On Aug. 29, 2019, the California Supreme Court issued a highly anticipated opinion, Pitzer College v. Indian Harbor Ins. Co., 8 Cal. 5th 93 (2019), answering two questions certified from the Ninth Circuit as a matter of first impression regarding California’s notice-prejudice rule:
(1) Is California’s common law notice-prejudice rule a fundamental public policy for the purpose of choice of law analysis?
(2) If the notice-prejudice rule is a fundamental public policy, does it apply to the consent provision of an insurance policy governing a contamination claim in California?
The notice-prejudice rule generally requires the insurer to prove that it has been prejudiced before disclaiming coverage on late notice grounds. The consent provision or “no voluntary payment provision” prohibits an insured from settling a claim or incurring non-emergency expenses for which it will seek coverage without the prior consent of its insurer. This article will analyze the court’s answers to these questions, discuss the potential impact of the court’s decision on the insurance industry at large, and offer guidance to underwriters, claims handlers, and coverage counsel in the wake of this decision.
