Under the notice-prejudice rule, late notice or another condition breach forfeits coverage only if the insurer proves the delay materially impaired its ability to investigate, defend, or settle.
The rule reflects the view that forfeiture is disproportionate to a technical breach causing no harm.
Alternative Names:
Notice-Prejudice Rule, Prejudice Rule
Why it Matters?
This rule converts most condition breaches from automatic defenses into evidentiary questions, and the prejudice showing requires specifics: evidence that became unavailable, witnesses who could no longer be located, or a settlement opportunity that closed. Generalized assertions that earlier notice would have been better routinely fail. The rule generally does not apply to claims-made reporting requirements, which courts treat as defining coverage rather than conditioning it.
Frequently Confused with
Related terms
Frequently asked questions
What must an insurer show to establish prejudice?
Does the rule apply to claims-made policies?
