Under claims made insurance policies, policyholders must provide timely notice of claim to their insurers in order to trigger coverage. Late notice is among the most common reasons that insurers deny coverage for claims. In order to try to avoid a coverage denial for late notice, policyholders have tried to argue that late notice should not preclude coverage where the policyholder renewed the coverage and where successive policies with the same insurer are in place. In a recent decision, an Ohio appellate court, applying Ohio law, rejected a policyholder’s attempt to rely on this kind of continuity of coverage argument. The court’s decision raises some interesting issues, as discussed below.
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Readers know that it doesn’t take much to get me up on my hobby horse about insurers trying to deny coverage based on the late provision of notice. In general, I am against a mere procedural fault causing a complete coverage forfeiture. Every now and then though there is a case where the policyholder’s lack of diligence makes the case against the insurer’s coverage defense very tough.  A recent decision out of the District of Minnesota provides an example where the extent and nature of the policyholder’s delay in providing notice of claim made the argument in favor of coverage very difficult. But while the insurer’s denial of coverage based on policyholder’s late provision of notice arguably was justifiable in the case, the circumstances involved still present some important lessons both about notice of claim and about the policyholder’s obligations under the policy.
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Under the so-called “notice-prejudice Rule” applicable in some jurisdictions, insurers can deny coverage for claims based on the policyholder’s late provision of notice of claim only in the event that the late notice materially prejudiced the insurer. In a recent decision, the California Supreme Court, ruling on questions certified to the Court from the Ninth Circuit, held that the notice-prejudice rule represents a “fundamental public policy” under California law potentially sufficient to override the choice of law provision in the parties’ insurance contract. The Court also held that the notice-prejudice rule also applies to the consent to incur expense provisions in first-party insurance policies. As discussed below, there are a number of interesting aspects to the court’s ruling. The California Supreme Court’s August 29, 2019 decision in Pitzer College v. Indian Harbor Insurance Company can be found here.

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John F. McCarrick

In a recent post, I expressed a variety of opinions about claims notice issues arising in connection with D&O insurance renewals. Apparently, my commentary and proposals triggered enough of a reaction from my good friend John McCarrick that he felt compelled to write a response. John is a partner at the White & Williams law firm and chair of the firm’s Financial Lines Group. John is also one of the most widely respected professionals in the D&O insurance industry, and so I am pleased he took the time to write a response to my article and pleased to publish his response here. Here is John’s response.
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As anyone involved in the world of D&O insurance knows, a frequently recurring coverage issue is the question of whether or not the insured has provided timely notice of claim as required by the policy. These kinds of  disputes takes a variety of forms, but one particular recurring variation involves the question whether or not the policyholder has satisfied the policy’s notice requirements when a claim is made against the policyholder during the policy period of one policy but the policyholder does not provide notice until the policy period of a subsequent renewal policy. That was the issue in a case recently decided by the Sixth Circuit Court of Appeals, in which the appellate court affirmed the district court’s holding that the policyholder’s provision of notice during the renewal policy of a claim made during a prior policy period did not satisfy the applicable notice requirements. Because this is a recurring claims issue, I have some thoughts and suggestions about this situation, below. The Sixth Circuit’s May 31, 2019 opinion in the case can be found here.
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Regular readers know that I frequently write about insurance coverage disputes in which insurers contend that coverage is precluded due to the policyholders’ alleged late provision of notice. All too often, the policyholders end up without coverage as a result of the late notice allegations. In an interesting (albeit confusingly written) decision, a Michigan intermediate appellate court upheld a trial court’s rejection of a professional liability insurer’s late notice argument, finding that in fact the policyholder had provided timely notice of the claim ultimately in dispute, and therefore that the insurer was not entitled to recoup amounts the insurer incurred in defending and settling an arbitration that had been filed against the policyholder. The ruling highlights the fact that notice timeliness disputes often are factually complicated and that careful consideration of the applicable facts can sometimes confirm that a policyholder did in fact comply with the notice requirements. The Michigan Court of Appeals (Oakland Circuit)’s February 26, 2019 opinion can be found here.
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When most people think of liability insurance, they think about the insurer’s payment obligations. But policyholders have obligations under liability insurance policies, too. Among the most important policyholder obligation is the requirement to provide timely notice of claim. The failure to provide timely notice can entirely preclude coverage, as is illustrated in a ruling in a recent coverage dispute arising out of an underlying False Claims Act claim. As discussed below, there were a number of circumstances involved in the underlying claim that the policyholder argued excused or at least explained its late provision of notice. However, the court rejected these arguments and held the late notice was not excused and that coverage was precluded. The February 12, 2019 order in the case by Central District of California Judge Stephen V. Wilson can be found here.
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Claims made policies provide coverage for claims first made during the policy period, but only if the insurer is provided with timely notice of claim. Most claims made policies allow policyholders to provide insurers with a notice of circumstances that may give rise to a claim in the future, in order to make the date of the notice of circumstances as the claims made date for any future claims. A recent Sixth Circuit considered a situation in which a policyholder attempted to provide notice of circumstances, even though, the court later concluded, a claim had already been made. The appellate court concluded that because the policyholder’s notice omitted the circumstance the court considered to represent a claim, the attempted notice was insufficient to provide notice of the actual claim. The court’s decisions raises questions about policyholder’s notice obligations under the policy. The Sixth Circuit’s July 10, 2018 decision can be found here.
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Claims made insurance policies provide coverage for claims first made during the policy period. So if the claim is made during the policy period, there’s coverage, right? Not so fast; there’s a catch. Under most claims made policies, the claim also has to be reported during the policy period or within a short period after the policy period ends. In many jurisdictions, the insurer can deny coverage for the late notice even if the delay did not prejudice the insurer in any way. The policy’s notice clause operates as a “Mother May I” provision –  even though you paid your premium, you don’t get coverage unless you say “Mother May I” and provide notice within the time limits. The problem is that policyholders muff the notice requirements all the time. We all know that. Late notice happens all the time. As a result, policyholders often get no coverage for the claims but the insurers keep the premium.
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