D&O and E&O - How Not To Report A Claim Redux
In our May 25, 2011, blog post [see here], we reported on the lower court decision in this matter. Now the Third Circuit has affirmed that decision in Atlantic Health System, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, No. 11-2060, (3d Cir. March 22, 2012).[see here]
This is another cautionary tale of what can go wrong when an insured, directly or through its broker, ignores the claim reporting instructions in the policy form or on the Declarations and sends its notice of claim to an incorrect address. Some commentators will complain that this is another insurance company “gotcha” and there is no big deal in sending notice of a claim to the address for an underwriting unit. Why can’t they just walk it across the street or down the hall to wherever the claims unit may be?
The Third Circuit relied heavily upon its earlier decision in American Cas. Co. of Reading, Pennsylvania v. Continisio, 17 F.3d 62 (3d Cir. 1994), quoting from that decision as follows.
[T]he only reasonable interpretation of the policy provision is that the insureds mustvregard the information they possess as a potential claim and formally notify their insurervthrough its claims liability department that a claim may be asserted . . . . [N]otice mustvbe given through formal claims channels because we recognize that the information needed, or at least the perspective utilized in reviewing it, varies when predicting the probability of future losses and recognizing the need to investigate a claim that may be made based on past occurrences. (emphasis added)
Continisio, 17 F.3d at 69.
In my view, this matter was well-decided and well-reasoned both at the District Court level and upon appeal before the Third Circuit. It is certainly not a classic situation of a denial of coverage based upon a hyper-technicality. Rather, it shows a keen judicial understanding of the nature of underwriting and claims responsibilities within an insurance company. Hopefully, word of this decision is disseminated widely among policyholders and their brokers. Forewarned should be forearmed.