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Insurance 101: Don’t Forget the Policy Conditions

Alex Harms Hartzler, Steven Weisman, and Andrew Deutsch


  • Insurance policy conditions are important because they address a wide variety of issues.
  • They include how or if other insurance contributes, how and when the insured must give notice of a claim, and the insured’s duties.
  • They also include what happens in cases of fraud or misrepresentation by the insured.
Insurance 101: Don’t Forget the Policy Conditions
Cecilie_Arcurs via iStock

Policy conditions are the provisions in an insurance policy that often require the insured to comply with certain requirements to obtain coverage under the policy. Policy conditions can be overlooked because they are not in the insuring agreement, the exclusions, or the definitions. Instead, the conditions are provisions that might appear at the end of the policy. Insurance policy conditions are important, however, because they address a wide variety of issues including how or if other insurance contributes, how and when the insured must give notice of a claim, the insured’s duties after a loss or occurrence, the insurer’s subrogation and other rights, and what happens in cases of fraud or misrepresentation by the insured.

Historically, the insured’s failure to comply with policy conditions, unless waived or substantially complied with, resulted in a forfeiture of coverage under the policy. But the modern trend embraced by courts has been to balance the insurer’s and insured’s interests in interpreting and enforcing policy conditions. Accordingly, failure to strictly comply with policy conditions might not always preclude coverage.

This article discusses some important policy conditions that affect claims under many types of insurance policies. Although this article is not a 50-state survey, it provides an overview of the common issues and majority and minority trends for courts in different jurisdictions interpreting and applying policy conditions.

First, this article discusses the cooperation clause and the notice provisions that are typically found in all insurance policies. Second, the conditions related to payment and exhaustion of underlying insurance is discussed in the context of excess insurance. Third, consent-to-settle provisions and hammer clauses, often contained in directors and officers (D&O) and professional liability policies, are considered. Last, this article discusses policy conditions and issues unique to first-party insurance policies such as providing or making available documents and records, examinations under oath, and proofs of loss.

The Insured’s Duties to Cooperate and Provide Notice

Two common features of insurance contracts are “cooperation clauses” and “notice” provisions. In either case, an insured’s failure to comply with the provision can preclude recovery. However, most courts require that the failure actually prejudice the insurer before they shut the door on the insured’s recovery.

The underlying rationale for requiring the insurer to prove prejudice is that an insured should not be denied coverage on the basis of a technical failure to comply with a policy condition. By requiring insurers to demonstrate prejudice, courts often note that they are preventing an undue burden falling upon the insured when there is no harm to the insurer. In contrast, courts that require insureds to prove substantial compliance with policy conditions tend to interpret policy language more strictly according to the policy terms even if the outcome is potentially inequitable to the insured.

Cooperation clauses. A cooperation clause requires an insured to cooperate with its insurer’s investigation and handling of a claim. Thus, the clause creates the possibility that the insured will not recover if it does not cooperate. Generally, however, an insured’s noncooperation will preclude recovery only if the noncooperation actually prejudices the insurer.

Most jurisdictions place the burden on the insurer to prove that it was actually prejudiced by the insured’s noncooperation. A recent Illinois appellate court decision, Progressive Direct Insurance Co. v. Jungkans, illustrates this approach. In Jungkans, the insurer denied coverage on the ground that the insured had violated the cooperation clause by releasing an underlying tortfeasor without consulting the insurer. The insurer argued that this release had cut off its right of subrogation. The trial court found prejudice and entered summary judgment in favor of the insurer.

The appellate court reversed. The court held that the insured’s failure to notify the insurer of the settlement did not prejudice the insurer because the settling tortfeasor was judgment-proof. “[T]he mere right to sue the tortfeasor,” the court noted, “is of no value if there is no reasonable likelihood of obtaining a judgment that is worth the cost of litigation.” Noting that the insurer had produced “no evidence” that the tortfeasor had any assets, the court concluded that the insurer was not entitled to summary judgment. On the contrary, the court held that the insured was entitled to judgment as a matter of law.

On the other hand, some jurisdictions presumeprejudice to the insurer if the insured “fails to prove substantial compliance” with the cooperation clause. Even under this approach, however, the presumption of prejudice against the insurer is rebuttable if the insured makes a satisfactory showing of lack of prejudice.

