The Wyoming Supreme Court just raised the bar for insurers by adopting a notice prejudice standard for the first time. Finding that insurance policies are contracts “of adhesion” where the insured has little or no bargaining power to vary the terms, the Court will now require insurers to show that they’ve been harmed by late notice of an accident or claim before denying coverage. Century Surety Co. v. Jim Hipner and Huey Brock (2016 WY 81) was decided on August 17th and based largely on a growing public interest to compensate accident victims and innocent third parties. While Wyoming joins the majority of notice-prejudice States, it abandons a long history of strictly upholding the specific, clear language of private contracts. It now places insurance policies in a class of their own so as to make sure insurers are not “reaping any undeserved windfalls” because the insured provided untimely notice.
While such a decision is worrisome, the Century Court did recognize that there will be occasions where delayed notice is unreasonable, especially when an insured had knowledge of an accident in plenty of time to make a claim. Lower courts will now have to look at the sophistication of the insured, the wording in the policy, the seriousness of injury, and the underlying facts to determine if the insurer is relieved of its obligation to provide coverage due to late notice. The notice language in the policy appears to be the only factor that insurers have any control over.
If you have any questions about this update, please contact Deborah M. Kellam.