Late Means Late: U.S. Court Affirms Coverage Bar For Untimely Notice Under Claims‑Made Policy

The Eleventh Circuit has confirmed that an insured's failure to give prompt notice of a pollution condition—despite reporting within the policy period—can defeat coverage under a claims‑made policy where the insured cannot overcome the presumption of prejudice to the insurer under the law of the state in which the dispute arose. In many other US jurisdictions, however, late notice under a claims‑made policy does not automatically bar coverage if notice is still given within the policy period; instead, the insurer must show that the delay caused prejudice.

Background

L. Squared Industries owns and operates filling stations in Florida. In July 2018, it procured storage tank liability insurance from Nautilus, a surplus lines insurer, covering cleanup costs for "pollution conditions" arising from underground storage tank releases at its St Augustine site. In August 2018, L. Squared's consultant detected groundwater contamination in proximity to the location. Notwithstanding that report, L. Squared did not notify Nautilus until April 2019.

Nautilus declined coverage based on a strict contractual requirement to notify the insurer "as soon as reasonably possible, but in any event, not more than seven (7) days" after the insured became aware, or should have become aware, of a pollution condition that may give rise to a claim or cleanup obligation. L. Squared sued in the Florida state court for breach of contract and declaratory relief.

Policy Language and Notice Provisions

The policy contained two distinct notice constructs common to claims‑made forms. First, it required that any claim or pollution condition be reported to the insurer within the policy period—the claims‑made element. Second, it imposed a separate timeliness obligation, mandating notice within seven days of the insured's discovery (or constructive discovery) of a pollution condition that could result in a claim or cleanup liability.

On the undisputed chronology, L. Squared satisfied the first requirement by reporting during the policy period, but failed the second by waiting eight months after learning of the contamination to notify Nautilus. The question on appeal was whether this late "prompt notice" barred coverage as a matter of law, or whether some showing of prejudice was required when notice—albeit late—still occurs within the policy period.

The Eleventh Circuit's Analysis

The trial court granted summary judgement in favour of Nautilus, and L. Squared appealed. On appeal, the court focused narrowly on prejudice: when notice is late but still within the policy period, the insurer benefits from a rebuttable presumption that the delay prejudiced its interests. The insured must counter with concrete, competent evidence that the delay did not impair the insurer's ability to investigate, remediate, defend, or manage the claim. L. Squared offered no such evidence, so the presumption stood and summary judgement was affirmed.

Position in South Africa

South African policies generally do not require an insurer to demonstrate prejudice. Where a policy's notice wording is clear and unambiguous, our Courts will enforce such provisions strictly according to their terms, and late notice can therefore bar cover without a prejudice inquiry. The Office of the Ombud for Short‑Term Insurance takes a different approach: because it considers equity, it may require a demonstration of prejudice and can recommend outcomes that temper strict contractual terms in appropriate cases.

Takeaway

Jurisdictions treat prejudice from late notice under claims‑made policies differently. Some, including the state law applied in this case, presume prejudice from untimely notice (subject to rebuttal). Many follow a notice‑prejudice rule, requiring the insurer to prove actual prejudice where notice is given within the policy period, while others enforce prompt‑notice clauses strictly as conditions precedent. The point is: outcomes turn on the policy wording and the governing law, so parties should not assume that late in‑period notice will be excused.

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