Ninth Circuit Affirms Denial of Claim Based on Late Notice

    The Ninth Circuit agreed the insurer suffered prejudice by the late notice from the insured and affirmed the denial of the claim. Stockton Mariposa, LLC v. West Am. Ins. Co., 2023 U.S. App. LEXIS 14787 (9th Cir. June 14, 2023).

    Stockton submitted a claim for theft and vandalism of covered property. West American denied the claim. Stockton sued and the district court granted summary judgment to West American. 

    The Ninth Circuit found that the policy’s vacancy provision unambiguously stated that a consecutive vacancy for the prior 60 days prevented coverage for certain losses. When a triggering event occurred = a vacancy counting backwards more than 60 days before the loss – the exclusion applied without regard to who owned the property or who acted to cause the vacancy. 

   Further, Stockton provided late notice. Under California’s notice prejudice rule, an insurer could not deny an insured’s claim based on lack of timely notice or proof of claim unless it could show actual prejudice from the delay. The burden of establishing prejudice was on the insurer. Although the issue of prejudice with respect to delay was one of fact, under some circumstances, prejudice could exist as a matter of law 

    Here, West American had shown that it suffered actual prejudice because of Stockton’s delay. West American’s ability to investigate was not only impaired but rendered impossible. Given the delay, an investigation would not be able to determine whether an appreciable loss was covered under the policy. The late notice made it virtually impossible to learn what facts, favorable to the insurer, could have been ascertained through prompt injury. Stockton’s late notice of its claim actually prejudiced West American as a matter of law.