Most property insurance policies include a provision that requires the insured to provide prompt notice of a loss as soon as possible after a covered loss—known as the notice of claim provision or awareness provision.

An insured’s failure to do so may be a breach of the insurance contract and allow the insurance company (insurer) to deny the claim—meaning the insurer would have no obligation to defend or indemnify the insured against the claim—and may allow the insurer to cancel the insurance policy.

Courts in many states have adopted the Notice-Prejudice Rule, which prohibits an insurer from denying a claim—even when the notice provided by the insurer may not have been prompt—unless the insurer can demonstrate actual prejudice resulting from the delayed notice of loss.

But some courts have held that the failure to notify the insurer within a reasonable time constitutes a breach of the insurance contract—unless there is a justifiable excuse or extenuating circumstances explaining the delay—and the insurer cannot be held liable under the insurance contract to defend the insured and pay any settlements or court judgments on the loss. This is known as the Traditional Notice Rule.

In New Jersey, the law requires policyholders to promptly notify their insurance company of a loss, as stipulated by the notice of claim provision in most property insurance policies. If an insured fails to provide timely notice, they may be in breach of the insurance contract, potentially leading the insurer to deny the claim and possibly cancel the policy. However, New Jersey courts adhere to the Notice-Prejudice Rule, which means that an insurer cannot deny a claim based on late notice unless it can show that the delay caused actual prejudice to its ability to defend the claim or indemnify the insured. This rule is more policyholder-friendly compared to the Traditional Notice Rule, which allows insurers to deny claims for lack of timely notice unless the insured has a reasonable excuse for the delay. Therefore, in New Jersey, the burden is on the insurer to prove prejudice before denying a claim for late notice.