Notice provisions. Notice provisions are treated like cooperation clauses in many jurisdictions: An insured’s violation of a notice provision will relieve the insurer of liability only if the insurer establishes that it was prejudiced by the lack of notice from the insured. Courts following this approach are often following state statutes. For example, in Sherwood Brands v. Great American Insurance Co., the insured failed, as required by the policy, to notify its third-party liability insurer within 90 days of the policy period’s expiration. The trial court granted summary judgment to the insurer without requiring a demonstration of how it had been prejudiced by the late notice. The court concluded that the insurer was not required to show “actual prejudice” because of the policy’s specific language: “[N]otice shall be given . . . in no event later than 90 days after the end of the policy period.”

On appeal, Maryland’s high court reversed. The court held that, under the relevant Maryland statute, an insurer “is required to demonstrate how it was prejudiced by [the insured’s] late-bestowed notice.”

Other courts have developed the same rule through case law. For an extreme example, consider State v. National Union Fire Insurance Co. There, the insured did not give notice to its insurer until several years after the underlying tort occurred. The insurer moved for summary judgment but “did not submit any evidence of actual prejudice.” The trial court denied the insurer’s motion for summary judgment, and the appellate court—recognizing that the notice was far from “prompt”—affirmed. The appellate court explained that the purpose of notice provisions is to prevent prejudice to the insurer, not to provide an “escape-hatch” through which insurers can avoid the “fundamental protective purpose” of insurance contracts. However, the appellate court also held that the insured was not entitled to summary judgment, finding a genuine issue of fact as to whether the insurer was prejudiced.

Some states, meanwhile, are more favorable to insurers. In Florida, for instance, an insured’s breach of its policy’s notice provision creates a presumption—albeit a rebuttable one—of prejudice to the insurer. The insured, in turn, carries the burden of showing a lack of prejudice. As the Florida Supreme Court explained in declining to adopt the “modern trend,” a notice provision creates a “condition precedent” to a claim, meaning the insured, as the party seeking to avoid the condition, has the burden of proving no prejudice to the insurer.

In 1997, the Connecticut Supreme Court identified Florida as being the only state out of 10 surveyed that “requires insureds to prove lack of prejudice.” However, Florida is not alone. The Michigan Supreme Court also treats a notice provision as a “condition precedent” to a policy’s enforcement and does not require insurers to show prejudice. Courts in Ohio and Indiana have also applied a presumption of prejudice when notice is late.

The rationales applied by courts for and against requiring a showing of prejudice mirror those in the cooperation clause context. Requiring insurers to show prejudice avoids forfeiture for the insured’s noncompliance that creates no harm to the insurer. On the other hand, not requiring a showing of prejudice is often stated to be consistent with the parties’ freedom to contract and the language in the policy.

Excess Insurance and Exhaustion of Underlying Insurance

Excess insurance policies usually contain conditions related to exhaustion of underlying insurance. Understanding the nuances in these provisions, and how courts apply them, is critical to determine whether excess insurance applies for liability that exceeds primary policy limits.

No excess coverage without actual payment of underlying policy limits. Recently, in Quellos Group LLC v. Federal Insurance Co., the Court of Appeals of Washington held that the policyholder could not recover loss in excess of its primary policy from its excess insurers after settling with the primary insurer for less than the primary policy’s limits. The court reached its holding even though the policyholder agreed to pay the difference between the settlement amount and the full limit of the underlying primary policy.

The policyholder in that case was Quellos, an investment management company. Quellos faced threats of litigation from its clients, and various federal government investigations, concerning an allegedly fraudulent tax shelter Quellos had developed. Quellos settled the clients’ claims for approximately $35 million. Quellos also incurred approximately $45 million in defense fees and other costs in connection with investigations and audits by the Internal Revenue Service, a U.S. Senate subcommittee, and the U.S. Attorneys’ Office. Quellos sought to recover the settlement and defense amounts from its insurers.

Quellos had primary coverage under a policy issued by American International Specialty Lines Insurance Company (AISLIC). Federal Insurance Company provided first-layer excess coverage, while Indian Harbor Insurance Company provided second-layer excess coverage. The Federal excess policy provided that coverage “shall attach only after the insurers of the Underlying Insurance shall have paid in legal currency the full amount of the Underlying Limit.” The Indian Harbor excess policy similarly provided that coverage “will attach only after all of the Underlying Insurance has been exhausted by the actual payment of loss by the applicable insurers thereunder.”

