The Collapsing Warehouse and the Late Notice
Meridian Fabrication owns a leased warehouse in Ohio. Its CGL policy is written on an occurrence basis with a $1,000,000 each-occurrence limit, a $2,000,000 general aggregate, and a $5,000 per-claim deductible for bodily injury. On March 3, a racking system Meridian installed two years earlier collapses, injuring a visiting contractor and destroying the landlord's inventory. Meridian's safety manager learns of the collapse that day but does not notify the insurer until September 12, after the contractor sues. The policy requires notice "as soon as practicable." The landlord also sues, alleging the racking was negligently designed by Meridian's engineering staff. Meridian's plant manager had inspected the racking in January and noted loose bolts in an internal email that was never sent to the insurer.
1. Evaluate whether the late notice and the January email affect coverage, and identify which coverage part responds to each claimant.
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Start with the trigger. The collapse is an occurrence: an accident causing bodily injury and property damage during the policy period. Notice prejudice is the key issue. Under occurrence policies, most courts require the insurer to show substantial prejudice before denying for late notice; six months' delay after a known injury invites a prejudice argument, especially since the insurer lost the chance to inspect the racking before repair. The January email is not a notice substitute, but it is evidence of the insured's knowledge date and may support a late-notice defense or a "known loss" argument if Meridian knew before inception. Next, allocate claimants. The contractor's bodily injury falls under Coverage A. The landlord's inventory damage is also Coverage A property damage, subject to the care, custody, or control exclusion only if the inventory was in Meridian's care; it was not, so the exclusion likely does not apply. The landlord's claim about negligent design may also implicate professional services exclusions if Meridian sold engineering services, so check whether an endorsement or professional policy applies. Finally, the $5,000 deductible applies per bodily injury claim, not per occurrence, so calculate deductibles separately for the contractor and any bodily injury claimant, while property damage may carry a different deductible.
2. Assume the insurer denies coverage for late notice. Explain how a court would likely analyze the notice condition and what facts Meridian should develop.
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The court will ask three questions. First, when did the duty to notify arise? Meridian knew of the injury on March 3, so the clock started then. Second, was the delay unreasonable under the circumstances? Six months is long, but reasonableness is fact-specific; a small insured may not appreciate that a workplace accident could produce a claim. Third, did the delay prejudice the insurer? Prejudice is the battleground. Meridian should develop evidence that the racking was preserved, photographs and maintenance records exist, and the insurer could still investigate. It should also show that the insurer never requested documents or reserved rights promptly. Because Ohio and many states require prejudice for occurrence policies, Meridian's best argument is that the insurer cannot show it lost evidence or settlement opportunity. Meridian should also check whether the policy has a claims-made notice requirement, which is stricter, but here it is occurrence. Finally, Meridian should preserve the January email under a litigation hold and analyze whether it creates a separate known-loss problem.