Eleventh Circuit Predicts Florida Will Apply the Notice-Prejudice Rule to Prompt-Notice Breaches in Claims-Made Policies When Claims Are Timely Reported

Introduction

In L. Squared Industries, Inc. v. Nautilus Insurance Company, No. 23-13031 (11th Cir. Oct. 15, 2025) (published), the Eleventh Circuit addressed whether a surplus-lines insurer must provide coverage under a claims-made-and-reported storage tank liability policy despite the insured’s failure to comply with a stringent “as soon as reasonably possible, but not more than seven days” notice-of-pollution-condition clause. The insured, L. Squared Industries, operates gas stations with underground storage tanks (USTs) in Florida; the insurer, Nautilus, issued a claims-made policy responding to pollution conditions first discovered and reported within the policy period.

The core legal issue was whether a breach of a prompt notice provision (here, a seven-day reporting requirement triggered by awareness of a pollution condition) automatically forfeits coverage under a claims-made policy when the insured nevertheless reports the claim within the policy or extended reporting period. The district court treated the seven-day clause as dispositive and granted summary judgment to the insurer. The Eleventh Circuit affirmed, but on a different ground: it predicted that Florida would apply a notice-prejudice rule to such prompt-notice breaches in claims-made policies, yet held that Florida’s presumption of prejudice for notice breaches controlled and the insured failed to rebut it on summary judgment.

This opinion is significant for insurers and policyholders in Florida and the Eleventh Circuit because it clarifies the consequences of violating prompt-notice conditions in claims-made policies and articulates a burden-shifting framework rooted in Florida law. It also flags important procedural lessons about choice-of-law waiver, standards of review, and the perils of trying to introduce prejudice rebuttal for the first time in a motion for reconsideration.

Summary of the Opinion

The district court held Nautilus owed neither defense nor indemnity because L. Squared failed to notify Nautilus of a pollution condition within seven days of learning about it (August 2018 Taylor Environmental report), waiting until April 2019—eight months later. The Eleventh Circuit affirmed summary judgment but refined the legal analysis:

• It distinguished between two notice features typical of claims-made policies: (1) the requirement that a claim or covered event be discovered and reported within the policy period (or extended reporting period), and (2) a separate prompt-notice requirement (e.g., “as soon as practicable,” or a fixed number of days) designed to ensure timely investigation and claims handling.
• Where the insured reports the claim within the policy period (satisfying the essence of a claims-made policy), late compliance with the prompt-notice provision does not automatically forfeit coverage. Instead, under the majority rule and treatise guidance, the notice-prejudice rule applies—coverage is barred only if the insurer is prejudiced by the delay.
• Predicting Florida law in the absence of on-point state authority, the court adopted the majority view and applied the notice-prejudice rule. It then overlaid Florida’s specific burden rule: when a notice provision is breached, prejudice to the insurer is presumed, but may be rebutted by the insured (Bankers Ins. Co. v. Macias, 475 So. 2d 1216, 1218 (Fla. 1985)).
• On this record, L. Squared did not timely present evidence to rebut the presumption of prejudice at summary judgment and could not cure that omission via a motion for reconsideration. Therefore, summary judgment for Nautilus was affirmed.

Analysis

Precedents and Authorities Cited and Their Influence

Substantive insurance law and contract interpretation:

