In the following guest post, Chris Quirk, a wholesale broker at ARC Excess & Surplus, now part of CRC Group, examines issues surrounding the provision of notice of circumstances that may give rise to a claim in connection with a claims made and reported insurance policy. Our thanks to Chris for allowing us to publish his article as a guest post on this site. Here is Chris’s article.
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In 193 BC, the Roman playwright Titus Maccius Plautus wrote: “Semper tu scito, flamma fumo est proxima,” which translates into English as: “Always remember, fire is very near to smoke.” In the management and professional liability context, the maxim is apt: potential claims, given enough time, often develop into formal claims.
How that reality intersects with an insured’s claims-made and reported policy can be a perilous source of coverage forfeiture for insureds who recognize that trouble may be brewing, but whose communications have not yet risen to the level of a formal claim. These insureds must pay close attention to whether, when, and how that information is communicated to insurers. Failure to navigate this process carefully may result in a coverage denial born not of the absence of merit, but of defects in procedure.
Broadly stated, the danger commonly appears in two forms:
- The insured elects to file a Notice of Circumstances (NOC), but does so imperfectly; or
- The insured fails to file a Notice of Circumstances when doing so is effectively mandatory.
A. Filing an Imperfect Notice of Circumstances
In Evanston Ins. Co. v. Frederick, 2025 U.S. Dist. LEXIS 142026, individual insureds found themselves without coverage even though a notice of circumstances had been filed and accepted by the insurer.
Evanston issued a D&O/EPLI policy to HRC Fertility for the policy period 8/29/2018–8/29/2019. On 3/14/2019, HRC Fertility became aware that a former employee (who had been terminated) might assert wrongful termination claims. HRC Fertility promptly submitted a notice of circumstances to Evanston, and Evanston accepted that notice. In the notice, however, only HRC Fertility was identified as the subject of the potential claim.
The policy expired on 8/29/2019, and the 90-day post-policy reporting period expired on 11/27/2019, with no claim having been made. On 12/4/2020, approximately one year after the end of the reporting period, the former employee filed a wrongful termination action naming HRC Fertility and several individual defendants. The claim was applied to the expired 18-19 policy through the previously accepted NOC.
Evanston agreed to provide coverage for HRC Fertility under the 2018–2019 policy but denied coverage for the individual defendants on a late-notice theory, notwithstanding that they were employees of HRC Fertility and otherwise qualified as insureds under the policy. In the ensuing declaratory judgment action, the U.S. District Court agreed with Evanston: the individual defendants were not properly noticed to the carrier until more than a year after the 90-day post-policy reporting period had expired, and where therefore excluded from coverage.
At first glance, the result appears puzzling. HRC Fertility had provided timely notice; Evanston had accepted it; and the individuals were insureds under the policy. Why, then, was coverage denied? The answer lies in HRC Fertility’s imperfect compliance with the policy’s notice-of-circumstances provision.
Evanston’s D&O/EPLI policy contained the following notice-of-circumstances provision (edited for brevity):
“With respect to any purchased Coverage Part, if … the Insured becomes aware of any circumstance that could give rise to a Claim against the Insured and gives written notice of such circumstance containing the information listed below to the Insurer … then any Claim subsequently arising therefrom shall be deemed … to have been first made on the date on which such written notice is received by the Insurer.
It is a condition precedent to the coverage afforded by this SECTION V B. that such written notice to the Insurer contain the following information:
- A description and date of the Wrongful Act which could be alleged in the potential Claim;
- The injury or damage which has or may result from such Wrongful Act;
- The identity of the Insureds who may be the subject of the potential Claim;
- The identity of potential claimants; and
- The manner and time in which the Insureds first became aware of such circumstance or Wrongful Act.”
This provision imposes five specific requirements. Critically, item 3 requires the insured to identify and list the insureds who may be the subject of the potential claim, that is, the potential defendants.
The HRC Fertility NOC identified only HRC Fertility as a potential defendant under item 3. The individual employees were not identified as potential defendants in response to that requirement. The first time they were presented to Evanston as defendants, potential or actual, was when the complaint was filed on 12/4/2020. Because they were omitted from the NOC, the individual defendants did not benefit from the NOC’s claims-made filing date of 3/14/2019, and were instead treated as first noticed on 12/4/2020—well after the reporting window had closed.
In practical terms, the individuals had a claims-made date of 12/4/2020 under a policy whose post-policy reporting period had expired on 11/27/2019. The fact that they otherwise qualified as insureds did not cure the notice defect. Because they were not listed in the NOC as potential defendants as required by item 3, they were not entitled to the 3/14/2019 claims-made filing date.
