Notice Prejudice Rule Not Applicable to Claims-Made-And-Reported Policies

The U.S. Court of Appeals for the Ninth Circuit, applying California law, has held that an insurer is not required to show prejudice to deny coverage under a claims-made-and-reported policy based on an insured’s late notice.  Euraupair Int’l, Inc. v. Ironshore Spec. Ins. Co., 2019 WL 6817593 (9th Cir. Dec. 13, 2019).

The insured purchased claims-made-and-reported policies for consecutive policy periods.  The first policy required the insured to report claims to the insurer “as soon as practicable but in no event later than thirty (30) days after the end of the Policy Period.”  A lawsuit was filed against the insured, and the insured was served, during the first policy period.  The insured did not tender the lawsuit to the insurer until six months after the end of the first policy period, during the second policy period.  The insurer denied coverage because the insured failed to comply with the notice provision.  The insured filed a coverage action.  The trial court granted the insurer’s motion to dismiss.

The Ninth Circuit affirmed, holding that no coverage was available for the lawsuit because the insured did not report the claim to the insurer under the terms of the notice provision, and the insurer was not required to demonstrate prejudice.  The court held that the notice provision unambiguously required the insured to report all claims made during that policy period to the insurer no later than thirty days after the end of the policy period, even though the insured purchased insurance for a subsequent policy period.