Proof of Loss Filed Late—Is Coverage Lost?

Proofs of loss and examinations under oath will be my speech topic at the Annual Meeting of the National Association of Public Insurance Adjusters (NAPIA) in June. My speech commemorates the same topic I gave 40 years ago at NAPIA ‘s Annual Meeting in Carmel, California. If you missed the one 40 years ago, you may want to sign up for this one. We might not be around in another 40.

In preparation, I studied a law review article, The Role of Prejudice in Resolving Insurance Condition Clause Disputes: The Good, the Bad, & the Ugly, 1 written by law professor Johnny Parker. The law review article was a study on the treatment of prejudice in the context of insurance by the various states. I noted this article and how it applies to late notice in The Notice Prejudice Rule Is By Far the Accepted Rule of Law Rather Than the Forfeiture of Policy Benefits Rule.

When an insured suffers a loss, insurance policies often require them to submit a sworn proof of loss detailing the nature and extent of the damages. But what happens if the proof of loss is filed late? Does the insurer have an automatic right to deny the claim, or is the insured entitled to coverage regardless of the delay? The answer to these questions often hinges on the concept of “prejudice,” a key issue that courts examine closely in determining whether coverage should be denied due to non-compliance with policy conditions.

Prejudice, in the insurance context, refers to whether the insurer suffered a material disadvantage because the insured failed to fulfill policy conditions in a timely manner. The principle is rooted in fairness: Should an insurer be permitted to deny coverage solely because a policyholder was late in meeting a policy condition, even if the insurer suffered no harm as a result? To address this dilemma, most jurisdictions have adopted what is known as the “notice-prejudice rule,” an equitable doctrine requiring insurers to prove actual prejudice caused by an insured’s delay in providing a proof of loss.

Courts embracing the notice-prejudice rule emphasize that insurance policies are contracts of adhesion—standardized contracts drafted by insurers without negotiation, where consumers have little or no input beyond accepting the offered terms. Recognizing the imbalance in bargaining power between insurers and insureds, courts applying the prejudice rule strive to prevent insurers from unjustly benefiting from a technical breach that results in no meaningful disadvantage to them.

Historically, insurance policies treated timely submission of a proof of loss as a strict condition precedent. Under this traditional view, insurers were permitted to deny claims for any breach, regardless of whether the insurer suffered harm or prejudice. Over time, however, courts began to recognize the inherent unfairness and harshness of allowing insurers to avoid paying otherwise valid claims due to a technical breach that caused no actual damage to the insurer.

The evolution towards the notice-prejudice rule acknowledges the practical realities facing insureds. Insurance policies are typically contracts of adhesion—standardized agreements offered on a take-it-or-leave-it basis by insurers who hold significantly greater bargaining power. Most policyholders have little to no opportunity to negotiate or understand complex contractual provisions. Consequently, enforcing policy conditions without consideration of prejudice often leads to disproportionate forfeitures, defeating the very purpose of insurance—to provide protection against loss.

Today, most states evaluate late proof of loss filings through one of two prejudice standards: actual prejudice or a rebuttable presumption of prejudice. In jurisdictions requiring proof of actual prejudice, the burden rests squarely with insurers. The insurer must demonstrate, typically through clear evidence, that the delay materially impaired their ability to investigate, defend, or settle the claim. Insurers may argue, for example, that delayed notice compromised their ability to conduct a thorough investigation, resulted in the loss of critical evidence, or hampered their opportunity to mitigate damages through timely intervention.

In states applying a rebuttable presumption of prejudice, the initial burden falls upon the insured to prove that the insurer was not prejudiced by the late filing. The insurer, however, ultimately bears the responsibility of persuasion, meaning it must demonstrate substantial prejudice to prevail in a denial of coverage.

Not all conditions are evaluated equally under the prejudice rule. The rule commonly applies to notice of loss, cooperation, and proof of loss conditions, while other provisions, such as limitations on filing suits, consent-to-settlement clauses, and examination-under-oath requirements, may be treated differently depending on jurisdiction. For instance, consent-to-settlement and cooperation provisions often require insurers to demonstrate actual prejudice to deny coverage. In contrast, conditions related to the timing of lawsuits typically are enforced strictly without a prejudice analysis.

Despite widespread adoption, the notice-prejudice rule is not universal. A minority of jurisdictions continue to enforce strict compliance with conditions precedent, meaning coverage may be forfeited without regard to prejudice. Such states place significant weight on contractual freedom and policy language, reasoning that courts should not interfere with clearly expressed agreements. In these jurisdictions, insureds risk losing coverage entirely due to even minor delays or technical missteps in submitting proofs of loss.

The trend among courts to adopt the notice-prejudice rule reflects a broader shift toward non-forfeiture based on technicality. By emphasizing actual harm to insurers rather than strict adherence to contractual provisions, my view is that courts aim to prevent unjust forfeitures and uphold the protective intent underlying insurance policies. In essence, the trend by courts is to let the claim be determined on its merits.

Policyholders should remain mindful, however, that timely compliance with policy conditions is always the best practice, as the application of prejudice analysis remains inconsistent across jurisdictions, leaving significant uncertainty for insureds who delay. Ultimately, insureds, their public adjusters, and their counsel should be attentive to deadlines and policy language while also recognizing the potential for equitable relief when prejudice is absent.

Parker’s law review breaks down these issues on a state-by-state basis. If you are really an insurance coverage nerd, you will love reading his law review article.

I hope to see you at the NAPIA convention in Scottsdale this June. Here is a link for registration: https://www.napia.com/events/2025-napia-annual-meeting-copy

Thought For The Day 

“I have noticed that people who are late are often so much jollier than the people who have to wait for them.” 

—E. V. Lucas

1 Johnny Parker, The Role of Prejudice in Resolving Insurance Condition Clause Disputes: The Good, The Bad, & The Ugly, 47 U. Mem. L. Rev. 779 (2017).