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Silence is Not Golden in Insurance Claims Tell the Insurance Company About Claims and Lawsuits ASAP

You know you have a problem. You made a mistake. It costs someone else money. You have insurance to cover it. But, you don't tell your insurance company about the possible claim. What?! Then you're sued for damages. You still don't tell your insurance company. What?! What?! You've been paying for insurance coverage and when you need it, you don't call the carrier?

Huge mistake. Expensive mistake. Worst part? It could have all been avoided.

This was the exact scenario the Southern District of Florida considered in Pharm. D. v. Founders Insurance Co., 2014 WL 32557844 (S.D.Fla. 2014). An insured property owner had a flood and fire which damaged a pharmacy located on the floor below. The pharmacy sued, but the insured did NOTHING. A default judgment was entered in excess of $500,000.00. A few years later, the pharmacy sued the insured's insurance company, Founders, (commercial general liability, CGL, carrier) for payment of the judgment. Founders argued that all coverage should be void because its insured violated the policy terms. 

Terms? Yes, terms. All those pages that follow the declarations page that many people never read hold the keys to kingdom when it comes to whether the carrier will, or will not, pay. And they also list out many things that an insured must do before the carrier will even consider paying the claim. Putting the carrier on notice of any claim or lawsuit as soon as possible is almost boilerplate language in any insurance policy.

In Pharm. D v. Founders, the insured never notified the carrier of a possible claim, nor did the insured inform the carrier that a lawsuit had been filed. The federal court held that these were "duties" that the insured owed to the insurance company that the insured had "materially breached" the insurance contract by failing to provide any notice. The court determined that Founders no longer had a contractual duty to defend or indemnify after the insured materially breached the insurance contract. Although this is a federal court decision, it is likely that a state court would have ruled the same way.

If you are insured and there is the possibility of a claim, notify your insurance company immediately. If someone else's conduct had caused you some type of damage, ask for the at-fault person's insurance information and call their carrier yourself. Do not rely on someone else to notify their own insurance company. If they decide to stay silent like the example above, your notice to their carrier will serve as "notice" and give the insurance company one less argument against covering the claims. 

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