Quellos and its primary insurer AISLIC settled their coverage dispute with AISLIC paying half, or $5 million, of its $10 million primary policy limits. Quellos then sought from Federal and Indian Harbor all amounts in excess of the AISLIC primary policy’s $10 million limit. Federal and Indian Harbor denied coverage on the ground that the underlying primary insurance had not been exhausted by payment of loss.

Quellos and the excess insurers filed summary judgment motions on whether the failure to exhaust primary coverage through actual payment by the primary insurer barred coverage under the excess policies. The lower court dismissed Quellos’s claims against Federal and Indian Harbor, ruling that under the plain and unambiguous language of the excess policies, the limits of the primary policies were not exhausted.

The Washington Court of Appeals affirmed. The appeals court found that the Federal and Indian Harbor excess policies clearly and unambiguously did not provide coverage unless and until the underlying insurance was exhausted by the underlying insurer’s payment “in legal currency” or by the underlying insurer’s “actual payment” of a claim, respectively. The court also found that the phrase “only after” in the excess policies’ insuring clauses did not transform the exhaustion requirement into a condition precedent to coverage; rather, that language merely reflected the “distinguishing characteristic and function of an excess policy.”

The court also rejected Quellos’s policy argument that a literal interpretation of the excess policies’ exhaustion requirement violated the public policy of promoting settlements. It found that public policy should not “override the unambiguous exhaustion language” in the excess policies. Significantly, the court noted alternative policy language, available to Quellos, that would have allowed it to pay the full amount of underlying policy limits to trigger excess coverage. The court therefore held that it would enforce, as written, unambiguous language dictating how the underlying insurance must be exhausted.

The court in Quellos Group followed a number of decisions in other jurisdictions in which courts apply a textual analysis of exhaustion language requiring actual payment by lower-level insurers. For example, in Comerica Inc. v. Zurich American Insurance Co., Comerica settled five class action suits for a total of $21 million. Its primary insurer disputed coverage but settled with Comerica, contributing $14 million of its $20 million limits toward the class action settlements. Comerica paid the balance of $6 million and sought coverage under its excess policy. Its excess insurer, however, denied coverage on the ground that the underlying insurer did not exhaust its limits by payment of loss, which the excess policy required.

The excess insurer’s policy contained two relevant provisions. The first, titled “Depletion of Underlying Limit(s),” stated that the underlying insurance could be exhausted “solely as a result of actual payment of loss thereunder.” The “Maintenance of Underlying Insurance” provision required the insured to maintain underlying insurance except in the case of “reduction of the aggregate limit(s) of liability . . . solely by reason of payment of loss thereunder.”

The Michigan district court rejected Comerica’s argument that filling the $6 million gap was the “functional equivalent” of exhausting the primary policy. The court reasoned that Comerica’s “fundamental disagreement with its primary insurer” on liability for the settlement amount did not involve the excess insurer. As a result, the court held that Comerica had no right to bind the excess insurer to the underlying settlement without the excess insurer’s consent.

Quellos Group and Comerica are not the only cases to reach these results. Other courts have also reached the conclusion that policy language can require full payment of underlying policy limits to trigger excess coverage.

Other courts do not require actual payment of underlying policy limits to trigger excess coverage. In contrast to Quellos Group and Comerica, the Second Circuit Court of Appeals in 1928 held that a primary insurer did not need to make a payment to exhaust the primary insurance in Zeig v. Massachusetts Bonding & Insurance Co. The policyholder in Zeig sought coverage under an excess burglary first-party insurance policy for amounts exceeding the limits of three underlying policies. The policyholder settled his claims with the primary insurers for less than the policy limits. The excess policy applied “only after all other insurance herein referred to shall have been exhausted in the payment of claims to the full amount of the expressed limits of such insurance.” The excess insurer argued that its policy applied only after full payment of the underlying policy limits.

The Second Circuit, affirming the lower court’s finding that the policyholder had a right to coverage under the excess policy, stated:

The clause provides only that it be “exhausted in the payment of claims to the full amount of the expressed limits.” The claims are paid to the full amount of the policies, if they are settled and discharged, and the primary insurance is thereby exhausted. There is no need of interpreting the word “payment” as only relating to payment in cash. It often is used as meaning the satisfaction of a claim by compromise, or in other ways. To render the policy in suit applicable, claims had to be and were satisfied and paid to the full amount of the primary policies. Only such portion of the loss as exceeded, not the cash settlement, but the limits of these policies, is covered by the excess policy.

