Insurance Companies Must Show "Substantial Prejudice" to Deny Claims for a Failure to Comply With the Proof of Loss Requirement
Following the August 2009 Station Fire, the lawsuits of over 1,440 policyholders filed against Fire Insurance Exchange (“FIE”) and related insurers were consolidated into one case – Henderson v. Farmers Group, Inc., __ Cal.App.4th __, 2012 Cal. App. LEXIS 1108 (October 24, 2012). In this case, the California Court of Appeal, Second Appellate District, issued an interesting opinion addressing several important issues.
In the consolidated lawsuit, the policyholders alleged that FIE improperly denied their claims by asserting either that: (1) the policyholders did not submit sworn proof of loss as required by the fire insurance policies, or (2) that the policyholders submitted delayed notice of loss. The policyholders asserted causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing (bad faith) and unfair business practices under section 17200. Given the large number of policyholders, five plaintiffs were selected as representative of the other policyholders and had their claims litigated, while the lawsuits of the other policyholders were stayed.Continue Reading