Policyholders and their representatives have long pushed to have the definition of “claim” in professional and management liability insurance policies expanded, to bring an increasingly larger kinds of circumstances within the policies’ coverage. However, there are consequences when more kinds of circumstances constitute a “claim,” such as, for example, with respect to the claims-made date and notice obligations. A recent insurance coverage ruling by a New York state court interpreting a lawyers’ professional liability insurance policy underscores how an expanded definition of the term “claim” — in this case, pertaining to a request to toll the statute – can affect the availability of coverage. The court, applying New York law, determined that a tolling request prior to the policy period met the applicable policy’s definition of claim, and therefore, because the claim was first made before the policy incepted, the subsequent claim during the policy period was not covered.Continue Reading Tolling Agreement Prior to the Policy Period Precludes Coverage for Later Claim
In a June 23, 2021 opinion (here), a Delaware Superior Court Judge held that a subsequent opt-out action is interrelated with the prior securities class action lawsuit; that the opt-out action claim is deemed made at the time of class action suit’s filing; and therefore that the D&O insurers whose policies were in force at the time the opt-out action was filed do not have coverage for the opt-out action. The court’s conclusion that an opt-out action is interrelated with the underlying class action lawsuit arguably is unremarkable, but, as discussed below, there are features of this dispute and of the court’s ruling that make the court’s decision noteworthy.
Continue Reading Opt-Out Action Held Interrelated with Underlying Securities Class Action Suit
In a recent decision in an insurance coverage dispute, a federal court applying Puerto Rico law concluded that there was no coverage under a management liability insurance policy for a discrimination claim that had first been made prior to the policy period of the claims made policy at issue, and that notice of the claim was untimely as well. The court’s conclusion is in a sense unremarkable. What is worth considering about the ruling is how often these same problems recur, as discussed below. The District of Puerto Rico’s May 28, 2020 opinion can be found here. A June 17, 2020 post on the Wiley law firm’s Executive Summary Blog about the decision can be found here.
Continue Reading No Coverage for Claim First Made Prior to the Policy Period of a Claims Made Policy
Let’s say your client has been served with a new D&O lawsuit. Based on what you know about the events that led up to the lawsuit, you are genuinely unsure whether the claim was first made earlier, or not until the lawsuit was filed. Just to complicate things further, during the last renewal cycle, the client moved its D&O coverage from one carrier to another carrier, and some of the events in the lawsuit lead-up occurred during the prior policy period. Just notice both carriers, right? That would seem to be the prudent thing to do, especially given the uncertainty about the claims made date, right?
As I have noted in earlier posts, questions of whether or not two sets of circumstances are interrelated for purposes of determining insurance coverage can be vexing; at a minimum, they are always fact-intense. In a recent decision, the Tenth Circuit examined the question of whether or not a later civil lawsuit was interrelated with an earlier SEC investigation, and therefore deemed first made at the earlier date (prior to the policy period). The appellate court affirmed the district court’s conclusion that the lawsuit was interrelated with the investigation, precluding coverage for the claim. As discussed below, while the appellate court’s conclusion arguably is unremarkable, it still does highlight the elusive problems involved with relatedness issues. The Tenth Circuit’s September 10, 2018 decision in the case can be found here.
Continue Reading Tenth Circuit: Later Lawsuit Interrelated with Earlier SEC Investigation
Most professional liability insurance policies are written on a claims-made basis – that is, they cover only claims first made during the applicable policy period. A recurring issue under these kinds of policies is the question of when a claim was first made. This question can be particularly complicated if there were pre-policy period communications about a subject that subsequently results in a lawsuit. The question is whether the claim was first made at the time of the prior communications or at the time of the subsequent lawsuit. Two recent cases reached different conclusions about whether not pre-policy period communications represented a claim. As discussed below, these diverging decisions raise interesting issues.
Continue Reading Claims Made Policies: The Problem of Pre-Policy Period Dispute Communications
In an interesting June 23, 2017 opinion in a case raising a host of claims made date, notice of potential claims, and notice of claims issues, Western District of Tennessee Judge Sheryl Lipman, applying Tennessee law, held that a purported notice to insurers of a potential claim was insufficient to provide notice of an actual claim, therefore concluding that the defendant insurers did not have to reimburse the policyholder for its $212.5 million FHA loan violation settlement with the DOJ. The opinion provides interesting insights into the meaning of the policy term “Claim,” as well as into what is required in order to provide sufficient notice of claim.
Continue Reading Purported Notice of Potential Claim Held Insufficient to Provide Notice of Actual Claim
A recurring circumstance fraught with peril for policyholders is one in which the policyholder receives a demand letter in one policy period and then receives a related lawsuit in a subsequent policy period. The fact that these events straddle two policy periods creates potential for possible coverage preclusive issues having to do with Notice of Claim and Claims Made Date issues. In an April 13, 2017 order (here), Judge James Robart, applying the law of Washington State, held that because Zillow failed to give timely notice of a demand letter it received in the prior policy period, there was no coverage for the later lawsuit filed against Zillow in the subsequent policy period, because the claim had first been made at the time of the demand. As discussed below, this case and Judge Robart’s analysis raises some interesting issues.
Continue Reading Late Notice and Claims Made Date Issues
In a June 6, 2016 opinion (here), Middle District of Florida Judge Sheri Polster Chappell, applying Florida law, held that subsequent claims filed in 2011 and 2012 were interrelated with claims first made in 2008, and therefore deemed made at the time of the initial claim. Because the initial claim was filed before the relevant policy incepted, there is, Judge Chappell concluded, no coverage for the claims under the relevant policy.
In reaching these conclusions, Judge Chappell rejected the policyholder’s argument that the policy’s related claim provision conflicted with the policy’s prior and pending litigation provision (which had a May 2003 date), and therefore should be construed against the insurer and disregarded in light of the prior and pending litigation date. Judge Chappell’s opinion quite sensibly and correctly rejects arguments that other courts (applying different jurisdiction’s law) have accepted, as discussed below. A July 22, 2016 post on the Wiley Rein law firm’s Executive Summary Blog about Judge Chappell’s opinion can be found here.
Continue Reading D&O Insurance: Prior and Pending Litigation Provisions Do Not Undercut Interrelated Claims Provision
Many D&O insurance policies contain specific prior litigation exclusions precluding coverage for claims made during the policy year related to proceedings commenced prior to the policy inception. A question that can arise is the issue of what type of prior proceedings or actions triggers this exclusion. The Second Circuit recently considered whether a Maryland attorney general’s office’s letter threatening that it “may” bring an enforcement action triggered an exclusion precluding coverage for a claim “involving” any prior “demand, suit or other proceeding.” In a March 7, 2016 summary order (here), the appellate court, applying New York law, affirmed the district court’s ruling that the AG’s prior letter was a “demand,” and therefore that the policy unambiguously precluded coverage for the insured’s defense fees incurred in a later U.S. Department of Justice action.
Continue Reading D&O Insurance: Regulator’s Previous Threat to File Action Triggers Prior Litigation Exclusion