indiana, an insurance company that denies a claim with these facts shouldn’t prevail.  Notice to your insurance agent and/or your insurance broker constitutes notice to the insurer. Ind. Code § 27-1-13-7(a) states: 

No such policy shall be issued or delivered in this state by any foreign or domestic corporation, insurance underwriters, association or other insurer authorized to do business in this state, unless there shall be contained within such policy a provision that notice given by or on behalf of the insured to any authorized agent of the insurer within this state, with particulars sufficient to identify the insured, shall be deemed to be notice to the insurer.  

Thus, if your policy doesn’t say that notice to the “authorized agent” constitutes notice to the insurer, then this statute legally adds it to the policy.

Now, this raises the question: what constitutes an “authorized agent?” The Indiana Supreme Court has addressed that. It has held that when an insurance agent and/or insurance broker “makes an application for insurance and the policy is issued[,] the broker become[s] an agent for the insurance company . . . .” Benante v. United Pac. Life Ins. Co., 659 N.E.2d 545, 547 (Ind. 1995). The Supreme Court went even further stating: “Our opinion in Aetna Ins. Co. clearly stands for the proposition that the application for and issuance of an insurance policy establishes the broker as the agent of the insurer; it does not hold that a broker for several insurance companies can never be the agent of one in the absence of the issuance of a policy.” Id. (internal citation omitted).

Thus, if you notified the same agent/broker of the claim that you used to purchase the policy, the insurance company should be deemed to have notice of the claim.  The late notice defense fails. If you bought the policy from someone else, there’s still hope, but things won’t be as clear. Good luck.