• Gulf Ins. Co. v. Dolan, Fertis & Curtis, 433 So. 2d 512 (Fla. 1983): The Florida Supreme Court emphasized that the “essence” of a claims-made policy is notice within the policy period. The Eleventh Circuit leverages this to separate the policy’s coverage trigger (timely claim reporting within the period) from ancillary prompt-notice provisions. If the claim is reported within the policy period, the central rationale for strict forfeiture—allowing the insurer to “close its books”—is satisfied.
• Key v. Allstate Ins. Co., 90 F.3d 1546 (11th Cir. 1996) and Westchester Gen. Hosp., Inc. v. Evanston Ins. Co., 48 F.4th 1289 (11th Cir. 2022): Florida insurance contracts are construed according to their plain meaning; unambiguous terms are enforced as written. The court begins with the policy text but then considers how Florida law treats breaches of notice provisions.
• State Farm Mut. Auto. Ins. Co. v. Menendez, 70 So. 3d 566 (Fla. 2011): Ambiguities in policy language are construed in favor of coverage. Although not outcome-determinative here, Menendez frames the interpretive lens.
• Bankers Ins. Co. v. Macias, 475 So. 2d 1216 (Fla. 1985): The cornerstone Florida case on notice breaches: prejudice is presumed from a breach of a notice provision but may be rebutted by the insured. The panel uses Macias to allocate burdens once a prompt-notice breach is shown.
• SA Palm Beach v. Certain Underwriters at Lloyd’s London, 32 F.4th 1347 (11th Cir. 2022): When Florida law is unsettled, federal courts predict state law and presume adoption of the majority rule absent contrary indications. The court uses this to import the notice-prejudice rule into the claims-made/prompt-notice context.

Majority rule and persuasive authorities:

• Prodigy Communications Corp. v. Agricultural Excess & Surplus Insurance Co., 288 S.W.3d 374 (Tex. 2009): A leading state supreme court decision applying the notice-prejudice rule when the insured provided notice within the claims-made reporting window but not “as soon as practicable.” Cited to show that prompt-notice clauses do not define coverage scope in the same way as the policy period requirement.
• Ottawa Bancshares, Inc. v. Great American Security Insurance Co., 764 F. Supp. 3d 1079 (D. Kan. 2025): Recognizes the waning rationale for automatic forfeiture when prompt-notice clauses are breached, favoring a prejudice requirement when claims are timely reported under claims-made policies.
• Restatement of the Law, Liability Insurance § 35 cmt. h (2019); Couch on Insurance § 186:13; Bruner & O’Connor on Construction Law § 11:129: Leading treatises and Restatement commentary support applying a prejudice requirement when late notice is still given before the end of the reporting period, while acknowledging that no prejudice showing is required if the insured fails to report the claim within the policy period at all.

Procedural and appellate practice:

• State Farm Fire & Cas. Co. v. Steinberg, 393 F.3d 1226 (11th Cir. 2004): Confirms de novo review of summary judgments; L. Squared’s reliance on Carithers (bench trial standard) was misplaced.
• Access Now, Inc. v. Southwest Airlines Co., 385 F.3d 1324 (11th Cir. 2004); Mesa Air Group, Inc. v. Delta Air Lines, Inc., 573 F.3d 1124 (11th Cir. 2009); Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (1984); Cole v. U.S. Attorney General, 712 F.3d 517 (11th Cir. 2013): Collectively support the holding that choice-of-law arguments not clearly presented in the argument section on appeal are abandoned. Consequently, Florida law governs.
• Samara v. Taylor, 38 F.4th 141 (11th Cir. 2022): A motion for reconsideration cannot be used to raise new arguments or evidence that could have been raised earlier.
• Coleman v. Hillsborough County, 41 F.4th 1319 (11th Cir. 2022): Courts are not obligated to scour the record for a non-movant’s evidence at summary judgment; parties must direct the court to specific materials.
• Kramer v. State Farm Florida Insurance Co., 95 So. 3d 303 (Fla. 4th DCA 2012): Illustrates Florida’s requirement that an insured come forward with counterevidence to create a material dispute over prejudice resulting from late notice.

Legal Reasoning

The court’s reasoning unfolds in four steps:

1. Contract interpretation and the two-tiered notice framework in claims-made policies. The policy here contained:

   • A claims-made-and-reported requirement: pollution conditions must be first discovered and reported to Nautilus during the policy period or extended reporting period.
   • A separate prompt-notice requirement: the insured must notify Nautilus as soon as reasonably possible, but no later than seven days after the insured became or should have become aware of a pollution condition that may result in a claim or cleanup obligation.

   L. Squared satisfied the first (it reported within the policy period) but breached the second (reported eight months after awareness).

