Take quick action when it comes to injuries, insurance

The Nevele Hotel, located in the Catskill Mountains of New York, includes on its premises a ski resort. In 2006, a guest at the facility suffered injuries on the slopes and sued. Very few details about the accident are available. While the defense of assumption of risk looms big in sporting mishaps, not surprisingly, plaintiff alleged the cause of her injuries was the resort’s negligence. Typically, hotels that receive a summons and complaint immediately notify their liability insurance company and let the lawyers handle the matter. The Nevele, however, was slow on the draw. As a result, its carrier, Lexington Insurance Company, refused to defend or indemnify. Yikes!

Turns out the Nevele had generated an incident report on the day the accident occurred. Additionally, within a month, the Nevele received written notice from plaintiff threatening to sue if claimed compensation was not forthcoming. But the hotel failed to notify Lexington until 10 months later. Oops!

Both the hotel and the plaintiff have an interest in the insurance company’s participation in the litigation. Plaintiffs sued Lexington seeking to force it to cover the resort. 

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The Nevele’s insurance policy contained a clause requiring that the inn provide the insurer with notice of any claims “as soon as reasonably practicable.” This term is common in insurance policies. Prompt notification enables the insurer to investigate accidents efficiently and in a timely manner. As times passes, evidence dissipates and witnesses forget facts, their recollections become hazy, or their stories otherwise might change. Courts interpret these clauses as requiring that notice be given to the carrier “within a reasonable period of time,” a somewhat flexible standard but clearly meaning sooner rather than later. 

Lexington argued its obligation was voided by the late notification. The court obliged and dismissed the insurer from the case. How painful for the Nevele! It paid for insurance coverage, but lost the benefits unnecessarily and due to its own neglect. If plaintiff is able to overcome the assumption of risk hurdle and wins a judgment, the Nevele will have to pay it from its own funds. The resort closed for business in 2009. It was purchased in 2012 by investors who announced a $500-million redevelopment plan to transform it into a resort and casino.

The lesson is simple: Do not hide claims from your insurance company. Rather, the carrier should be among the first to know when an accident occurs that causes injury. 

Another best practice is to review your insurance policy with your agent and lawyer to identify any other prerequisites to coverage. Then do what’s necessary to develop a system for compliance. Action now can save a lot of unwanted surprise and pain later.