What is a potential consequence if the insured fails to give prompt notice of a claim?

• A. It can jeopardize the insurer's defense and may result in denial of coverage for that claim.
• B. It has no impact on defense or coverage.
• C. It automatically extends the policy period.
• D. It requires the insured to cover defense costs personally.

Answer: (A)

Prompt notice of a claim is a standard condition in many liability policies because it allows the insurer to promptly investigate, preserve evidence, arrange defense counsel, and assess coverage. When notice isn’t provided timely, the insurer can be prejudiced—evidence may be lost, memories fade, and the defense can’t be mounted as effectively. That prejudice gives the insurer the ability to deny coverage for the claim or limit the defense under the policy. The late reporting concept is why prompt notice is so important. A policy generally doesn’t automatically extend the period or shift defense costs to the insured simply for late notice; those outcomes aren’t typical consequences of delayed reporting.