Question

Dan bought an insurance agreement from Seattle Insurance Co. The policy contained a clause stating that all claims for losses had to be reported within 60 days after the date of the loss or the claim would be barred. Time is stated to be of the essence. Dan sustained a covered theft loss, but did not report it to Seattle Ins. until 90 days later. Seattle Ins. denied coverage for the claim. If Dan sues, who wins?

a. Dan wins; the contract was substantially performed.

b. Seattle Ins. wins; there was failure of a condition subsequent.

c. Dan wins; courts will not enforce a time-of-the-essence clause.

d. Seattle Ins. wins; the impossibility doctrine applies.

Answer 1

Answer: (b) Seattle Ins. wins; there was failure of a condition subsequent.

Explanation: The insurance agreement between Dan and the Seattle Insurance Co. clearly stated in its policy clause that all claims for losses had to be reported within 60 days after the date of the loss or the claim would be barred. That is, time was stated to be of the essence and it was a binding condition of the contract. Therefore, even if Dan sues Seattle Ins. for denial of coverage for the claim, Seattle Ins. will win as there was failure of a condition subsequent.