Insufficient Notice of Potential Claim Held to Bar Coverage
The United States District Court for the Southern District of New York, applying Pennsylvania law, has held that an insured’s failure to provide sufficient notice of a potential claim during the policy period precluded coverage under its claims-made policy. University of Pittsburgh v. Lexington Ins. Co., 2016 WL 4991622 (S.D.N.Y. Sept. 16, 2016).
The insured, an architectural firm, submitted a “notice of occurrence/claim” on the last day of the policy period of its claims-made insurance policy. The notice failed to provide certain information required by the policy's notice of potential claim provision, such as an “indication of the actual or alleged breach of any professional duty” or “a description of the professional services rendered which may result in a claim,” and merely stated that the insured had been advised by its client, a university, that “this project is experiencing problems and delays in its early stages.” When the insured did not provide any further information upon request, the insurer denied coverage on the grounds that the notice was insufficient.
The university ultimately sued the firm and, under an assignment of rights, instituted coverage proceedings against the insurer. In an earlier opinion, the court denied the university’s motion for partial summary judgment, holding that the architectural firm’s “perfunctory,” “non-specific” notice was deficient because it did not provide the information required by the plain terms of the policy. At the court’s invitation, the insurer then filed a motion for summary judgment seeking dismissal of the university’s complaint.
The court granted the insurer’s motion for summary judgment, holding that the university could not recover under the policy because the insured failed to provide sufficient notice of the potential claim before the policy expired. In so holding, the court disagreed with the university that the insured’s failure to comply with the notice provisions of the policy should be excused because its compliance was “substantial.” The court also rejected the university’s argument that it should be entitled to recover under the policy because precluding coverage would create a “Catch-22” of no coverage under either the earlier policy or the subsequent policy. The court stated that the university’s claims for coverage under the two policies involve different coverage and different facts. Further, the court opined that the insured was aware of the risks inherent in purchasing a claims-made policy and, if it wanted to avoid these risks, it could have purchased occurrence coverage. However, in this case, the court concluded that the insured’s failure to comply with the claims-made policy’s notice provisions precluded coverage under the policy.