No Coverage for Claim Deemed Made After Policy Expired When Insured First Received Actual Notice of Lawsuit

The United States District Court for the Northern District of Illinois, applying Illinois law, has held that a claim was deemed first made when the insured received actual, rather than constructive notice of the claim. Philadelphia Indem. Ins. Co. v. Lewis Produce Mkt No. 2, 2022 WL 1045640 (N.D. Ill. Apr. 7, 2022).

The insured, a supermarket, was insured under two successive professional liability policies (the “2020 Policy” and the “2021 Policy”). A lawsuit alleging violations of the Illinois Biometric Information Privacy Act (BIPA) was filed against an uninsured affiliate of the supermarket on the last day of the 2020 Policy, but the insured did not receive notice of that lawsuit until one week later, by which time the 2021 Policy had incepted.  The insured notified its professional liability carrier of the lawsuit and the complaint was later amended to add the insured as a defendant.

The insurer filed a declaratory judgment action, seeking an order it had no duty to defend or indemnify the insured under the policies because under the 2020 Policy, the lawsuit was not a claim deemed first made during the policy period because the insured received notice of the lawsuit after the 2020 Policy expired. The parties agreed that the 2021 Policy, unlike the 2020 Policy, did not provide coverage for BIPA violations.

The court granted a motion for judgment on the pleadings in favor of the insurer. The court highlighted the 2020 Policy’s terms, which provided “a claim shall be considered made when an Insured first receives notice of the Claim.” The court held that while the lawsuit was filed within the 2020 Policy’s policy period, under the relevant policy language, the Claim was deemed made when the insured first received notice of the lawsuit, and it was undisputed that the insured did not receive actual notice of the Claim until after the expiration of the 2020 Policy. As such, the lawsuit was not a Claim made during the relevant policy period. The court also rejected the insured’s argument that it had constructive notice of the lawsuit during the policy period because the lawsuit was a matter of public record, and that constructive notice should be sufficient to deem the claim first made during the 2020 Policy, noting that such an interpretation would contravene the plain and unambiguous language of the 2020 Policy and would render the language deeming a claim first made when the insured “first receives notice” superfluous.