Court Denies Coverage for Late-Reported Vandalism Claim
A Texas-based company, Best Center, has lost a multimillion-dollar insurance claim against Steadfast following a court ruling that highlighted the critical importance of adhering to policy deadlines when filing property damage claims. The case centered on a former Walmart Supercenter in Alabama that Best Center insured with Steadfast. The court found that Best Center’s failure to provide “prompt notice” of vandalism and theft resulted in the denial of their claim.
Best Center had a commercial insurance policy with Steadfast from October 2016 to October 2017, which was later renewed and subsequently canceled in March 2018 due to nonpayment. In 2017, the property reportedly suffered two incidents involving vandalism and theft, including damage to the building and the theft of copper wiring and industrial equipment. Best Center estimated its losses at around $3 million.
Despite being aware of the incidents, Best Center did not formally notify Steadfast until January 2019, over a year after the alleged damage occurred. Steadfast’s subsequent multi-year investigation culminated in a denial of coverage in August 2021, based on Best Center’s failure to provide “prompt notice” as required by the policy.
The court’s decision hinged on whether Best Center had met the policy’s requirements for providing “prompt notice of the loss or damage” and a description of the property involved. The policy also stated that legal action was conditional upon “full compliance with all of the terms” of their coverage.
Best Center acknowledged the delay in official written notification but argued that the delay was unintentional and did not prejudice Steadfast. They cited the declining health of the principal owner, Robin Parsley, and the terminal illness of his assistant, who allegedly possessed key documentation related to the claim.
The court rejected these explanations, noting a lack of evidence to support the claims that the assistant’s illness, diagnosed in 2019, prevented the timely reporting of incidents that occurred in 2017. Similarly, they found no evidence that Mr. Parsley’s health issues, including a 2024 hospitalization, would have kept him from reporting the claim earlier.
Under Alabama law, the failure to provide prompt notice of an insurance claim acts as a condition precedent that can bar coverage, irrespective of whether the delay harmed the insurer. The court cited previous rulings that held even a five-month delay in reporting a loss could be considered unreasonable. Because Best Center waited over a year to report the theft and vandalism, the court deemed the delay “sufficiently protracted” to prevent recovery.
Based on these findings, the court granted Steadfast’s motion for summary judgment, ruling that Best Center’s failure to provide timely notice of the claim invalidated its lawsuit. The court also dismissed Best Center’s additional claims against Steadfast, including breach of contract, bad faith, and violations of the Texas Insurance Code because of their failure to meet the policy’s conditions.
Furthermore, the court ruled that Alabama law applied to the case, as the insurance policy contained multiple references to Alabama law, making the case subject to its jurisdiction. The decision underlines the critical importance of reporting claims promptly in commercial insurance scenarios.
For business clients, the case serves as a cautionary tale about the importance of thoroughly documenting and promptly reporting losses to prevent the loss of coverage. It highlights the risks of relying on less formal methods of notification.
Insurers are likely to see this as a reaffirmation of the enforceability of policy conditions related to notice and the courts’ willingness to strictly uphold these terms. Best Center faces a substantial loss as its multi-million-dollar claim will not be covered. The ruling underscores the principle that failing to adhere to the procedural requirements of an insurance policy can result in the loss of coverage even if the underlying claim is legitimate.