In rejecting the excess insurer’s argument, the Second Circuit found that interpreting the policy to require actual payment by the primary insurer “seems unnecessarily stringent.” Continuing, the court noted that requiring full payment “would in many, if not most, cases involve delay, promote litigation, and prevent an adjustment of disputes which is both convenient and commendable.” But the court also recognized that “[i]t is doubtless true that the parties could impose such condition precedent to liability upon the policy, if they chose to do so.”

Other courts have found Zeig and its reasoning persuasive. In those cases, courts have declined to require actual payment of primary insurance on the basis that settlement can be an equivalent of exhaustion and that public policy supports settlement that reduces litigation. In one such case, HLTH Corp. v. Agricultural Excess and Surplus Insurance Co., the Delaware court was presented with an exhaustion provision requiring “pay[ment] in legal currency.” The court followed Zeig and rejected Comerica and Qualcomm as contrary to New Jersey and Delaware law. The court also based its decision on public policy favoring settlements that avoid costly and needless litigation.

Consent-to-Settle Provisions in D&O and Other Policies

D&O, employment practices liability, and professional liability policies typically provide insureds with the right to consent to—or reject—a proposed settlement of a liability suit. Consent-to-settle provisions typically provide that the insurer may “make such investigation and negotiation and, with the written consent of the insured, such settlement of any claim or suit as the company deems expedient.” Or a slightly different provision might state that “[t]he Company shall have the right to make any investigation it deems necessary and with the written consent of the insured, said consent not to be unreasonably withheld, any settlement of any claim covered by the terms of this policy.”

Even where the policy does not include a consent-to-settle provision, some courts have read such provisions into the policy as a matter of law or public policy. In one such case, Saucedo v. Winger, the Kansas appellate court noted that “the policy at issue simply does not say if [insurer] has the exclusive right to settle.” The court held that it “consequently must be interpreted” to require the policyholder’s consent.

When the policy includes a consent-to-settle provision, the insured can revoke consent before settlement is finalized. In Lieberman v. Employers Insurance of Wausau, Employers defended Lieberman in an underlying malpractice lawsuit. Lieberman initially consented to settle but later revoked his consent. Employers nevertheless settled the lawsuit. Lieberman sued Employers claiming that the settlement was without consent and in breach of the insurance contract. The New Jersey Supreme Court held that because the policy did not bar Lieberman from revoking consent, Lieberman had properly revoked his consent and Employers’ settlement breached the policy.

The hammer clause. In instances when the policyholder refuses to consent to settle, so-called hammer clauses have been included in consent-to-settle provisions to limit the insurer’s liability. In effect, hammer clauses shift the risk of the amount of a forgone settlement by forcing the policyholder to pay toward a subsequent settlement or judgment.

Hammer clauses vary. The most common type strictly limits the insurer’s liability to the amount of the proposed settlement and freezes the insurer’s defense cost obligation to the amount accrued when the insured rejects settlement. Such a provision might state that if the insured refuses to consent to a settlement recommended by the insurer, and continues litigation at the trial or appellate level, “then the company’s liability for that claim shall not exceed the amount for which the claim would have been settled plus the cost and expenses incurred with the Company’s consent up to the date of such refusal to settle.”

By comparison, a “full” hammer clause might allow the insurer to withdraw its defense if the insured refuses to settle. In addition to the provision above, a full hammer clause would also include language similar to the following: “The Company shall have no liability for claims expenses accruing thereafter and the Company shall have the right to withdraw from the further defense thereof by tendering control of said defense to the Insured.”

There are also other variations on the hammer clause. Some policies contain a type of “modified” hammer clause, which limits the insurer’s liability to the amount of the proposed settlement plus a percentage of certain additional costs.

Analysis and application of the hammer clause. Security Insurance Co. of Hartford v. Schipporeit provides an example of how courts have applied hammer clauses. In that case, the insurer recommended that the policyholder pay $5,000 as part of proposed global settlement of the suit against the policyholder and two other defendants. The plaintiff’s acceptance of the proposed settlement was contingent on, among other things, the $5,000 payment by the policyholder and settlement with the other defendants. The policyholder refused to consent, however, and no settlement was reached.

The insurer sought a declaratory judgment that it owed neither a continuing duty to defend nor any indemnification above the $5,000 offer. The court disagreed, ruling that the recommendation for the insured to pay $5,000 did not constitute a “settlement” within the meaning of the policy. The court reasoned that “the term ‘settlement’ in this [hammer clause] provision makes sense only if it means a full and final disposition of a claim, and that assumes that a release of liability will be issued.” Because there was no global settlement, however, the court held that there was no full and final disposition and the insured had not breached the policy.