As the court explained, the burden rests with the insured to comply with the policy’s reporting requirements; the insurer has no duty to supplement an incomplete notice or infer what was not properly reported:
“Moreover, [w]ithout having received the written notice which would trigger coverage under [this] provision, the insurer had no duty to inquire on its own of circumstances that might give rise to a claim, and it cannot be charged with constructive notice of circumstances it had no duty to investigate. … Because the evidence shows the Physician Defendants did not comply with the Policy’s reporting requirements, the Physician Defendants cannot receive coverage. “
It is important to recognize that HRC Fertility’s predicament was, in a meaningful sense, self-inflicted.
HRC was not obligated to file a notice of circumstances under this policy. Had it declined to file an NOC and instead reported the claim when it was actually made in December 2020, the then-current policy would have responded, and all insureds (including the individual defendants) would have been eligible for coverage under that in-force policy (subject, of course, to its terms and exclusions).
By electing to file an NOC, however, HRC Fertility voluntarily subjected itself to a technical procedure that carried strict conditions, among them, the requirement to identify all insureds who might be the subject of the potential claim. Once Evanston accepted the NOC, the later claim became tethered to the earlier policy. The failure to identify the individuals as potential defendants in the NOC, as the policy required, prevented them from having a claims-made filing date within the policy’s reporting period. Subsequently, they were excluded from coverage due to late notice.
This is a recurring lesson in claims-made coverage: noncompliance with policy conditions is a common cause of coverage denials. The insured elected to invoke the optional notice of circumstances clause, failed to comply with it precisely, and therefore the individual insureds forfeited coverage.
B. Failing to File an NOC When It Becomes Mandatory
Although NOCs are often optional, there are situations in which they become effectively mandatory. In those circumstances, insureds must handle notice requirements with exceptional care.
1. Policies with a mandatory NOC clause
Some policy forms use mandatory language. Instead of an optional “if … then” clause, they provide that if the insured becomes aware of circumstances that may give rise to a claim, the insured must provide notice before expiration. Clauses of this type operate like tripwires: if overlooked or mishandled, they will cause coverage forfeiture on a later date. Courts, however, will generally enforce them as written.
2. Warranties of no known circumstances on renewal
Some carriers require insureds to sign renewal warranties stating that they are unaware of any circumstances that may give rise to a claim. This can convert an otherwise optional NOC clause into a de facto mandatory one.
- If the insured is aware of a circumstance but signs a warranty stating otherwise, coverage for a future claim may be lost due to breach of warranty, even if the NOC clause itself is nominally optional.
- In practice, this creates the same functional result as a mandatory notice requirement: the insured must either (a) disclose and notice the circumstance, or (b) risk losing coverage later.
3. Moving coverage to a new carrier
Warranty issues arise particularly often when changing insurers. In D&O placements, an experienced broker may be able to negotiate away warranties in favorable markets, but for E&O and cyber placements, incoming carriers are often less willing to waive them.
When moving to a new carrier, especially where new applications and warranties are required as pre-bind or post-bind subjectivities, insureds must carefully evaluate what they are warranting, and whether any potential circumstances should be noticed to the expiring policy before binding the replacement coverage.
Failure to properly navigate switching carriers led to coverage forfeiture in Ironshore Specialty Ins. Co. v. Callister, 2017 U.S. Dist. LEXIS 210973.
In 2010, insured law firm Callister, Nebeker & McCullough (“Callister”) performed legal services for its client Hoyt Stephenson with respect to an ERISA-related transaction. From 2009 to 2013, and during the period of the alleged malpractice, Callister carried E&O coverage through Ironshore. Beginning in 2013, Callister was insured by Old Republic.
When Callister switched carriers to Old Republic in 2013, it completed a new business application containing warranty questions. In those warranties, Callister disclosed a potential matter. As the district court recounted:
“Question 30(a) asks whether the applicant knows “of any acts, errors, omissions or circumstances that could reasonably give rise to a professional liability claim against the applicant.” When completing its application, Callister answered this question “Yes” and referred to an attached explanation that listed the “Issue/Claimant” as “National Finance Systems/Hoyt Stephensen” and noted it was “Active.” Callister wrote in the summary that Ironshore (its carrier at the time) “has not been notified as no claim has been asserted against the Firm” and that the matter involved an “[a]lleged error in documenting ERISA-related transaction.” Question 30(b) asks whether the above-listed matter had been reported to the applicant’s current or former insurer. Callister answered “Yes” and stated, “Concurrently, or immediately succeeding this application, written notice will be given to the current insurer.” Beneath Question 30(b) is a prominent disclaimer that reads, in bold, “NOTICE: THE POLICY BEING APPLIED FOR WILL NOT PROVIDE COVERAGE FOR ANY CLAIM ARISING OUT OF THE MATTERS REQUIRED TO BE LISTED IN 30(a) AND 30(b) ABOVE.”
In February 2014, Hoyt Stephensen filed suit against Callister. Both Ironshore and Old Republic denied the claim.
