Federal District Court Concludes No Coverage for Untimely Claim

In an unpublished decision applying Louisiana law, a federal court has held that matters not timely reported under claims-made-and-reported D&O liability policies do not implicate coverage. XL Spec. Ins. Co. v. Bollinger Shipyards, Inc., No. 12-2071, 2015 WL 853993 (E.D. La. Feb. 26, 2015).

The insurers each issued a D&O policy to the insured, a ship building company, with one-year policy periods. The policies provided coverage for claims first made during the policy period of each respective policy and reported by January 30, 2007 and July 30, 2009, respectively. The insured asserted that the United States “first made” claims against it under the False Claims Act on two separate occasions—the first being a “preserve evidence” letter and the second being a tolling agreement—and, as a result, each claim implicated one of the policies. The insurers denied coverage for both claims on the basis that they were not timely reported and the insured initiated coverage litigation.

In granting the insurers’ motion for summary judgment, the court determined that there was no evidence that the insured gave notice of any claim to any insurer prior to July 28, 2011. Therefore, according to the court, neither policy was implicated. In doing so, the court observed that “the purpose of the reporting requirement . . . is to define the scope of coverage . . . by providing a certain date after which an insurer knows it is no longer liable under the policy.” The court disagreed with the insured’s argument that, because its coverage had been continually renewed, its policies had effectively “merged into one” single policy for purposes of notice. The court explained that each policy is separate and not an extension of the previous policy. Additionally, the court determined that the policies’ continuity date did not alter the relevant policy periods, but instead applied only to define the scope of a particular exclusion.

Wiley Executive Summary

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