No Coverage Under Claims-Made-and-Reported Policies for Claims Not Timely Reported
In an unpublished decision applying Kentucky law, a federal court has held that a matter not timely reported under one of a series of consecutive claims-made-and-reported policies does not implicate coverage. C.A. Jones Mgmt. Group, LLC, v. Scottsdale Indem. Co., No. 5:13-cv-173 (W.D. Ky. Mar. 25, 2015).
The insurer issued consecutive D&O liability policies to the insured for several one-year periods. The policies provided coverage for claims first made during the policy period of each respective policy. Each policy’s notification provision required that notice of a claim be given within 60 days following the end of the policy period in which the claim was made. The insured sought coverage for a claim of which it gave the insurer notice more than 60 days after the expiration of the policy period in which the claim was made. The insurer denied coverage on the basis that the claim was not reported during the policy period in which it was made or the applicable grace period.
Relying on an unpublished opinion of an intermediate Kentucky appellate court, the court initially determined that the insured timely reported the claims because, according to the court, the renewal of the relevant policy resulted in seamless coverage for the insured. The insurer then filed a motion for reconsideration. In granting the insurer’s motion for reconsideration, the court determined that applying the Kentucky appellate court’s reasoning would result in “manifest injustice” because it would “generat[e] a long and unbargained-for tail of liability exposure, the avoidance of which forms the conceptual framework for claims-based coverage in the first place.” The court concluded that the Kentucky Supreme Court more likely would follow the dissenting opinion of the intermediate appellate court opinion, and therefore held that the insured must satisfy the reporting requirements of the applicable policy notwithstanding that it purchased several consecutive claims-made policies.