Every policy that I have ever looked at includes a condition that the insurance company be notified quickly about a loss or a potential claim.
Under a strict reading of these conditions, a claim could be denied if the policyholder waits to inform the insurer of an occurrence that could give rise to a claim. Sometimes a strict reading might even require prompt notice without regard to whether the policyholder even knows about the matter.
Enforceability of notice provisions varies in different jurisdictions.
Some states, for example, only enforce notice provisions if the insured unreasonably delayed and the insurer was materially prejudiced. For example, if the policyholder is served with a lawsuit, does not report it to the insurer, and a default judgment is entered against the policyholder (thereby preventing the insurer from contesting the policyholder’s liability), that would be material prejudice. On the other hand, if no default is entered and nothing much has happened in the suit, a court is less likely to find any prejudice caused by the delay.