Insurance policies invariably require insureds to submit timely written notice of a “Claim” made by third parties to obtain coverage from the insurer.  A recent decision from the United States District Court for the Southern District of New York is yet another reminder that insureds need to closely analyze what constitutes a “Claim” under their policies in order to comply with the timely notice requirement. 

The issue of providing timely notice gained attention late last year in a widely-publicized ruling that Harvard University could not access $15 million in potential insurance coverage to pay for legal expenses incurred in a lawsuit concerning Harvard’s race-conscious admissions program.  In that case, the court found that Harvard failed to formally notify its insurer until more than a year after the policy period ended, and rejected Harvard’s argument that because the insurer was aware of the high-profile litigation, it could not have been prejudiced by the late notice. 

On March 20, 2023, Judge Mary Kay Vyskocil of the United States District Court for the Southern District of New York issued an opinion that further illustrates the consequences of failing to understand what constitutes a “Claim” triggering the notice requirement under an insurance policy.  In Pine Management Co. v. Colony Insurance Co., the insured, Pine Management, brought suit against its insurer, Colony Insurance Company, after Colony refused to defend and indemnify Pine against a third-party lawsuit.  The policy at issue covered the period from August 1, 2018 to December 1, 2019.  Importantly, the term “Claim” was defined as “a written demand received by the Insured for monetary, non-monetary or injunctive relief.” 

Before the Colony policy incepted, Pine had received a letter from an attorney representing a group of companies managed by Pine, advising of “serious issues arising from Pine’s management” and claims against Pine that “should survive a motion to dismiss and a motion for summary judgment.”  The letter specified some of the bases for those claims, requested non-monetary relief and the right to inspect documents, and suggested that the parties schedule a meeting in an effort to resolve the claims without the need for litigation.  More than a year later, on July 26, 2019, the companies filed a complaint in New York state court alleging similar claims and facts as the earlier letter.  After receiving the complaint, Pine provided written notice to Colony.  But Colony disclaimed coverage, contending that the wrongful acts alleged in the complaint were the same as those alleged in the letter and thus, according to Colony, constituted a “Claim” made prior to the inception date of the Colony policy.  Pine filed a coverage action against Colony and Colony moved for judgment on the pleadings, arguing that it had no duty to defend or indemnify Pine under the policy.

The Court agreed with Colony, and held that a “Claim” was first made against Pine when it received the letter before the policy period, not when it was served with the complaint during the policy period.  Because the Colony policy only covered Claims first made during the policy period, Pine was not entitled to coverage.

This decision reinforces the need for insureds to be fully familiar with the terms and conditions of their insurance policies as a general rule.  But it is especially important to know what facts and circumstances could trigger an insured’s obligation to submit notice of a claim to its insurer, even in the absence of formal litigation commenced against the insured.  For example, “a written demand received by the Insured for monetary, non-monetary or injunctive relief,” such as the letter received in Pine Management, will often be enough to require notice to the insurer.  Without knowing what triggers an obligation to submit notice of a claim, however, insureds may lose the right to coverage for an otherwise valid Claim.