No Coverage For Claims Made Outside Of Claims-Made Policy Period

Thomas Benjamin Boley | Wiley Rein

The United States District Court for the Northern District of Illinois, applying Illinois law, has granted a legal professional liability insurer’s motion for summary judgment, holding that its claims-made policy did not apply to various claims that were first made either before or after the policy period. Twin City Fire Ins. Co. v. Law Office of John S. Xydakis, P.C., 2023 WL 2572468 (N.D. Ill. Mar. 20, 2023).

The insured attorney bought a claims-made legal malpractice insurance policy that had a policy period of January 26, 2017, to January 26, 2018, and a retroactive date of January 26, 2016. The policy, which the insured did not renew, had a 60-day automatic extended reporting period. The policy gave the insured the right to purchase a longer extended reporting period, but the insured did not exercise the option.

Three claims were made against the attorney: (1) a lawsuit alleging failure to pay expert witness fees in 2012, (2) judicial sanctions levied in 2019 against the attorney and his client, and (3) a 2019 lawsuit by one of the law firm’s former employees alleging legal malpractice, breach of contract, and breach of fiduciary duty. The attorney sought coverage for these claims. The insurer denied coverage because the suits were made outside the policy period and/or involved acts before the retroactive date.

The court granted the insurer’s motion for summary judgment. The court declared that the insurer owed no coverage because the first lawsuit involved acts occurring prior to the retroactive date, and because the 2019 sanctions and lawsuit occurred after the policy period and automatic extended reporting period expired.

The insured raised a peripheral issue, arguing that a genuine issue of material fact existed as to whether the insurer was estopped from denying coverage. The attorney argued that, by regulation, the insurer should have offered at least a 12-month extended reporting period and that the insurer failed to notify him that the policy would be non-renewed. The court rejected both arguments, noting that the policy offered the insured the right to purchase a longer extended reporting period and that the insurer provided a nonrenewal notice to the insured’s broker. The court also rejected the argument on a legal basis, observing that “estoppel may not be used to create or extend coverage where none exists.”


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Washington Supreme Court Holds Certain Hybrid Occurrence/Claims-Made and Reported Policies May Violate Public Policy

Campbell Stuart | Cozen O’Connor

“We cannot enforce insurance provisions that render coverage so narrow it is illusory.”[1]  The Washington Supreme Court used this reasoning to hold that a contractor’s commercial general liability policy was unenforceable where it required that an “occurrence” occur and a claim be made and reported to the insurer in the same year.

According to the Court, although parties to insurance contracts generally should have the freedom to contract, the Washington Legislature has mandated that contractors must bear financial responsibility for the injuries their negligence may cause, and has further dictated that insurance is the preferable method to comply with its mandate.[2]  Though the Legislature has not required that insurance purchased to comply with its mandate be issued on an occurrence basis, nor required that policies issued on a claims-made basis provide prospective or retroactive coverage, the Court held that “insurers should not issue policies that essentially cause contractors to default on their statutorily mandated financial responsibility.”[3]

On October 31, 2019, an employee of Baker & Son (“Baker”) allegedly dropped a two-by-four on another contractor  during renovations to a Long Beach, Washington motel.  Nearly a year later, on September 23, 2020, Baker received notice of a wrongful death claim.  Two days later, Baker notified its insurer, Preferred Contractors Insurance Company (PCIC), of the claim.  Ms. Cox filed her wrongful death claim in Pacific County Superior Court on November 12, 2020.  After agreeing to defend subject to a reservation of rights, PCIC brought a declaratory judgment action in the United States District Court for the Western District of Washington, which ultimately certified the following question to the Washington Supreme Court:

When a contractor’s liability insurance policy provides only coverage for “occurrences” and resulting “claims-made and reported” that take place within the same one-year policy period, and provides no prospective or retroactive coverage, do these requirements together violate Washington public policy and render either the “occurrence” or “claims-made and reported” provisions unenforceable?[4]

PCIC had issued two consecutive CGL policies to Baker.  Although Baker’s policies contained language “typical of an occurrence policy,” namely an insuring agreement which provided coverage only if “bodily injury” or “property damage” was caused by an “occurrence” that first takes place or begins during the “policy period,” each was also subject to the terms of a “claims-made and reported limitation endorsement,” which restricted coverage to losses that occur and are reported to PCIC within the applicable one-year policy period.[5]  Neither policy contained a provision for retroactive or prospective coverage.

