Recently, in a case in Alabama, an insurance company was able to deny coverage because the builder did not timely report the claim.  In American Builders Insurance Company v. Riverwood Construction, LLC., the issue was whether Riverwood Construction, the contractor and policyholder/insured, had to timely report lawsuits to its insurance carrier.

Riverwood was sued in two residential cases in Alabama in 2017 and immediately hired an attorney to defend the case. But, Riverwood apparently failed to send notice of these lawsuits to its insurance carrier, American Builders, until 2019.  Once it was provided notice of the claims American Builders began to defend Riverwood under a reservation of rights because the insurance policy required Riverside provide Notice “as soon as practical” of any occurrence, claim or lawsuit.

When asked in deposition about why Riverwood failed to send notice to the insurance company, the President of Riverwood testified, “I don’t have a reason.  That’s what I am trying to get you to understand, sir.  I don’t know a reason why.  I don’t know that I can answer you any clearer that I don’t have an explanation for that.”  There was some testimony about whether Riverwood’s insurance agent was put on notice of the claim but the agent denied being told about the lawsuits until 2019 and immediately sent the claim to American Builders.

American Builders filed a declaratory judgment action on the basis that Riverwood’s failure to provide notice of the lawsuit “as soon as is practical”. The trial court granted summary judgment against Riverwood. The court reasoned that since the policy required written notice to American Builders “as soon as practical” and no written notice was provided until two years after the lawsuit was filed, that as a matter of law Riverwood did not provide proper notice to American Builders. As such, American Builders could withdraw from providing both defense and indemnity to Riverwood.

Making sure you have placed all the insurance policies required by contract is only the start.  Providing timely and proper notice of claims and keeping your insurer informed throughout the dispute to prevent a declination of coverage are later but equally important steps.  The attorneys in our Austin and Dallas offices have significant experience assisting clients in the insurance process and are available to answer any questions you may have. You may contact us for info@gstexlaw.com

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