Insured’s Late Notice of Original Discrimination Charges Bars Coverage for Related Lawsuits

In a win for Wiley Rein’s client, the United States District Court for the Eastern District of North Carolina, applying North Carolina law, has held that an insurer owed no coverage for two underlying lawsuits because the insured failed to provide notice of the EEOC charges of discrimination that arose from the same facts at issue in the underlying lawsuits.  John Hiester Chrysler Jeep, LLC v. Greenwich Ins. Co., 2017 WL 6210897 (E.D.N.C. Dec. 8, 2017).

The insured, a car dealership, received two EEOC charges of discrimination in 2015 within the relevant policy periods.  The insured did not give notice of the EEOC charges of discrimination, however.  Later, two lawsuits were filed in 2016 against the insured based on the same facts that gave rise to the EEOC charges of discrimination.  The insured provided notice of the two lawsuits, several months after the expiration of the relevant policy periods.  The insurer denied coverage for the two lawsuits because the claims were first made in 2015, when the EEOC charges were filed, but notice was not given until 2016, after the policies had expired.  The insured filed suit, and the insurer moved for summary judgment.

The court first determined that the claims had first been made in 2015 when the EEOC charges had been filed, but notice had not been provided until 2016.  The court next held that, because the insured had failed to satisfy the policies’ notice conditions, the insurer had properly denied coverage for the claims.  The court reasoned that, because the two lawsuits were related to the 2015 EEOC charges, the insured’s untimely notice precluded coverage because notice was given several months after the expiration of the relevant policy periods in which the EEOC charges were made.  In so holding, the court noted that no notice-prejudice rule applies to claims-made-and-reported policies under North Carolina law.  As such, the court rejected the insured’s argument that the insurer could only deny coverage if it demonstrated prejudice from the late notice.

Finally, the court rejected the insured’s argument that the lawsuits were entitled to coverage under the renewal policies in effect when the lawsuits were filed.  Citing to the policies’ language, the court determined that the two lawsuits were not claims first made during the policy periods for the later-issued policies because the lawsuits alleged the same wrongful conduct found in the EEOC charges, which was the time at which the claims were first made.