Notice of Violation Alleging Refusal to Tender Benefits Owed Constitutes a “Claim”

The United States District Court for the Middle District of Florida, applying Florida law, has held that a civil remedy notice of insurer violation made pursuant to a bad-faith statute and alleging an insurer’s failure to tender benefits owed constitutes a “claim” made against the insurer.  Windhaven Managers, Inc. v. Chartis Specialty Ins. Co., 2014 WL 6674609 (M.D. Fla. Nov. 24, 2014).

An insurer issued a claims-made professional liability policy to an automobile insurer for the policy period of May 1, 2011 to May 1, 2012.  The policy defined a “claim” as a “written demand for monetary damages” or a “judicial … proceeding in which monetary damages are sought.”  The policy deemed a claim first made against the insured when “written notice of such [c]laim is received by the [i]nsured, or by the [insurer], whichever comes first.”

In December 2009, after suffering an injury in a car accident, the underlying claimant sued the automobile insurer, alleging that she was entitled to the motor vehicle policy’s limit.  That same month, the underlying claimant filed a civil remedy notice of insurer violation (CRN) pursuant to Florida’s bad-faith statute, alleging that her automobile insurer had refused to settle her claim in bad faith and refused to tender benefits owed under her policy.  On July 14, 2011, the underlying claimant filed a complaint against the automobile insurer for bad faith failure to settle.  On August 26, 2011, the automobile insurer sent its professional-liability insurer notice of a “possible claim” made against it.  The professional-liability insurer denied coverage, arguing that, inter alia, the claim was not first made during the claims-made policy period.

In the coverage litigation that followed, the court held that, because the CRN detailed the allegations behind the underlying bad-faith failure to settle action and because it demanded payment of benefits owed under the automobile insurance policy, the CRN constituted a “written demand for monetary damages” and hence a “claim” first made in 2009, before the applicable policy period.  In the court’s view, “[b]ecause this [claim] was outside the policy period, no coverage exist[ed] under the policy.”