The United States District Court for the Western District of Missouri has held that a letter requesting payment of funds pursuant to an agreement was not a demand for monetary relief and therefore not a “claim” under a claims-made D&O policy. Phila. Indem. Ins. Co. v. Cmty. Found. of the Ozarks, Inc., 2016 WL 837951 (W.D. Mo. Mar. 3, 2016).
A community center had made a $500,000 deposit with the insured community foundation pursuant to the terms of a written agreement. The community center later requested the return of the deposit. On January 30, 2012, the community center sent a letter to the foundation enclosing a copy of the agreement and requesting a check in the amount of $500,000. Subsequently, on April 9, 2013, counsel for the community center sent a letter to the foundation demanding payment of the $500,000 with interest under Missouri law. The foundation did not return the funds, and the community center filed a lawsuit.
The foundation sought coverage under its D&O policy, which covered claims for wrongful acts first made against the insured during the policy period and reported to the insurer as soon as practicable but no later than 60 days after the expiration date of the policy. The insurer had issued an initial policy for the period of July 1, 2011 to July 1, 2012 and renewed the same coverage for the period of July 1, 2012 to July 1, 2013. The foundation reported the community center’s claim during the renewal policy period, after its receipt of the April 9, 2013 letter. The insurer then sought a declaratory judgment regarding the availability of coverage, arguing that the community center first made a claim against the foundation at the time of the January 30, 2012 letter, and that the foundation had failed to report the claim within the time period specified by the initial policy.
The court first considered Missouri’s unfair insurance claims settlement practices regulation, which provided that “[n]o insurer shall deny any claim based upon the insured’s failure to submit a written notice of loss within a specified time following any loss, unless this failure operates to prejudice the rights of the insurer.” Citing Eighth Circuit and Missouri Court of Appeals precedent, the court held that the regulation did not apply to the claims-made policies at issue here because timely notice defines the limits of coverage under a claims-made policy and allows the insurer to more accurately calculate reserves and premiums.
The court then turned to the insurer’s argument that the foundation did not give timely notice of the community center’s claim. Both of the policies defined “claim” to include “a written demand for monetary or non-monetary relief.” The court determined that the January 30, 2012 letter was not a claim because it did not contain a “demand” for monetary or legal “relief” beyond the return of funds pursuant to the agreement that the community center believed entitled it to the money. The court also observed that the letter did not make any allegation of a wrongful act because it did not accuse the foundation of breaching the agreement, and that there were no allegations of any wrongful act prior to the April 9, 2013 letter. Accordingly, the court held that the foundation had timely reported the claim by the community center under the renewal policy.