Claim First Made After Policy Period But During Extended Reporting Period Does Not Trigger Coverage Under Claims-Made-And-Reported Policy
The United States District Court for the District of Montana, applying Montana law, has held that a claims-made-and-reported policy does not afford coverage for a claim first made after the expiration of the policy but during the policy’s extended reporting period. Schleusner v. Cont’l Cas. Co., 2015 WL 1609202 (D. Mont. Apr. 10, 2015).
A lawsuit was filed against an insured real estate company during the policy period of an E&O policy. However, the lawsuit was not served on the insured. The insured only first became aware of the lawsuit following the expiration of the policy, which was not renewed, during the automatic 60-day extended reporting period that went into effect upon nonrenewal. The policy’s insuring agreement provided that “[a] claim must be first made during the policy period and must be promptly reported to [the insurer] in accordance with Section VI, Conditions, paragraph B.” In addition, the policy’s notice provision states that “[t]he Insured, as a condition precedent to our obligations, must promptly give written notice to us during the policy period or any renewal policy period . . . of any claim made against the Insured during the policy period.” The insurer denied coverage for the lawsuit on the grounds that the claim did not satisfy the claims-made-and-reported requirements of the insuring agreement.
In the coverage litigation that followed, the court held that the claim was first made against the insured when the insured received notice of the underlying lawsuit, not when the lawsuit was initially filed. Next the court held that “[t]he clear language of [the policy’s] provisions indicate that in order to trigger coverage, a claim, as defined by the Policy, must be made on the insured within the policy period itself and not during an extended reporting period.” In this regard, the court found that the claim was not “timely” because it “was made beyond the policy term.”
The insured argued that the notice provision was ambiguous based on the “personal knowledge” condition of the notice provision, which states that the notice provision “will not be a barrier to coverage for those Insureds who do not have personal knowledge of a claim or potential claim. However all Insureds must promptly comply with this condition upon obtaining such knowledge.” In rejecting the insured’s contention, the court held that “[t]he personal knowledge provision can be reasonably interpreted to allow an insured to report a claim outside either the policy period or the extended reporting period as long as the insured ‘promptly’ does so once it has personal knowledge.” According to the court, “[t]his interpretation, while construing the Policy in the light most favorable to the insured, does not make a claim filed after the termination of the policy period timely. If it did, instead of turning the Policy into a mere claims-made policy, it would effectively turn it into an occurrence policy. The Court can not rewrite the Policy.”