{"id":893428,"date":"2018-01-04T15:44:13","date_gmt":"2018-01-04T22:44:13","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=893428"},"modified":"2018-01-04T15:44:13","modified_gmt":"2018-01-04T22:44:13","slug":"traps-await-unwary-claims-made-insurance-policies","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/traps-await-unwary-claims-made-insurance-policies\/","title":{"rendered":"Traps Await the Unwary in &#8220;Claims-Made&#8221; Insurance Policies"},"content":{"rendered":"<p>Dwain Clifford | <a href=\"https:\/\/www.thepolicyholderreport.com\/2017\/12\/traps-await-the-unwary-in-claims-made-insurance-policies\/\" target=\"_blank\">The Policyholder Report<\/a> | December 29, 2017<\/p>\n<p>Under typical Commercial General Liability policies, which are triggered by an \u201coccurrence\u201d during the policy period, an insured can safely wait until being served with a complaint to notify the insurer about the litigation. But policies written on a \u201cclaims made\u201d basis, such as many Errors and Omissions policies or Employment Practices Liability policies, raise the specter of forfeiting any coverage at all for not notifying the insurer of a \u201cclaim\u201d long before the insured knew that it would have to lawyer up and defend against a lawsuit.<\/p>\n<p><em>Scottsdale Indemnity Co. v. Convercent, Inc<\/em>., a recent decision from the federal court in Colorado, demonstrates this risk and the hole that an insured can inadvertently dig for itself.\u00a0<span id=\"more-2127\"><\/span>In this case, Convercent (a company that makes \u201cethics and compliance\u201d software for businesses) notified Eugene Ferraro in October 2015 that it was going to sack him in January 2016.<\/p>\n<p>Ferraro did not take this news well. He wrote a letter on October 20 to accuse the company of breaking its employment promises and violating federal age-discrimination laws, asking that Convercent \u201creconsider the decision to terminate my employment because of my age or any unjustified or unlawful reason\u201d and threatening to \u201cpursue all appropriate remedies against everyone involved\u201d if his salary and benefits were \u201cinterrupted\u201d in January. Convercent apparently ignored the letter, so Ferraro wrote another one in December, which the company also ignored. (Spoiler alert: nothing was said about Ferraro\u2019s letters to Scottsdale, Convercent\u2019s \u201cEmployment Practices Coverage\u201d insurer.) Ferraro was terminated on January 4, 2016.<\/p>\n<p>Now the rub: Convercent purchased a renewal policy with Scottsdale on May 30, 2016, still without any notice about Ferraro\u2019s noisy exit months earlier. This silence wasn\u2019t broken until Ferraro filed a charge of discrimination with the EEOC on August 5, 2016, which recycled the allegations from the October 2015 letter and which Convercent notified Scottsdale about on August 29, 2016.<\/p>\n<p>Convercent assumed that the \u201cclaim\u201d for which it wanted coverage was started by the August 5 filing, and that it would be covered under its in-force policy renewed three months earlier. But Scottsdale denied coverage under this policy because Ferraro\u2019s letter in October 2015, which was sent even before he was shown the door three months later, established when the \u201cclaim\u201d was first made against Convercent. Under \u201cclaims made and reported\u201d policies like Scottdale\u2019s, the claim must be made against the insured\u00a0<em>and<\/em>\u00a0reported during the same policy period. If not, no defense, no indemnity, no protection for premiums long ago paid.<\/p>\n<p>The judge agreed with Scottsdale. Because Ferraro wasn\u2019t even fired yet, his letter was not the classic \u201cwritten demand against an Insured for damages or other relief\u201d that usually leads to notice to the insurer and getting defense lawyers on board. But in this case, just the implied threat of litigation was enough to make Ferraro\u2019s letter a \u201cclaim\u201d against Convercent:<\/p>\n<blockquote><p>Mr. Ferraro\u2019s letter contained enough information to put defendants on notice of his willingness to litigate the matters he raised if a settlement was not possible. Defendants were thus given fair warning of Mr. Ferraro\u2019s complaints and of the fact that he would likely sue if his requests were not addressed. The absence of an attorney was not a legitimate reason for defendants\u2019 ignoring Mr. Ferraro\u2019s requests or failing to see his letter for what it was: a demand for relief.<\/p><\/blockquote>\n<p>This \u201cfair warning\u201d provided by Ferraro\u2019s letter cuts twice: First, the letter was a \u201cclaim\u201d made in October 2015, which had to be reported before the original policy expired in May 2016. This wasn\u2019t reported by the renewal, so Scottsdale owed no coverage under that policy. Second, the court found that the claim was \u201clater reasserted\u201d in the EEOC filing in August 2016, which meant no coverage under the renewal policy either. Under this very generous view of what constitutes a \u201cclaim,\u201d insureds must notify their insurers if there is even the whiff of a lawsuit in the air.<\/p>\n<p>Readers of this blog will remember other traps in claims-made coverage like\u00a0omitting notice of a \u201ccircumstance\u201d in a renewal application, or\u00a0buying policies with \u201cretroactive\u201d dates later than a claim. Policies written on a \u201cclaims made\u201d basis simply don\u2019t fit very well with how most insureds think about insurance coverage. Careful business owners will consult with coverage counsel long before defense lawyers have to be hired in responding to a claim.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Dwain Clifford | The Policyholder Report | December 29, 2017 Under typical Commercial General Liability policies, which are triggered by an \u201coccurrence\u201d during the policy period, an insured can safely wait until being served with a complaint to notify the insurer about the litigation. But policies written on a \u201cclaims made\u201d basis, such as many&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/traps-await-unwary-claims-made-insurance-policies\/\">Continue reading <span class=\"screen-reader-text\">Traps Await the Unwary in &#8220;Claims-Made&#8221; Insurance Policies<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9914],"tags":[9895,9980,23],"class_list":["post-893428","post","type-post","status-publish","format-standard","hentry","category-insurance-coverage","tag-advise-consult","tag-claims-made-insurance-policy","tag-insurance-coverage","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Traps Await the Unwary in &quot;Claims-Made&quot; 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