The 47-Day Notice and the Failed Supply Line
On January 3, a homeowner discovered water damage in a finished basement after a refrigerator supply line failed. She reported the loss to her HO-3 carrier on February 19-47 days later. The policy requires immediate notice and says no coverage exists unless the insured gives prompt notice. The insured explains that a handyman told her the stain was cosmetic, and she was hospitalized from January 5 through January 20. The adjuster finds wet drywall, warped flooring, and visible mold across roughly 300 square feet. No emergency mitigation was performed. The carrier has not yet inspected the attic or tested the line. The insured has already retained a public adjuster and threatens bad faith. The claim file contains only the first notice of loss and two phone notes.
1. May the adjuster deny the claim solely because notice was 47 days late? Explain the analysis and list the facts you must develop.
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No-not on these facts alone. Prompt notice is a policy condition, but a 47-day delay does not automatically void coverage. The adjuster should analyze whether the carrier suffered actual prejudice: Could it still inspect the line, drywall, and attic? Did the delay destroy evidence, increase mold, or prevent subrogation? The hospitalization and the handyman’s statement are relevant but not conclusive. The file is thin-two phone notes and no inspection-so denying now would be premature and difficult to defend. The adjuster should: (1) inspect immediately and photograph/test the supply line; (2) obtain the handyman’s statement and medical records; (3) determine when the insured first knew the damage was more than cosmetic; (4) evaluate mold progression and mitigation; and (5) send a reservation-of-rights letter. Because Alabama late-notice law is fact-specific, coverage counsel should review before a denial.
2. Draft a reservation-of-rights strategy: what policy issues should be reserved, and what should the letter say about the investigation?
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Reserve at least these issues: late notice; whether the insured failed to mitigate; the mold exclusion and any sublimit; and any exclusion for faulty workmanship or wear and tear if the line was deteriorated. The letter should be non-waiver and non-adversarial: state that the carrier is investigating, that no coverage position has been made, that the insured must cooperate and preserve damaged property, and that the carrier will not waive rights by continuing to inspect or pay undisputed amounts. It should set a specific next step and date-for example, inspection within five business days and a status letter within ten. The adjuster should also document why the delay occurred and what prejudice, if any, the carrier can prove. Do not use the reservation letter as a denial; it preserves issues while the facts are developed.