Last week, THE SUPREME COURT OF CALIFORNIA concluded that California’s common law late notice-prejudice rule is fundamental public policy for the purpose of choice of law analysis.
Note that the California’s notice-prejudice rule generally allows insureds to proceed with their insurance policy claims even if they give their insurer late notice of a claim, provided that the late notice does not substantially prejudice the insurer. THE SUPREME COURT OF CALIFORNIA considered two narrow questions from the United States Court of Appeals for the Ninth Circuit, restated as follows: (1) Is California’s common law notice-prejudice rule a fundamental public policy for the purpose of choice of law analysis? (2) If so, does the notice-prejudice rule apply to the consent provision of the insurance policy in this case? THE SUPREME COURT OF CALIFORNIA ruled, in line with California’s strong preference to avoid technical forfeitures of insurance policy coverage, that (1) “our notice-prejudice rule is a fundamental public policy of our state in the insurance context, and (2) the rule generally applies to consent provisions in the context of first party liability policy coverage and not to consent provisions in third party liability policies.”