In Clauson v. New England Insurance Co., the court considered a full hammer clause in a professional liability policy. That clause said that the insured’s consent to settle could not be “unreasonably withheld” and that the insurer could withdraw from the defense if the insured refused to settle.

The First Circuit considered whether the hammer clause was triggered categorically by the policyholder’s refusal to settle or whether the clause remained dormant unless such refusal to settle was deemed “unreasonable.” Clauson, the plaintiff, sought coverage for a judgment obtained against his attorney, the insured, in a legal malpractice lawsuit. The insured had rejected a nonbinding arbitration award of $20,000 contrary to the recommendation of the insurer and his counsel. When the insurer invoked the policy’s hammer clause to limit its exposure to the amount of the rejected settlement, Clauson’s counsel and the insured’s counsel agreed that the arbitrator’s award, plus interest, would be a reasonable basis for settlement. The insured again refused to consent to a settlement, however. The insurer informed the insured that his refusal was unreasonable and that its liability would be limited to the amount of the rejected settlement.

Following a bench trial in the underlying lawsuit, a $97,716.50 judgment was entered in favor of Clauson. The insurer paid only $29,000, however, relying on the policy’s hammer clause to limit its liability. Clauson then sued the insurer for the entire underlying judgment.

The First Circuit found coverage, holding that the hammer clause “by preventing the insurer from settling without the insured’s consent and prohibiting the insured from unreasonably withholding consent” gave “the insured the right to reasonably withhold consent.” In other words, the insurer could not enforce the hammer clause if Clauson reasonably withheld consent to settle. Because the reasonableness of the insured’s decision to withhold consent to settle was not challenged on appeal, the court held that coverage applied for the judgment. In doing so, the First Circuit distinguished Schipporeit, noting that “the policy in that case did not distinguish between the reasonable and unreasonable rejection of settlement offers.”

Conditions in First-Party Insurance Policies

Unlike liability policies, which provide indemnity to third parties, first-party policies provide indemnity to the insured directly. A first-party policy might provide coverage for damage to buildings such under a homeowners’ or commercial property policy. Other examples of first-party coverage include no-fault and uninsured or underinsured motorists’ coverage.

Because indemnity is owed directly to the insured in a first-party policy, the conditions in first-party policies differ in some ways from those in liability policies. The rights and duties under first-party policies are often oriented to the insurer’s need to conduct an investigation into, and determine payment for, losses where there is no lawsuit or other outside source of facts or information. Until the insurer can conduct an investigation, the insurer typically has no or limited information on the nature or basis of the loss or damage. As a result, typical insurance policy conditions in first-party policies facilitate the insurer’s claim investigation by permitting inspection of damaged property, requiring the insured to produce records or documents of damaged property, and requiring the insured to submit to an examination under oath.

Some typical conditions in first-party insurance policies. This section of the article discusses a few typical policy conditions under first-party policies that affect coverage: the insured’s obligation to produce or allow inspection of records requested by the insurer, submit to an examination under oath, and provide a proof of loss. After examining these conditions, common issues are discussed for the consequences of failing to comply with policy conditions, including considerations of the insured’s substantial compliance and prejudice to the insurer.

1. Producing or allowing inspection of records and documents. A common condition in first-party policies requires the insured to “as often as we reasonably require . . . [p]rovide us with records and documents we request and permit us to make copies.” Courts generally agree that an insurer may request records or documents related to the claim or loss, including records and documents related to the insured’s finances and income at the time of the loss. Financial and income information can be relevant if there is a concern that the insured has a motive for fraud or misrepresentation in the insurance claim, or to investigate payments for previous claims.

As long recognized by courts, requiring the insured to comply with reasonable requests for information allows the insurer to obtain information and evidence from the insured that is relevant to the insurer’s investigation and coverage determination. The insured has no obligation to produce documents he or she does not have. But the insured’s refusal or failure to produce documents reasonably requested by the insurer is a breach of the policy conditions. And if the breach is material, coverage is barred under the policy.

2. Examinations under oath. First-party policies typically give the insurer the right to request that the insured submit to an examination under oath. The purpose of an examination under oath is to enable the insurer to obtain all knowledge and information on other sources and means of knowledge regarding facts to enable the insurer to make a coverage determination and to protect against false claims.

