Coverage Barred for Claim Made During Initial Policy Period and Reported in Renewal Period

The Ninth Circuit, applying Alaska law, has held that coverage was not afforded under a company’s professional errors and omissions insurance policy for a claim made against the company during the policy period but not reported until the renewal policy period.  Alaska Interstate Constr., LLC v. Crum & Forster Specialty Ins. Co., 2017 WL 3601728 (9th Cir. Aug. 22, 2017).

The company purchased an initial E&O policy, with a policy period of December 1, 2011 to May 1, 2013, and then a renewal policy, with a policy period of May 1, 2013 to May 1, 2014, from the insurer.  Both policies provided coverage for claims made and reported during the policy period, which was defined as “the period shown in the Declarations.”  It was undisputed that the company received a claim on January 10, 2013, during the policy period of the initial policy, but it did not report the claim to the insurer until June 19, 2013, during the renewal policy period.  The insurer denied coverage for the claim, arguing that notice was untimely under the policy.  In subsequent coverage litigation, the district court granted summary judgment for the insurer, and the company appealed.

The Ninth Circuit affirmed and rejected the company’s proposed interpretation of “policy period” as encompassing both the initial and renewal periods.  The appellate court noted that while Alaskan courts had not addressed the issue, most courts have held that renewing a claims-made policy did not extend the reporting period and that the cases cited by the insured “represent[] a minority view that has been criticized.”  Finally, the appellate court also held that the insured was not entitled to an extended reporting period under the terms of the initial policy because only cancellation or non-renewal would trigger that provision.

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