ABA Section of Litigation 2012 Insurance Coverage Litigation Committee CLE Seminar, March 1-3, 2012: Please Excuse the Delay: The Consequences of Untimely Notice, Slow Investigation, and the Failure to Communicate Please Excuse the Delay: The Consequences of Untimely Notice, Slow Investigation, and the Failure to Communicate J. James Cooper Jordan J. La Raia Gardere Wynne Sewell LLP Houston, Texas Terrance J. Evans Duane Morris LLP San Francisco, California Katherine E. Mast Sedgwick LLP Los Angeles, California Miles C. Holden Hanson Bridgett LLP San Francisco, California American Bar Association Section of Litigation Insurance Coverage Litigation Committee CLE Seminar March 1–3, 2012, Tucson, AZ ABA Section of Litigation 2012 Insurance Coverage Litigation Committee CLE Seminar, March 1-3, 2012: Please Excuse the Delay: The Consequences of Untimely Notice, Slow Investigation, and the Failure to Communicate TABLE OF CONTENTS Page I. Introduction .................................................................................................................................... 1 II. The “Notice” Condition ................................................................................................................. 1 A. Typical Policy Language .................................................................................................. 1 B. Rules of Construction ....................................................................................................... 2 1. California .............................................................................................................. 2 2. Illinois .................................................................................................................... 2 3. Nevada .................................................................................................................. 2 4. New York .............................................................................................................. 3 5. Texas ..................................................................................................................... 3 C. Effect of Untimely or Unreasonable Notice .................................................................... 3 1. California .............................................................................................................. 3 2. Illinois .................................................................................................................... 3 3. Nevada .................................................................................................................. 3 4. New York .............................................................................................................. 3 5. Texas ..................................................................................................................... 4 D. Proving Untimely Notice & Prejudice ............................................................................. 4 1. Generally a Fact Question ................................................................................... 4 a. California ................................................................................................. 4 b. Illinois....................................................................................................... 4 c. Nevada ..................................................................................................... 5 d. Texas ........................................................................................................ 5 2. Who Has Burden of Proof? ................................................................................. 5 a. California ................................................................................................. 5 b. Illinois....................................................................................................... 5 c. Nevada ..................................................................................................... 6 d. New York ................................................................................................. 6 e. Texas ........................................................................................................ 6 3. Defining Untimely Notice & Prejudice .............................................................. 6 a. California ................................................................................................. 6 b. Illinois....................................................................................................... 6 c. Nevada ..................................................................................................... 7 d. Texas ........................................................................................................ 7 4. Evidentiary Issues ................................................................................................ 7 a. California ................................................................................................. 7 b. Illinois....................................................................................................... 7 c. Nevada ..................................................................................................... 8 d. New York ................................................................................................. 8 e. Texas ........................................................................................................ 9 1. Prejudice as a Matter of Law ............................................................................ 12 a. California ............................................................................................... 12 b. Illinois..................................................................................................... 12 c. Nevada ................................................................................................... 12 d. New York ............................................................................................... 12 e. Texas ...................................................................................................... 13 E. Waiver of Late Notice Defense ....................................................................................... 13 1. California ............................................................................................................ 13 i 3970185.1 ABA Section of Litigation 2012 Insurance Coverage Litigation Committee CLE Seminar, March 1-3, 2012: Please Excuse the Delay: The Consequences of Untimely Notice, Slow Investigation, and the Failure to Communicate 2. Illinois .................................................................................................................. 14 3. Nevada ................................................................................................................ 14 4. New York ............................................................................................................ 15 5. Texas ................................................................................................................... 15 F. Claims-Made Policies—The Prejudice Rule May Also Apply .................................... 16 1. California ............................................................................................................ 16 2. Texas ................................................................................................................... 16 G. Additional Insured Issues & Notice From Other Sources ........................................... 17 1. California ............................................................................................................ 17 2. Illinois .................................................................................................................. 18 3. New York ............................................................................................................ 18 4. Texas ................................................................................................................... 19 III. The “Settlement Without Consent” Clause ............................................................................... 20 A. Typical Policy Language ................................................................................................ 20 B. Prejudice is Required ..................................................................................................... 20 1. California ............................................................................................................ 20 2. Illinois .................................................................................................................. 21 3. Nevada ................................................................................................................ 21 4. New York ............................................................................................................ 21 5. Texas ................................................................................................................... 22 C. Prejudice as a Matter of Law ......................................................................................... 23 1. California ............................................................................................................ 23 2. Texas ................................................................................................................... 23 D. Waiver .............................................................................................................................