No Coverage for Criminal Investigation Where Claim Was Not Reported During Applicable Notice Period

The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has affirmed a ruling that no coverage was available in connection with a criminal investigation where the insured failed to timely report a sealed affidavit that constituted a “claim” under the language of the policy at issue.  Crowley Maritime Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2019 WL 3294003 (11th Cir. July 23, 2019).

In 2008, FBI agents executed a search warrant on a shipping company.  The day before executing the search warrant, the FBI delivered a sealed affidavit to a federal magistrate judge.  Although the affidavit was used to support a finding that the government had probable cause to execute the search, the search warrant did not reveal the content of the affidavit.  A week after the search warrant was executed, the shipping company purported to provide notice to its D&O insurer of a “claim” under a claims-made run-off policy that permitted the company to report claims until 2013.  The insurer took the position that no “claim” had been made because the shipping company had not furnished a writing identifying an executive as a target of the criminal investigation, but it agreed to accept the 2008 materials as notice of circumstances that may give rise to a claim.  The shipping company instituted a coverage arbitration on the issue of whether the investigation was a “claim” as defined by the policy, and the insurer prevailed on the grounds that no “claim” had been made while the affidavit remained under seal.

In 2015, following the expiration of the policy’s run-off period, the affidavit was unsealed and reported to the insurer.  The affidavit included detailed evidence identifying the executive as a target of the investigation.  The insurer and the shipping company agreed that the affidavit was a “claim,” because the D&O policy defined “claim” to include a criminal investigation of an “Insured Person once such Insured Person is identified in writing” as a person against whom a criminal proceeding may be commenced.  However, the parties disagreed as to when that claim was first made.  The insured argued that the claim was first made in 2008, when the affidavit was filed, while the insurer argued that the claim was first made in 2015, when the affidavit was unsealed and its contents became known.

In the ensuing coverage litigation, the court of appeals found that it did not need to determine the date that the claim was first made.  Rather, the court held that the shipping company was collaterally estopped from arguing that it provided notice of a claim in 2008 because the arbitration panel previously had decided that no claim had been reported to the insurer in 2008.  The court also held that the company’s 2015 notice to the insurer of the unsealed affidavit did not constitute effective notice of a claim because the deadline for reporting claims under the run-off policy expired in 2013.  Finally, the court of appeals determined that the shipping company had waived any argument on appeal that the notice provided in 2008 constituted a “notice of circumstances,” such that a later claim would “relate back” to that original notice.  In light of the insured’s waiver of a relation-back argument, the court “express[ed] no opinion” on the merits of that argument.

Wiley Executive Summary

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