No E&O Coverage Where Insured Failed to Report Claim During Policy Period When It Was First Made

The Appellate Court of Illinois, applying Illinois law, has held that an insurer has no duty to defend or indemnify an insurance agent under an errors and omissions liability policy where the agent failed to provide notice of the claim during the policy period in which the claim was first made.  James River Ins. Co. v. Timcal, Inc., 2017 WL 2852812 (Ill. App. June 30, 2017).

The insurance agent received a letter from an insurer client in July 2012, alleging that the insurance agent had breached its duty as an insurance agent and that the insurer would seek to recover damages.  The insurance agent failed to notify its E&O insurer until April 2013, after the policy had renewed.  The E&O insurer filed a declaratory judgment action against the insurance agent, seeking a judgment that it had no duty to defend or indemnify the agent under either the policy in effect when the claim was first made or the renewal policy in effect when notice was ultimately given because the agent failed to provide timely notice of a claim.  The trial court granted summary judgment for the insurer, and the agent appealed.

On appeal, the court held that the July 2012 letter unambiguously constituted a “written demand for monetary relief” and therefore a claim under the policy even though the letter did not specify a settlement amount or the total damages claimed.  Further, the court held that the insurance agent unambiguously failed to timely report the claim to its insurer, rejecting the agent’s argument that notice was not untimely if provided during the renewal policy period.  The court instead concluded that renewals cannot affect the reporting period for claims-made-and-reported policies such as the one at issue.