(Article from Insurance Law Alert, November 2025)
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Holding
A policyholder that failed to provide notice of a pollution condition to its insurer within the policy’s seven-day period is not entitled to defense or indemnity because it was unable to rebut the presumption of prejudice under Florida law. L. Squared Indus., Inc. v. Nautilus Ins. Co., 2025 U.S. App. LEXIS 26839 (11th Cir. Oct. 15, 2025).
Background
An underground storage tank owned by L Squared accidentally released petroleum. After incurring cleanup and defense costs from that incident, L Squared sought indemnification from Nautilus under a surplus lines policy. Nautilus denied coverage based on L Squared’s failure to comply with a seven-day notice provision relating to “pollution conditions which may result in a claim or any action or proceeding to impose an obligation on the insured for cleanup costs.”
In ensuing litigation, a Florida district court granted Nautilus’ summary judgment motion based on late notice since L Squared failed to provide notice for eight months following its investigation of contamination stemming from the petroleum leak. The Eleventh Circuit affirmed.
Decision
The claims-made-and-reported policy included two notice provisions. One required claims to be made during the policy period, and the other required notification of a potential claim within seven days. L Squared notified Nautilus of the pollution conditions in April 2019, within the July 2018-July 2019 policy period, but failed to inform Nautilus of the pollution condition within seven days of receiving a contamination report from an environmental consulting company it had retained. The central issue was whether the breach of the seven-day provision resulted in a lack of coverage. The court concluded that it did.
The court held that a breach of the time-specific notice provision does not automatically forfeit coverage. Rather, it predicted that Florida courts would apply a notice-prejudice rule where, as here, the insured provided notice within the policy period but did not provide notice within the specified seven-day time frame.
Under Florida law, prejudice is presumed when a policyholder breaches a notice provision but may be rebutted by a showing that the insurer has not been prejudiced. The court concluded that L Squared failed to offer evidence to create an issue of fact as to the absence of prejudice to Nautilus.
Comments
In addressing this matter of first impression under Florida law, the Eleventh Circuit noted that the majority of courts to address this issue have concluded that when a policyholder provides notice within the policy period of a claims-made policy and breaches only a time-specific or “as soon as practicable” provision, a showing of prejudice is required. Importantly, however, there is a near unanimous consensus among courts that a showing of prejudice is not required when the insured fails to provide notice within the policy period.