According to PCIC, neither of Baker’s policies provided coverage.  The 2019 policy did not provide coverage because the claim was not first made and reported within that policy period, and the 2020 policy did not provide coverage because both the “occurrence” and the bodily injury giving rise to the claim occurred prior to its inception date.

Nevertheless, the Washington Supreme Court held that such policies — which only provide coverage for “occurrences” and resulting “claims-made and reported” within the same one-year policy period, and which provide no prospective or retroactive coverage — are unenforceable based on Washington’s public policy.  The Court concluded that such “nonretroactive claims made policies combine the worst features of ‘occurrence’ and ‘claims made’ policies and the best of neither by providing neither retroactive nor prospective coverage found in those policies.”[6]

The insurance policies PCIC issued to Baker fail to provide prospective or retroactive coverage and create limited one-year windows for claims to occur and be reported to qualify for coverage.  Such restrictive coverage violates Washington’s public policy.[7]

Although the Supreme Court’s ruling applies to a narrow subset of  policies, it may be beneficial for insurers to consider whether coverage under any policy they issue may run afoul of Washington State’s financial responsibility laws.


[1] Preferred Contractors Ins. Co. v. Baker & Son Constr. Inc., 200 Wash. 2d 128, 143, 514 P.3d 1230, 1237 (2022).

[2] Id. at 143 (citing R.C.W. 18.27.050).

[3] Id.

[4] Id. at 134-5.

[5] Id. at 141.

[6] Id. at 142 (citing Sparks v. St. Paul Ins. Co., 100 N.J. 325, 339, 495 A.2d 406, 414 (1985)) (internal quotations omitted).

[7] Id. at 143.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Insurer Must Show Prejudice to Deny Coverage for Untimely Notice Under Claims-Made Policy

Mallory Meaney | Wiley Rein

The United States District Court for the Central District of California, applying California law, has held that an insurer must show prejudice to deny coverage for untimely notice under a claims-made policy. Triyar Hosp. Mgmt. LLC v. QBE Specialty Ins. Co., 2023 WL 2372049 (C.D. Cal Jan. 17, 2023). The court also held that the policy was not a claims-made-and-reported policy because timely reporting was not an element of or necessary condition precedent to coverage.

In October 2014, the insured hospitality company filed a lawsuit against another party seeking enforcement of an agreement. The court found for the other party and, on February 21, 2017, entered an order directing the insured to pay the other party $2.17 million in fees and costs. In September 2019, the court amended the 2017 order to include the individual owners of the insured as judgment debtors. The individual owners paid the judgment, which totaled $3.39 million after adding accrued interest, and the insured entity indemnified the owners for their payment.

The insured first notified its insurer of the 2017 order and 2019 order on November 30, 2020, and sought coverage from the insurer for its indemnification payment to the owners. The insurer denied coverage on the basis that notice of the 2017 order was untimely for the September 15, 2016 to November 15, 2017 policy period and that the 2019 order constituted a “Related Claim” for which notice was also untimely. The insured brought a lawsuit asserting that (1) the 2017 and 2019 orders were not “Claims” under the policy; (2) even if the orders were “Claims,” they were timely reported; and (3) the insurer must show prejudice to deny coverage if the Claims were not timely reported, and could not do so.

In the coverage litigation, the court first held that both the 2017 and 2019 orders were “written demand[s] for monetary or non-monetary relief against an Insured for a Wrongful Act” and therefore constituted “Claims” and “Related Claims” under the policy. The court also held that, because the 2017 and 2019 orders constituted a “Claim” first made against the insured during the 2016-2017 policy period, the insured’s November 30, 2020 notice to the insurer was untimely. Finally, the court rejected the insurer’s argument that the policy was a claims-made-and reported policy and, as such, the insurer need not show it was prejudiced in order to deny coverage based on the insured’s late reporting of the Claim. The court explained that the policy’s insuring agreement did not limit coverage to claims reported during the policy period and that the policy did not designate the reporting provision as an essential precondition to coverage. Accordingly, the policy properly was construed as a claims-made policy, under which the insurer was required to show that it had been prejudiced by the insured’s late notice in order to deny coverage on that basis.