With respect to Ironshore, Callister had not formally submitted a notice of circumstances in accordance with the policy; instead, it had disclosed the potential claim only through renewal applications. The district court upheld Ironshore’s denial, emphasizing strict compliance with the policy’s notice requirements:
“The primary dispute between Callister and Ironshore concerns whether Callister gave proper notice of the potential claim. Ironshore argues that Callister was required to strictly comply with the notice provision in the policy, which Callister does not dispute that it failed to do. … As the insured of a claims-made policy, Callister needed to strictly comply with the notice provision in the policy. Because it notified Ironshore of a potential claim only in renewal applications, and not in a formal notice of a potential claim, Callister has not strictly complied.”
With respect to Old Republic, coverage was barred by the application disclaimer language, which operated functionally as a prior-knowledge exclusion:
“Callister listed the “[a]lleged error in documenting ERISA-related transaction” in response to Question 30(a)’s prompt about “any acts, errors, omissions or circumstances that could reasonably give rise to a professional liability claim against the applicant. … Old Republic’s policy thus excludes the malpractice suit, and Old Republic does not have a duty to defend.”
The result is a classic “gap” scenario: the expiring carrier denied coverage because the insured failed to fully comply with the requirements of the expiring policy, while the incoming carrier denied coverage because the matter was disclosed and expressly carved out in the application process.
When filing a notice of circumstance becomes mandatory, whether by policy wording or warranty, judicious compliance with the policy’s notice of circumstances clause is imperative.
Benefits and Drawbacks of Filing an NOC
Electing to file an NOC when not required is not a trivial decision. Insureds should weigh the potential advantages against the significant technical and administrative risks the election creates.
Potential benefits
- Preservation of future limits
If a claim materializes later, it will erode the limits of the earlier policy (when the NOC was filed) rather than the then-current policy. - Potential access to superior terms and conditions
If the policy in force when the NOC is filed has broader coverage than a later policy (for example, fewer exclusions, broader definitions, or more favorable sublimits), a future claim tied back through the NOC may be governed by the superior wording. The inverse is equally true: if the later policy is broader, filing the NOC may tether the claim to a more restrictive form. This can be employed strategically should an Insured anticipate that its future coverage will materially worsen. - Facilitating a more competitive renewal or remarketing process during an ongoing circumstance
Filing a NOC on an existing policy for an ongoing circumstance may invite superior renewal options from competing insurers. A good example is a publicly traded company facing difficult renewal conditions (for example, after a significant stock-price decline). Incumbent insurers may seek higher premiums or tighter terms due to perceived heightened claim risk, while competing insurers may hesitate to quote aggressively for fear of inheriting that exposure. If the insured notices the circumstance (in the example case, the stock decline) to the incumbent carrier(s) before expiration, competing insurers may be more willing to quote competitively because expiring insurers will be stuck holding the bag should the circumstance lead to a claim. This approach can, however, damage relationships with insurers and should be considered carefully.
Material drawbacks
- Strict compliance risk
If the insured fails to satisfy every element of the notice requirement, coverage may be jeopardized or lost. That is the central lesson of the cases discussed above. Because filing an NOC is often optional, the insured voluntarily assumes this strict-compliance risk. Absent a clear and concrete benefit, there is a substantial argument against filing. - Administrative burden and the need for acceptance letters
Filing an NOC creates administrative obligations. The insured should obtain both (1) an acknowledgment of receipt and, more importantly, (2) a written letter of acceptance confirming that the filing qualifies as a valid notice of circumstances under the policy. If the file does not contain a letter of acceptance, the insured should not assume the notice is effective.
This matters because many D&O/E&O policies contain prior notice or “matters noticed” exclusions. If an insured submits an NOC that is never formally accepted, a coverage gap can result: the prior policy may not respond because the carrier never accepted the NOC, while the subsequent policy may not respond because the matter was (or was attempted to be) noticed under a prior policy and is therefore excluded.
In that sense, filing an NOC can expose insureds to technical and administrative landmines that produce a worse outcome than doing nothing.
Conclusion
Filing a notice of circumstances under a claims-made policy is not a ministerial act; it is a technically demanding, high-stakes coverage election. It may confer real advantages, but it also introduces substantial legal and administrative risk. Courts routinely decline to cure procedural defects in order to rescue insureds from coverage denials.
Where NOCs are mandatory, whether by policy language, or by warranty, insureds must strictly comply with policy requirements and obtain written acknowledgment and acceptance from the insurer. When NOCs require insureds to predict potential defendants of a future claim, as it did in HRC Fertility’s case, the only way to strictly comply would be to submit a laundry list of names for every person or legal entity connected to the matter and submit them as potential defendants. Where NOCs are optional, insureds should consider carefully whether the anticipated benefit justifies the added risk.