Most property insurance policies include a provision that requires the insured to provide prompt notice of a loss as soon as possible after a covered loss—known as the notice of claim provision or awareness provision.
An insured’s failure to do so may be a breach of the insurance contract and allow the insurance company (insurer) to deny the claim—meaning the insurer would have no obligation to defend or indemnify the insured against the claim—and may allow the insurer to cancel the insurance policy.
Courts in many states have adopted the Notice-Prejudice Rule, which prohibits an insurer from denying a claim—even when the notice provided by the insurer may not have been prompt—unless the insurer can demonstrate actual prejudice resulting from the delayed notice of loss.
But some courts have held that the failure to notify the insurer within a reasonable time constitutes a breach of the insurance contract—unless there is a justifiable excuse or extenuating circumstances explaining the delay—and the insurer cannot be held liable under the insurance contract to defend the insured and pay any settlements or court judgments on the loss. This is known as the Traditional Notice Rule.
In Texas, property insurance policies typically include a clause that mandates the insured to promptly notify the insurer of a loss as soon as possible after it occurs. This is known as the notice of claim provision. If an insured fails to provide timely notice, it may be considered a breach of the insurance contract, potentially leading the insurer to deny the claim and possibly cancel the policy. Texas courts generally follow the Notice-Prejudice Rule, which means that an insurer cannot deny a claim based on late notice unless it can show that the delay caused actual prejudice to its interests. However, if the insured does not notify the insurer within a reasonable time and cannot provide a justifiable reason for the delay, the insurer may not be obligated to defend or indemnify the insured under the Traditional Notice Rule. It's important for policyholders to understand their obligations under their specific policy and the potential consequences of failing to adhere to the notice requirements.
