Whether the contractor gave timely notice of loss to the carrier was the issue before the Eighth Circuit in The Weitz Co., LLC v. Lloyd's of London, No. 08-2835, 2009 U.S. App. LEXIS 17222 (8th Cir. Aug. 4, 2009) [here].
In January 2001, H. Group hired Weitz as general contractor to build a luxury retirement community. H. Group agreed to purchase an "All Risks" property insurance policy that protected Weitz's interests in work at the project. The policy provided that any loss or damage was to be reported in writing as soon as practicable after it became known to H. Group's risk management department. H. Group had to pay a $250,000 deductible for any covered loss.
Severe rains caused water damage to the project in June 2002. H. Group's representatives, Tim Reidy and Juan Rodriguez, visited the property soon thereafter and discovered the water damage. Neither Reidy nor Rodriguez informed H. Group's risk management department of the damage, however. In December 2002, Weitz sent a letter to Reidy, making a claim for water damage against H. Group's carrier. Reidy forwarded Weitz's notice of water damage to the claims adjuster named in the policy. H. Group's risk manager was copied on the letter to the claims adjuster. Hence, both the insurer and H. Group's risk management department first received notice of the loss on the same day.
After discussions with H. Group, the claims adjuster determined that the policy did not cover the water damage because of improper construction and failure to protect the property. H. Group then informed the insurer it no longer wished to pursue the claim, but never informed Weitz. Because the insurer denied the claim, Weitz suffered the entire loss of $3.4 million under the terms of the construction contract and H. Group owed nothing.
Weitz sued, but the district court granted summary judgment to the insurer because Weitz did not give notice to the insurer as soon as practicable after the loss became known. The Eighth Circuit reversed. Contrary to the district court's holding, notice of loss was given as soon as practicable after it became known to the insured's risk management department, as required by the policy. Timeliness of the notice was measured from when H. Group's risk management department became aware of the loss, not when Weitz or other H. Group personnel discovered the damage. Although the insurer argued this interpretation would produce an absurd result whereby Weitz could delay for years giving notice to H. Group's risk management department, the Court responded the insurer could have drafted different language in its policy.
