The insured did not notify the third party insurance broker of any claim until nearly a month after the basis for the claim was discovered.  The broker, in turn, did not notify the insurer of the loss or that the insured had obtained private counsel until nearly two months after receiving notice from the insured.  Furthermore, the broker’s initial notice provided notification only that the insured “was submitting a claim for employee dishonesty or theft.”  It was not until more than seven months after the events in question that the insurer was informed that the insured was asserting a claim for business interruption and extra expense. 

Upon denial of coverage for its business interruption and extra expense claim, the insured filed suit for breach of the policy.  At trial, the insurer asserted the special defense that the insured had failed to provide prompt notice in compliance with the policy and that the insurer had been prejudiced by the delay.  The trial court declined to charge the jury with the insurer’s requested instruction and rendered judgment in favor of the insured in excess of $1 million.  The appellate court affirmed on appeal, based in large part on its conclusion that the broker was the agent of the insurer and, therefore, notice to the broker was notice to the insurer.  The insurer appealed to the Connecticut Supreme Court. 

Connecticut law generally imposes upon the party asserting a special defense the burden of proving that issue.  However, where the special defense at issue is failure to provide prompt notice, the plaintiff bears the burden of proving compliance with the insurance policy, including the burden of proving no prejudice in the case of late notice.  Here, the Connecticut Supreme Court noted that questions of fact remained as to the actual timing of notice (including whether the broker was the insurer’s agent) and what prejudice to the insurer might have resulted.  Such factual questions, the court ruled, should have been submitted to the jury because such an inquiry was reasonably supported by the evidence.  The court further held that failure to submit the insurer’s requested instruction to the jury was harmful error.

For a full copy of the Connecticut Supreme Court’s opinion, please click here.