2. Predicting Florida law on the consequence of breaching the prompt-notice provision when the claim was timely reported. The panel adopted the majority view that prompt-notice clauses in claims-made policies are designed to facilitate timely investigation, reserving, and defense—not to define the temporal scope of coverage. Accordingly, a violation of a prompt-notice clause does not automatically void coverage if the claim was reported within the policy period; instead, the insurer must demonstrate prejudice (the notice-prejudice rule). The court grounded this in:

   • The logic of Gulf Ins. Co. v. Dolan concerning the core purpose of claims-made periods.
   • Persuasive state high court authority (Prodigy) and secondary sources (Restatement, Couch, Bruner & O’Connor).
   • The Eleventh Circuit’s predictive approach to unsettled Florida law (SA Palm Beach).

3. Applying Florida’s presumption of prejudice to the breach. Even with the notice-prejudice rule in play, Florida allocates the burden through a presumption: once the insurer proves a breach of a notice provision, prejudice to the insurer is presumed; the insured may rebut that presumption with counterevidence (Macias). This presumption shifts the burden of production to the insured to show, for example, that the delay did not impair investigation, defense, or claims handling.

4. Application to the record and procedural posture. L. Squared did not timely marshal and present record evidence to rebut the presumption at summary judgment, and its belated attempt to argue lack of prejudice in a motion for reconsideration could not be entertained. Nor was the district court obliged to mine the record for possible rebuttal evidence. As a result, the presumption stood unrebutted, and Nautilus prevailed as a matter of law.

Impact and Practical Implications

The decision establishes a clear, three-step framework for Florida law as predicted by the Eleventh Circuit in federal diversity cases involving claims-made policies:

1. Was the claim or pollution condition reported to the insurer within the policy period or any applicable extended reporting period?
   • If no, coverage is forfeited without any need to show prejudice (per Gulf and the prevailing rule, and as recognized by treatises and the Restatement).
   • If yes, proceed to step two.
2. Did the insured violate a prompt-notice requirement (e.g., “as soon as practicable” or a fixed-day deadline) separate from the policy period reporting requirement?
   • If no, coverage continues, subject to other terms and defenses.
   • If yes, proceed to step three.
3. Under Florida’s presumption (Macias), prejudice to the insurer is presumed from the notice breach; the insured must rebut with record evidence showing the delay caused no material prejudice to investigation, reserving, defense, negotiations, or settlement opportunities. If unrebutted, the insurer prevails; if rebutted, coverage is not automatically forfeited by the delay.
   • In this case, the insured failed at step three, resulting in affirmance of summary judgment for the insurer.

Broader effects:

• Federal district courts in the Eleventh Circuit now have a published guidepost when applying Florida law to prompt-notice breaches in claims-made policies across lines (e.g., environmental impairment liability, D&O, E&O, professional liability): no automatic forfeiture when the claim is timely reported; apply the Macias presumption and require insureds to rebut prejudice.
• Insureds must build a contemporaneous evidentiary record to rebut presumed prejudice, including proof that relevant evidence was preserved, remediation or regulatory activity proceeded under oversight, the insurer’s ability to investigate or defend was unimpaired, and no settlement or mitigation opportunities were lost due to delay.
• Insurers should still document actual prejudice where possible (e.g., lost witnesses, spoliation, altered site conditions, increased remediation costs, compromised negotiations) but benefit from Florida’s presumption once a breach is established.
• Policy drafting: Carriers may retain strict “claims must be reported within the policy period” conditions to preserve the bright-line claims-made trigger, while recognizing that separate prompt-notice clauses will be subject to a prejudice analysis under Florida law as predicted here.
• Procedure: The opinion underscores the importance of timely briefing on choice of law (waiver applies), properly identifying the standard of review, and presenting all prejudice-related record evidence at the summary judgment stage rather than in post-judgment motions.

