Late Insurance Notice to Your Insurer? How Lack of Prejudice Can Keep Coverage Intact

As a legal journalist, I’ve covered my share of insurance disputes, and the “notice-prejudice” rule is an intriguing one. This rule, recognized in states like Illinois and California, says that if an insured fails to give notice on time, the insurer can’t automatically deny coverage—unless it can show that the delay caused them harm, or “prejudice.”

Take Illinois, for instance. Recently, an Illinois federal court ruled in Old Republic Insurance Company v. Ideal Aviation Illinois, LLC, a case that highlights just how nuanced this issue can be. The insureds were months late in notifying Old Republic, their aviation insurer, about an accident. A propeller had injured someone on their plane, a serious incident to be sure. But despite the ten-month delay, the court found the insured’s notice reasonable because the insurer hadn’t been prejudiced.

Breaking Down the Case

In this case, the insured party rented aircraft, and their policy required “as soon as practicable” written notice following an incident. On July 5, 2021, a person was seriously injured by a propeller on their plane, but the insurer, Old Republic, wasn’t notified until nearly a year later. Even so, when Old Republic tried to use the late notice as a reason to deny coverage, the court sided with the insured. They said that because the insurer had time to investigate before any lawsuits were filed, they couldn’t claim harm.