The United States District Court for the Western District of Oklahoma, applying Oklahoma law, has held that a litigation hold letter requesting that an insured preserve documents did not constitute a “claim” as defined by the excess liability policies at issue. Colony Ins. Co. v. Chesapeake Energy Corp., 2016 WL 5416517 (W.D. Okla. Sept. 28, 2016).
The insurer issued two successive excess claims-made liability insurance policies to the insured for policy periods running from July 2012 to July 2013 and July 2013 to July 2014, with $1 million and $2 million, respectively in underlying limits. An individual was injured at the insured’s well site in January 2013, and the insured settled the resulting lawsuit. Prior to the lawsuit, the insured received a litigation hold letter from the injured individual’s attorney in February 2013, but the insured did not provide the insurer with a notice of circumstances until June 2014 when the underlying lawsuit was filed. The insurer paid a portion of the settlement, subject to an agreement with the insured that coverage issues would be litigated at a future time. In the ensuing coverage litigation, the insurer and the insured moved for summary judgment on the issue of whether the litigation hold letter was a claim that triggered the 2012-13 policy, or was a claim first made under the 2013-14 policy when the complaint was filed.
The insured argued that the litigation hold letter constituted a claim and therefore the 2012-13 policy was triggered. The insurer argued that the letter did not meet the definition of a claim and therefore the 2013-14 policy was implicated instead. The policy defined “claim” to mean “any demand or suit against any Insured for damages because of bodily injury, personal injury, or property damage.” The policy defined notice of circumstance to mean “written notice by the Insured to the Company of any Occurrence or circumstances which appear likely to give rise to a Claim against the Insured.”
The court determined that the litigation hold letter did not constitute a claim and that only the later policy for the 2013-14 policy period was triggered. The court explained that the letter’s intent was to notify the insured that the injured individual was represented by counsel and to request that the policyholder preserve relevant records pertaining to the accident. The court observed that the letter did not demand damages, reference an attorney’s lien or a claim or advise that a suit was imminent. The court also reasoned that, even if the insured regarding the litigation hold letter as a demand, it failed to take steps under the notice provisions of the 2012 policy in accordance with that belief, because the policyholder did not notify the insurer of the letter when it was received.