Iowa law mandates prompt notice of property insurance loss or damage to insurers if the policy requires such notice. Under Iowa law, if an insured fails to provide prompt notice as required by the policy, prejudice to the insurer is presumed. The burden then shifts to the insured to rebut this presumption by showing a lack of prejudice.

Bigfoot Co-Op A Inc. v. Nationwide Mutual Insurance Company 1 was noted in yesterday’s post, “Iowa Bad Faith Law—Can Iowa Policyholders Hold Insurers Accountable for Wrongful Claims Conduct?” The contract claim in that case centered on the issue of late notice of hail damage. For numerous reasons (and I recognize that it is always easy to “Monday quarterback” results), the case provides an excellent example of what not to do following a hailstorm.

Bigfoot Co-Op A Inc. (“Bigfoot”) filed a lawsuit against Nationwide Mutual Insurance Company (“Nationwide”), alleging breach of contract and bad faith after a wind and hail storm damaged its properties on August 9, 2021. The insurance policy required Bigfoot to provide prompt notice of any damage. However, Bigfoot admitted in pleadings that it did not notify Nationwide of the damage until April 1, 2023, nearly twenty months after the event. But is this notification date factually accurate?

One question in all late notice cases that everybody asks is, “Why was the notice late?” After looking at the facts, I am not certain that the notice to Nationwide was late. In an affidavit, the owner of the property made the following statement:

In the days following the storm, I notified my insurance agent, Julie Bray, that I need a copy of the policies for Pine Terrace and all my other properties to file a claim for damage to the storm. My wife and I own several different properties, all covered under different insurance policies, and I needed to know which policy covered Pine Terrace so I could pursue a claim for that damage.”

I know from personal experience that most Nationwide policies are sold by quasi-captive agents of Nationwide. A simple internet shows that the insurance agency is a Nationwide agent. When I ran a search for Nationwide insurance agents in that area, the agency which Julie Bray worked for is literally advertised by Nationwide as its agent. The actual certified copy of the policy lists the insurance agency as an agent of Nationwide with a Nationwide insurance agent number. The above affidavit should have been written to say: “In the days following the storm, I notified Nationwide’s agent, Julie Bray,” rather than to claim that the policyholder called “my insurance agent.” Julie Bray and that agency are, in fact, contractual agents of Nationwide and this fact was never raised or argued by the policyholder in the lawsuit.

When reading the documents, it is apparent that the Nationwide insurance agent, Julie Bray, apparently did not want to notify the Nationwide claims department of what she literally referred to as a “maybe claim.” All insurance agents should submit notice of loss to the claims department and all policyholders should do so. However, the fact is that Julie Bray is making those decisions while acting as a Nationwide insurance agent. As far as I can determine, this core issue was missed and never raised by anybody in the litigation.

Virtually all property insurance policies have language that requires a “loss” or “damage,” not a “claim,” be promptly reported. This is an important distinction because a “claim” may never be made, but virtually all property policies require prompt or timely notice of “loss or damage.” The claim in the form of a proof of loss or other documentation may have to be submitted at a later date specified in the policy. However, “loss” is what is typically required to be submitted promptly.

Public adjusters can learn a lesson from this case and should carefully review and investigate the facts about prior notice of the loss. The facts showed that the policyholder eventually signed an assignment of benefits form to a roofing contractor on April 1, 2023. On that same date, the roofer had the loss reported to the claims department. Eventually, a public adjuster was retained. There were two proofs of loss signed by the owner. The loss was estimated to be approximately $7 million. Unfortunately, one proof of loss stated, “We gave immediate notice to our agent of this claim on or about April 1, 2023.”

If the public adjuster had thoroughly investigated the facts and understood that Julie Bray was a Nationwide insurance agent, the date of notice of loss would have been claimed to be far sooner than April 1, 2023. Knowledgeable public adjusters can help bring these facts related to the late notice issue to the attention of claims departments and adjusters, possibly avoiding this entire late notice scenario. Insurance company property adjusters have two primary roles—investigate facts related to coverage and evaluate the amount of loss. In late notice cases, facts about why a notice of loss was reported late is always a coverage issue that the property insurance adjusters will investigate. Here, the public adjusters should have been writing and speaking with the claims department about the notice being given to the Nationwide agent and that it was Nationwide’s agent who delayed providing the information to the claims department because Nationwide’s own agent questioned whether the loss was above the deductible.

