16.5 The Insured’s Duties

• Library: Insurance Law in Virginia (Virginia CLE) (2020 Ed.)

16.5 THE INSURED'S DUTIES

16.501 In General. The conditions section of a typical CGL policy requires that the insured fulfill certain duties to the insurer. First, of course, the insured has a duty to pay the premium. The insured must also provide the insurer with timely notice of a loss for which the insured expects coverage. Once the insured has given notice and the insurer has accepted the claim, the insured has a further duty to cooperate in the defense of the claim.

16.502 Notice. Most CGL policies, whether "claims made" or "occurrence," impose a duty on the insured to notify the insurer of an occurrence. The following is a fairly typical form:

a.	You must see to it that we are notified as soon as practicable of an "occurrence" or an offense which may result in a claim. To the extent possible, notice should include:
	1.	How, when and where the "occurrence" or offense took place;
	2.	The names and addresses of any injured persons and witnesses; and
	3.	The nature and location of any injury or damage arising out of the "occurrence" or offense.
b.	If a claim is made or "suit" is brought against any insured, you must:

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1.	Immediately record the specifics of the claim or "suit" and the date received; and
2.	Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or "suit" as soon as practicable. ¹¹⁰

The Virginia Supreme Court has held that "performance of provisions requiring notice of an accident and the furnishing of information as to claims made or actions brought usually is considered a condition precedent to recovery under the policy." ¹¹¹ If timely notice is not given, the insurer can refuse to cover the occurrence or claim.

Two questions often arise when an insurer tries to avoid coverage on the ground that the notice condition has not been met. First, was there sufficient danger of a loss to alert the insured to give notice? Second, was the notice given promptly enough?

The Virginia Supreme Court applies an objective standard to determine whether the insured should have recognized that there had been a reportable occurrence that would give rise to a duty to provide notice to its insurer. The court's standard is whether there has been "an incident which was sufficiently serious to lead a person of ordinary intelligence and prudence to believe that it might give rise to a claim for damages covered by [the] policy." ¹¹²Dan River, Inc. v. Commercial Union Insurance Co.¹¹³ makes clear that this standard is objective rather than subjective:

The interpretation of policy language, requiring "prompt written notice" of an "occurrence" that "in the opinion of the insured" involves potential or actual liability under the insurance contract, demands an objective determination. Failure to give timely notice will not be excused when the insured only subjectively concludes that coverage under the policy will not be implicated. Such a policy provision requires the insurer to be notified whenever, from an objective

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standpoint, it should reasonably appear to the insured that the policy may be involved. ¹¹⁴

Thus, an insured cannot rely on its subjective belief on this issue. It must report all incidents that a reasonable person would believe might lead to a claim.

The second issue, the determination of whether notice has been given "as soon as practicable," is an inexact science. The Virginia Supreme Court has affirmed trial court rulings that delays of 51 days and 173 days constituted late notice, barring the insureds from recovery under the policies. ¹¹⁵ However, the court also affirmed a finding that notice given 75 days after an occurrence was not late notice. ¹¹⁶ Obviously, the insured should give notice as soon as possible.

Generally, the insurer is not required to show that it has been prejudiced by the lateness of the notice. The Virginia Supreme Court has stated that

[w]hen a violation of the notice requirement is substantial and material, the insurer is not required to show that it has been prejudiced by the violation. An absence of prejudice, however, is a "circumstance to be

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