## Facts

- Bituminous Casualty Corporation issued a commercial general liability policy to Huston Partin and others doing business as S & J Mining Company for June 11, 1987 to June 11, 1988.
- The policy was obtained to satisfy Kentucky mining-permit regulations requiring public liability coverage for personal injury and property damage to others, including injuries related to explosives.
- On February 7, 1988, John Jones, a former partner no longer associated with the mining operation, went to the mine and was seriously injured when a fire barrel on the premises exploded while in use.
- Bituminous was not notified of the occurrence for approximately six and one-half months.
- The policy required prompt notice of an occurrence; Bituminous asserted that late notice voided any duty to defend or indemnify.

## Issues

1. Whether an insurer may deny liability coverage based solely on late notice, or whether it must prove the delay substantially prejudiced the insurer’s interests.

## Decision

- The Kentucky Supreme Court reversed the judgment upholding summary judgment for Bituminous and remanded.
- The court held that an insurer may not deny coverage for late notice unless it proves it was substantially prejudiced by the delay.
- The court placed the burden of proving substantial prejudice on the insurer.

## Legal Principles

- A notice-of-occurrence condition in a liability policy does not forfeit coverage absent the insurer’s showing of substantial prejudice caused by delayed notice.
- The insurer bears the burden to prove substantial prejudice (e.g., impairment of investigation, defense preparation, or other material interests).
- When liability insurance is required by law to protect the public, policy conditions must be applied in a manner consistent with that public-protection purpose.
- Insurance policies are construed against the drafter; coverage reasonably expected by the insured is not defeated by technical forfeiture absent a materially harmful breach.

## Conclusion

Kentucky requires a notice-prejudice rule for liability policies: delayed notice alone does not relieve an insurer of the duty to defend or indemnify unless the insurer proves substantial prejudice, with special weight given to the public-protection purpose of compulsory liability coverage.


Jones v. Bituminous Cas. Corp., 821 S.W.2d 798 (Ky. 1991)