Unfortunately, Nationwide’s attorneys used the proof loss as evidence about the date that notice was first given to Nationwide, stating in its Statement of Material Facts, “According to Plaintiff, it first provided notice of the alleged loss ‘on or about April 1, 2023.’ See Plaintiff’s Proof of Loss.” Instead of disputing that notice of “loss” was provided to a Nationwide agent within days of a storm, the policyholder’s attorneys admitted that the notice was not given until April 1, 2023. They never raised the issue about Julie Bray being an authorized agent of Nationwide, who was authorized to accept notice of loss and actually was given a notice of loss within days of the storm. Without this objection to facts and raising the issue, Nationwide’s capable attorneys then argued the following in response and without ever having to address that Julie Bray was an authorized insurance agent of Nationwide:

Plaintiffs admit delay. (attempting to justify ‘the cause of Plaintiffs’ delay in providing prompt notice . . .’). Yet, Plaintiffs seek to excuse the 20-monthdelay because they supposedly asked for an insurance policy from a non-party who had computer issues. Regardless, they cannot say why they did not call Nationwide to report the claim. To be clear, Plaintiffs do not argue they tried to submit this claim promptly or tried to have a third party submit this claim promptly. They instead argue that they asked for an insurance policy from a non-party agent (Julie Bray). Plaintiffs offer only the affidavit of Greg Ladehoff and accompanying e-mails/texts: there is no proof that Plaintiffs actually asked Bray to submit this claim promptly…

Notice to the agent of a loss is important, as Merlin Law Group attorney Robert Gregory noted in “Was the Insurance Claim Really Late Reported?”:

In the above scenario, which we are finding to be more commonplace, the initial reporting to the insurance agent complies with the policy terms… The carrier, therefore, cannot assert a denial for late notice based on when they received notice of the loss, but only from the date of reporting per the terms of the policy. In the above scenario, that would be from the day the insurance agent was notified of the loss event.

The second prong of late notice under Iowa law is prejudice to the insurance carrier. Since the judge found that the notice was late, prejudice was presumed under Iowa law. This presumption is based on the understanding that delayed notice can hinder the insurer’s ability to investigate and mitigate losses. This means that the policyholder must come forward with some evidence showing that despite the late notice, there was not, in fact, prejudice. If the presumption of prejudice is not overcome by the insured, it will defeat the insured’s recovery. In this case, the policyholder presented no evidence.

The policyholder’s attorneys argued that the submittal of the proof of loss showed that the insurer was not prejudiced. The court noted the illogic of that argument:

[P]laintiffs’ focus on the time period between plaintiffs’ notifying defendant of the claim and filing suit is misplaced, according to defendant, because the prejudice occurred through the time lapse between the damage and notification—not in the time between notification and filing suit. Defendant argues that determining whether the damage is truly a covered loss under the policy is more difficult when it cannot investigate the situation relatively quickly after the damage occurs. Defendant’s inspector stated that he prefers to investigate hail and wind damage within a year of the damage occurring, for example. Thus, at base, defendant argues it was prejudiced by plaintiffs’ delayed notification because the delay created issues with the accuracy of claim investigation.

… Plaintiffs’ argument here is of little relevance concerning the prejudice issue. The issue is whether defendant was prejudiced by plaintiffs waiting almost twenty months to notify defendant of the damage. The fact that defendant did not explain to plaintiffs why defendant needed more time to investigate the claim has little, if any, bearing on this issue. The fact that plaintiffs filed suit against defendant 44 days after submitting their sworn proof of loss also has little, if any, bearing on this issue. The prejudice to defendant occurs because of the delay in notice and how it affects defendant’s ability to investigate the claim, not because of events which occurred after plaintiffs notified defendant of the damage. Plaintiffs have pointed to essentially nothing that would generate a genuine issue of material fact supporting their claim that defendant was not prejudiced by the delayed notice. Plaintiffs have not carried their burden here…

Overcoming the Prejudice of Late Reporting, noted the following:

As is evident from the cases discussed above, proving that reporting a claim late did not prejudice an insurance company is fact-specific for each claim. The insured must show specific evidence that the insurer was able to complete its investigation despite reporting the claim late. Generally, courts look at whether the insurance company was able to investigate the cause and scope of the damages reported. Over time, the cause and scope of the damage can become more difficult to determine. When an insured can show that the passage of time did not obstruct the insurer from fully investigating the claim, the insured can typically satisfy its burden of showing that reporting the claim late did not prejudice the insurance company….

The policyholder must show something to fight the presumption. Usually, while not exhaustive, expert reports from meteorologists, opposing engineers and roofing experts are commonly filed to rebut the presumption. Depositions and affidavits from those looking at the roof before the insurance company conducted its investigation and other nearby hail damage claims paid by the insurer or other insurers are presented. In this case, where the claimed amount was $7 million, the policyholder presented none of this typical type of evidence. Maybe none of this rebuttal evidence could be developed.

Hailstorm losses are often reported late, as I noted in “Should Late Notice of Windstorm and Hail Claims Be a Valid Defense When the Insurer Is Not Prejudiced?” Often, when facts are fully investigated, the loss is not reported late because notice is given to the insurance company’s agent. Further, even if notice of the loss or damage is late, there should be a full investigation and evidence provided to determine if the insurance company was prejudiced.

Thought For The Day

Learn from the mistakes of others. You can’t live long enough to make them all yourself.
—Eleanor Roosevelt

1 Bigfoot Co-Op A Inc. v. Nationwide Mutual Ins. Co., No. 23-CV-1016 (N.D. Iowa July 16, 2024).