The court also pointed out that the insurer had maintained from the outset that it would have denied coverage for the 2017 order even had it been timely reported because the insured had initiated the underlying complaint. The court reasoned that the insurer could show prejudice by demonstrating that, had it received timely notice, notwithstanding a denial of coverage or reservation of rights, it would have settled the claim for less than the amount ultimately paid or taken steps that would have reduced or eliminated the insured’s liability. Under that standard, the court held that the question of prejudice was one of fact that could not be resolved on summary judgment.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

No Coverage Under Claims-Made Policy for Lawsuit Served on Registered Agent Before Policy Period

Joseph Gross | Wiley Rein

In a win for Wiley’s client, the United States District Court for the Southern District of Florida, applying Florida and District of Columbia law, has found that a claims-made professional liability policy does not afford coverage for a lawsuit served on the insured’s registered agent prior to the policy period, even though the insured asserted that it did not have actual knowledge of the lawsuit until after the policy incepted. DC Cap. Law Firm, LLP v. Hanover Ins. Co., 2022 WL 18402566 (S.D. Fla. Nov. 15, 2022). The court found that the Claim was considered first made within the meaning of the policy when the lawsuit was served, and the “essence of a claims-made policy” is not to cover any claim made prior to the inception of the policy period.

The insured law firm purchased a claims-made lawyers professional liability policy with a policy period of December 21, 2018 to December 21, 2019. The policy defined “Claim,” in relevant part, as a “[c]ivil proceeding commenced by the service of a complaint or similar pleading.” A timeshare company sued the insured law firm alleging false advertising and served the complaint on the law firm’s registered agent on December 19, 2018. The insured sought coverage for the lawsuit under the policy. The insurer denied coverage on the basis that the lawsuit was a claim first made prior to the claims-made policy period. The law firm disputed the insurer’s position and filed coverage litigation. The insurer filed a counterclaim in the coverage litigation and moved for judgment on the pleadings.

The court granted the insurer’s motion. The court held that the lawsuit was a claim first made when the law firm’s registered agent was served, which was prior to the policy period. The court found it irrelevant whether the insured had actual knowledge of the lawsuit because the policy expressly defined “Claim” to include service of a lawsuit.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Eleventh Circuit Finds Claims-Made Policy’s “Correlating Claims” Provision Substantially Similar to “Related Claims” Provisions

Roben West | PropertyCasualtyFocus

In Datamaxx Applied Technologies Inc. v. Brown & Brown Inc., the Eleventh Circuit Court of Appeals affirmed the district court’s grant of summary judgment to the insurer, finding no merit in the insured’s argument that the analysis for construing a “correlating claims” provision differed substantially from the analysis in construing a “related claims” provision. In doing so, the Eleventh Circuit found that the insurer owed no duty to indemnify the insured for a claim that correlated with an earlier claim reported to a previous insurer and outside of the insurer’s policy period.

The underlying claim concerned a development and license agreement between the insured and a software provider to jointly develop, market, and sell an enhanced version of the insured’s already existing product using a code invented by the software provider. The agreement provided for the enhanced product to be marketed under a new, shared name. But when the insured cut out the software provider altogether by incorporating and using the code for an enhanced product under its own name — and not the agreed-upon shared name — the software provider filed suit. The insured tendered the claim to its insurer at the time, and the parties settled, releasing the then-insurer from any future related claims.

A few years later and unbeknownst to the software provider, the insured tried again, this time developing and marketing a different product that essentially mirrored the functionality of the initially infringing product while incorporating the software provider’s code without involving the software provider, leading the software provider to file another suit. When the insured tendered the claim this time, it had a new insurer. The insurer denied coverage on the grounds that the new suit correlated with the previously settled claim, which was brought prior to its policy period.

The claims-made policy stated that “all claims that correlate with an act will be deemed to have been made at the time the first of such claims is deemed to have been made” and that coverage does not apply to loss “in connection with any claim that correlates with an act, if such act also correlates with any claim deemed to have been made before the” policy period. Neither party argued that the word “correlate” was ambiguous. Instead, the insured argued that the policy language was exclusionary and improperly conflated with a typical related claims provision. The Eleventh Circuit found that the language was not exclusionary and was instead a prerequisite to coverage. And while the Eleventh Circuit acknowledged that the policy language was not the exact same as a related claims provision, as “correlates” is narrower than “relates,” the analysis remained the same in that the terms must still be interpreted according to their plain language. As such, because the dictionary provides that correlation only required a showing that acts and claims “tend to vary, be associated, or occur together in a way not expected on the basis of chance alone,” the court found that the claims correlate to each other. The insurer therefore had no duty to indemnify the insured because the claim correlated with a claim first made prior to the insurer’s policy period.


When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.