Insurer Has Duty to Defend under Claims-Made Policy Where Insured Potentially Received Notice of the Claim During the Policy Period

The United States District Court for the Eastern District of Texas, applying Texas law, has held that an insurer had a duty to defend its insured where the underlying complaint contained allegations sufficient to support the position that the insured potentially received pre-suit notice during the claims made policy period, notwithstanding that the insured was not served with the complaint until after the policy period had expired. Corinth Investors Holdings, LLC v. Evanston Ins. Co., 2015 WL 1321616 (E.D. Tex. 2015).

An insured medical center held a claims made insurance policy for the policy period of January 1, 2012 to January 1, 2013 (the 2012-2013 Policy) and a claims made insurance policy with another insurer for the policy period of January 1, 2013 to January 1, 2014 (the 2013-2014 Policy).

On January 2, 2013, the insured was served with notice of a suit filed by a former patient. The insured reported the lawsuit under both the 2012-2013 Policy and the 2013-2014 Policy. Both carriers denied coverage, each arguing that the claim was not first made during its respective policy period.

The insured sought a declaratory judgment that the 2013-2014 insurer had a duty to defend the insured in the underlying litigation, to which the court agreed. The two insurers then filed cross-motions for summary judgment seeking a declaration as to whether the 2012-2013 insurer had a duty to defend the claim. The 2012-2013 insurer argued that it had no duty to defend because the complaint in the underlying litigation did not specifically allege that the insured received notice of the claim during the 2012-2013 Policy period, and also because the court had already ruled that the 2013-2014 insurer had a duty to defend. The 2013-2014 insurer argued that the pleadings established that the insured potentially had received notice of the claim during the earlier 2012-2013 Policy period.

The court held that there was a duty to defend under the 2012-2013 Policy. In reaching this conclusion, the court rejected the argument that the underlying complaint had to allege specifically that the insured had received notice of the claim during the 2012-2013 Policy period in order to trigger defense obligations under that policy. The court explained that, to the contrary, the allegation in the complaint that the claimant had sent “pre-suit notice” to the insured was sufficient to support that the insured potentially received notice of the claim during the 2012-2013 Policy period and, accordingly, the 2012-2013 carrier had a duty to defend the insured. The court also rejected the argument that its conclusion that the 2013-2014 insurer had a duty to defend negated any defense obligation on the part of the 2012-2013 carrier. The court explained that the analysis as to the carriers’ defense obligations were to be completed separately, and each was to be resolved in favor of the insured.