SW Legal studies in Business

Insured Must Give Timely Notice to Insurer of Event That May Trigger Liability
Description Appeals court held that an insurer was not liable for coverage when the insured waited 25 years to inform the insurer of the occurrence of events that could lead to liability under an insurance policy. There is an obligation to give notice of occurrences as soon as practicable.
Topic Insurance
Key Words Claims; Notice of Occurrence; Timeliness
C A S E   S U M M A R Y
Facts In the late 1940s, faculty at Vanderbilt University conducted an experiment in which over 800 pregnant women were fed radioactive iron isotopes to study iron absorption in pregnant women. Participants claim they were only told they were being given vitamins. The women were reevaluated later, and an article was published in 1969 noting that there was a "small, but statistically significant increase" in the incidence of cancer in the children of the pregnant women given the isotopes compared to the regular population. Eventually there was a federal investigation of the matter. In 1994, over 800 women and their children filed a class action lawsuit against Vanderbilt that resulted in a $10 million settlement. Vanderbilt had excess liability insurance coverage from U.S. Fire during the reevaluation of the women in the 1960s. U.S. Fire refused to defend Vanderbilt or to contribute to the settlement. Vanderbilt sued for indemnity. The district court held for U.S. Fire; Vanderbilt appealed.
Decision

Affirmed. Under Tennessee law, the insured is required to give notice of an occurrence "as soon as practicable." That means when the insured becomes aware of facts that would suggest to a prudent person that an event has occurred that might be expected to produce a claim against the insurer; the insurer should be notified. Once knowledge of the higher levels of cancer were discovered in the 1960s, Vanderbilt had a duty to inform the insurer that problems had been identified, rather than wait 25 years later when the university was actually sued by participants in the study.

Citation United States Fire Insurance Co. v. Vanderbilt Univ., 267 F.3d 465 (6th Cir., 2001)

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