The U.S. Court of Appeals  for the Fifth Circuit, applying Texas law, found that a policyholder-owner of four rental buildings breached the prompt-notice provision of his commercial property policies by waiting unreasonably long to present a hail damage claim, prejudicing its property insurer because the damage increased as time passed, relieving the insurer of any obligation under the policy.

The hailstorm occurred in March, 2012, but the policyholder claimed that he didn’t realize the resultant damage until 2013 when tenants started complained of roof leakage and a neighbor suggested to him it was caused by the storm a year over a year earlier. He then hired an attorney but waited an additional five months to submit his claim to his insurer in February 2014. In total, the notice was first reported nearly two years after the hail storm.

On this record, the district court granted summary judgment to the insurer. The policyholder appealed arguing that the duty to provide notice was triggered by the tenants’ complaints and not the storm itself. He argued he did not know of the damage until the complaints were made so he could not have been expected to provide notice until that time. The policyholder offered no explanation for the delay in notifying the insurer after the tenants’ complaints and/or hiring an attorney.

The 5th Circuit agreed with the district judge’s findings that the delay in reporting the hail damage was unreasonable and prejudicial to the insurer. The court found that Texas law applies the notice requirement strictly and has found much shorter delays to be unreasonable.  The court noted the policyholder’s lack of an explanation for the delay in reporting the claim after the tenants’ complaints and hiring an attorney. As to the prejudice requirement, the court found that the properties continued to deteriorate unnecessarily during the period the policyholder learned of but did not report the claim to his insurer and that the damage might have been prevented, at least in part, had he reported the claim promptly. As a result, the insurer had difficulty determining the extent of the damage that was caused by the hailstorm as opposed to the delay in repair. Therefore, given the prejudice resulting from the delay, the court affirmed summary judgment to the insurer. Alaniz v. Sirius Int’l Ins. Corp., No. 15-40497, (5th Cir. Sept. 14, 2015).