The policy might state that the insured is required to “submit to examination under oath, while not in the presence of another insured, and sign the same, within a reasonable time of our request.” Other policy language might allow an examination under oath of the insured’s representatives, such as a property manager.

Under the policy, the insured is required to submit to the examination under oath as a condition to recovering for any loss or damage covered by the policy. An examination under oath is like a deposition in that the insured is sworn and the testimony is recorded. While a deposition is conducted as part of discovery in the course of litigation, however, an examination under oath is conducted by the insurer as provided in the policy. The examination under oath is therefore governed by the terms in the insurance policy, not rules of civil procedure.

Typically, after having an opportunity to review the transcript from an examination under oath and make corrections, the insured must swear or affirm that the testimony is truthful. The policy, statutes, or common law might also give the insured an express right to have counsel present, at the insured’s own expense, for the examination under oath or to be notified that any statements made under oath can be used against the insured in a civil or criminal proceeding.

3. Proofs of loss. First-party insurance policies also typically require the insured to provide the insurer a proof of loss or application for benefits that states the nature and extent of the loss. The policy might require that the proof of loss be submitted within a certain time after the loss or within a certain time after the insurer requests the proof of loss. Typical provisions require that the proof of loss identify the time and cause of loss; the value of the property or amounts claimed; the interests in any damaged or lost property for all insureds and any other persons, including any lienholders; other insurance that may cover the loss; and an inventory, receipts, or other documentation for any amounts claimed under the policy. The policy also might require that the insured swear or affirm that the amounts submitted in the proof of loss are true and accurate to the best of the insured’s knowledge.

The proof of loss provision in first-party policies allows the insurer to evaluate its obligations under the policy by requiring the insured to present necessary information on the claim. “The purpose of those requirements is to enable the insurer to form an intelligent estimate as to whether the claim comes within the terms of the policy, to prevent fraud, and to enable the insurer to make an investigation to determine its rights and liabilities.”

Consequences for failing to comply with conditions. What happens if the insured has not complied with the conditions in a first-party insurance policy? The answer depends on the jurisdiction and the condition.

Courts in some jurisdictions preclude coverage for the insured that does not comply with first-party policy conditions. Such a failure to comply with the policy conditions can result in forfeiture of coverage. Courts in numerous jurisdictions have thus upheld an insurer’s denial of coverage based on an insured’s failure to submit to an examination under oath. Indeed, the majority of jurisdictions have court decisions holding that the failure to submit to an examination under oath is a material breach of the policy. Case law in several jurisdictions also holds that failure to timely submit a proof of loss is a bar to coverage.

But courts in a majority of jurisdictions have held that coverage is not defeated unless the insurer demonstrates that the failure to cooperate or fulfill policy conditions has resulted in prejudice. For example, in State Farm Mutual Automobile Insurance Co. v. Curran, the Florida Supreme Court noted that an insured might still be able to recover under the policy if the breach of the policy did not prejudice the insurer.

A slightly different approach is taken under New York law. Without specifically considering prejudice, New York courts apply a three-part test to determine whether coverage is barred for the insured’s failure to cooperate or comply with policy conditions. The test requires that the insurer demonstrate “(1) that it acted diligently in seeking to bring about the insured’s cooperation, (2) that the efforts employed by the insurer were reasonably calculated to obtain the insured’s cooperation, and (3) that the attitude of the insured, after his or her cooperation was sought, was one of willful and avowed obstruction.” In effect, the test results in a “very heavy burden” for the insurer to prove that the insured deliberately failed to cooperate.

In other jurisdictions, the failure to comply with policy conditions might only delay payment under the policy until the insured has corrected the deficiency. Some courts will also consider whether the insured’s failure to comply with the policy conditions was justified or excused. Those courts will not preclude recovery if the insured’s failure is justified or excused or if the insured has substantially complied with the policy conditions. But the insured must still comply with the condition before recovering under the policy.


Failure to comply with insurance policy conditions can limit, or eliminate, the coverage available under the policy. It is therefore always best to carefully review the language and the applicable law, whether addressing policy conditions on behalf of an insured or an insurer. And because the law varies between states, it is also important to know which jurisdiction’s laws will apply. The applicable law will control whether compliance with policy conditions is strictly required, excused in certain circumstances, or enforced only when the insurer is prejudiced.

Regardless of the policy language or the law, insurance policy conditions should not be ignored. Ignoring them can mean the difference between a claim being covered or not covered.