Complex Concepts Simplified

• Claims-made vs. occurrence policies:
  • Claims-made policies provide coverage for claims or specified events reported to the insurer during the policy period (or extended reporting period). The “essence” is timely reporting within that period.
  • Occurrence policies cover events that occur during the policy period, regardless of when reported.
• Two types of notice provisions in claims-made policies:
  • Reporting within the policy period or ERP: defines the temporal scope of coverage. Missing this almost always voids coverage without a prejudice analysis.
  • Prompt notice (e.g., “as soon as practicable,” or a fixed day limit): aims to facilitate investigation and defense. Under the majority rule (and now the Eleventh Circuit’s prediction for Florida), a breach does not automatically forfeit coverage if the claim was timely reported; a prejudice inquiry applies.
• Notice-prejudice rule:
  • An insurer cannot avoid coverage for late notice unless it was prejudiced by the delay. Here, the court applies a Florida-specific variant—prejudice is presumed after a breach of a notice provision, and the insured must rebut the presumption with evidence.
• Presumption and burden shifting:
  • Once the insurer proves a breach of the notice clause, Florida law presumes prejudice. The insured must produce evidence showing the delay did not harm the insurer’s position. Failure to meet that burden sustains summary judgment for the insurer.
• Summary judgment and standards of review:
  • Summary judgment is appropriate where no genuine dispute of material fact exists and the movant is entitled to judgment as a matter of law. Appellate review is de novo.
• Choice-of-law waiver:
  • Arguments not clearly briefed in the argument section on appeal are abandoned. Here, Nautilus abandoned its New York choice-of-law position, and the Eleventh Circuit applied Florida law.
• Regulatory backdrop (UST context):
  • Florida’s FDEP regulates USTs and requires incident notifications and sampling where visual inspections or testing suggest potential releases. These regulatory steps can create a paper trail that may help (or hurt) prejudice analysis depending on timeliness and completeness.

Additional Observations and Practice Tips

• For insureds:
  • Calendar and comply with ultra-short prompt-notice windows in environmental and other claims-made policies. Even if you think a discharge relates to a prior, covered event, treat each regulatory finding or consultant report as a potential “awareness” trigger.
  • If notice is late but the claim is within the policy period, immediately gather and present evidence to rebut prejudice at summary judgment: contemporaneous sampling data, regulator communications, preservation of site conditions, photographs and logs, expert declarations on lack of investigative impairment, and records showing no lost settlement or mitigation opportunities.
  • Do not defer prejudice arguments until a motion for reconsideration; they must be raised with specific citations in opposition to summary judgment.
• For insurers:
  • Continue to enforce timely reporting within the policy period strictly; no prejudice showing is required if that core requirement is missed.
  • When asserting breach of a prompt-notice clause, document concrete prejudice (e.g., degradation of environmental evidence, increased remediation scope due to delay, lost third-party witnesses, diminished subrogation prospects). Although prejudice is presumed in Florida, a robust record strengthens the position and counters insureds’ rebuttal efforts.
  • Draft policies to clearly separate the claims-made reporting condition from any prompt-notice requirement, preserving the bright-line temporal coverage trigger.
• For both sides in UST/environmental claims:
  • Regulatory processes (FDEP inspections, incident notifications, and mandated sampling) can cut both ways. They may preserve evidence and mitigate prejudice, or reveal long gaps and degraded conditions. Counsel should evaluate and use the regulatory record strategically.

Conclusion

L. Squared Industries sets an important marker in Eleventh Circuit jurisprudence applying Florida law to claims-made insurance: a breach of a prompt-notice condition (such as a seven-day reporting clause) does not, by itself, automatically forfeit coverage when the claim is reported within the policy period. Instead, the court predicts Florida would apply the notice-prejudice rule to such breaches and, under Florida’s established framework, presume prejudice to the insurer unless the insured rebuts it with evidence.

The decision harmonizes Florida’s strong emphasis on the policy period as the defining feature of claims-made coverage (per Gulf Ins. Co. v. Dolan) with a pragmatic approach to prompt-notice clauses focused on actual prejudice. It also delivers a cautionary procedural message: parties must preserve choice-of-law arguments, understand the correct standard of review, and present all prejudice-related evidence at the summary judgment stage. As a published opinion, it will guide federal courts in the Eleventh Circuit and influence Florida coverage litigation, particularly in environmental, professional, and management liability contexts where short prompt-notice windows are common.