Prior Notice Exclusion

In July, the Seventh Circuit issued a unanimous opinion in the case of Emmis Communications Corp. v. Illinois National Insurance Company, in which the court ruled that the policyholder’s provision of notice to the previous carrier precluded coverage for an underlying claim under the later of two D&O insurance policies. The court’s ruling was widely criticized (including also on this site). The policyholder, Emmis, filed a motion for panel rehearing or rehearing en banc. And then on August 21, 2019, the appeals court panel did something very unusual — the court withdrew its July opinion, in which it had reversed the district court, and substituted an order affirming the district court’s ruling. As discussed below, this odd and inexplicable sequence of events raises some serious questions. The Seventh Circuit panel’s August 21, 2019 order can be found here.   
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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?

Maybe not.
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