Claim Supplement in Renewal Application Did Not Constitute Proper Notice under Claims-Made-and-Reported Policy

Applying Texas law, a federal district court has held that an insurer owed no duty to defend or indemnify its insured because the insured’s claim supplement to a renewal application did not constitute proper notice of a claim pursuant to the terms of the claims-made-and-reported policy.  Landmark Ins. Co. v. Lonergan Law Firm, PLLC, 2019 WL 2295358 (N.D. Tex. Mar. 8, 2019).

The insured law firm obtained professional liability insurance for the claims-made-and-reported period of May 8, 2015 through May 8, 2016.  The policy required that the insured provide notice of claims no later than thirty days after the end of the policy period, and that the insured immediately send copies to the insurer of any demands, notices, or legal papers in connection with any claim.  On July 30, 2015, the insured was sued in connection with a loan closing.  In preparation for the renewal of the policy, the insured provided a brief description of the lawsuit in its claim supplement in April 2016.  The insured did not seek coverage for the lawsuit or otherwise provide copies of case filings until March 12, 2017, after the expiration of both the policy period and the reporting deadline.  The insurer denied coverage, asserting that the matter was not timely noticed under the policy and that the insured had failed to provide copies of the pleadings to the insurer.  The insurer filed a declaratory judgment action.

The court ruled in favor of the insurer on summary judgment, holding that the insured had failed to properly and timely report the claim under the policy and was not entitled to coverage under any subsequent policy because the claim was first made under the subject policy.  In determining that the insurer owed no duty to defend or indemnify, the court held that the insured’s claim supplement in its renewal application was not sufficient to place the insurer on notice of the claim filed under the policy.  The court explained that the claim supplement did not satisfy the policy’s definition of “claim” because it did not demand monetary or non-monetary relief; as such, the claim supplement amounted to nothing more than an informational communication to the insurer about an incident that might reasonably be expected to result in a claim.  The court also held that the claim supplement failed to satisfy the insured’s notice obligations because it did not include any suit papers.  The court thus rejected the insured’s argument that its inclusion of the lawsuit in its claim supplement fell within the plain meaning of the term “reporting” because it conveyed basic information about the lawsuit.  The court concluded that such an interpretation was contrary to the policy’s requirements and placed too great a burden on insurers by forcing them to comb through any transmission received from an insured to assess whether a potentially actionable claim was mentioned.

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