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Late notice means Aspen unit not obligated to cover demolition

water damage

An Aspen Insurance Holdings Ltd. unit is not obligated to provide coverage to an apartment house owner for demolition costs associated with water damage because of an unexplained 12-day delay in informing it about the damage, says a federal appeals court, in upholding a lower court ruling.

Louisville, Kentucky-based South Fifth Towers LLC owns a Louisville high-rise apartment building insured by Aspen unit London-based Aspen Insurance UK Ltd., according to Friday’s ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in South Fifth Towers LLC v. Aspen Insurance UK Ltd. and Tenco Services Inc.

On June 26, 2013, thunderstorms dropped 2.6 inches of rain on Louisville and caused water damage. South Fifth contacted its insurance broker either that evening or the next day, but Aspen was not informed of what happened until 12 days after the storm, the same day demolition on the damaged areas of the building began.

By the time Aspen sent its own adjusters, employed by co-defendant Brentwood, Tennessee-based Tenco, the demolition was almost complete, according to the ruling.

South Fifth eventually claimed a $1.3 million loss, and Aspen denied coverage. In the ensuing litigation, the U.S. District Court in Louisville ruled in Aspen and Tenco’s favor, which was affirmed by a unanimous three-judge appeals court panel.

“There can be no genuine dispute that Aspen likely suffered substantial prejudice” from the 12-day delay in being told about the water damage, said the ruling.

The policy “required South Fifth to provide notice as soon as it could,” said the ruling.

“Here, South Fifth did not provide notice as soon as it could have. It notified Aspen eleven days after it notified its insurance broker…Indeed, when (the broker) was asked about this delay, he could not explain why Aspen had not been notified sooner. And on appeal, South Fifth fails to explain the delay,” said the ruling.

“The late notice deprived Aspen of the chance to see the water damage before demolition began. This means that Aspen had no way of assessing how much of the demolition was necessary or objecting to needless or too-costly demolition before it happened,” said the ruling.

“Even if all of the demolition was appropriate, the late notice made it impossible for Aspen to consult and coordinate with the demolition contract and South Fifth,” the ruling said. 

Aspen “had no chance to inspect the damage, view pre-demolition moisture readings (which the contractor did not retain), or ask the contractor to do anything different in such extensive and expensive demolition,” the ruling said.

The record “reveals no genuine dispute that … late notice created a reasonable probability of substantial prejudice to Aspen,” said the ruling, in affirming the lower court’s ruling.

In 2016, a federal appeals court upheld a lower court ruling and said QBE Insurance Corp. was justified in denying a homeowners association’s claim for hailstorm damage because it filed its claim nine months late, and failed to adequately explain the late notice.



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