Coverage Barred for Lawsuit Tendered to Insurer After Two-Year Delay

An intermediate Michigan appellate court has held that coverage was barred for a lawsuit tendered to an insurer nearly two years after the lawsuit was filed because the insured’s late notice did not satisfy the policy’s notice provision requiring notice to the insurer “as soon as practicable.” Maple Manor Rehab. Center, LLC v. Evanston Ins. Co., No. 359147, 2023 WL 3131930 (Mich. Ct. App. Apr. 27, 2023).

The insured, a nursing facility, was sued in July 2017 for negligence in connection with the death of a former patient. The insured had a professional liability insurance policy for the December 10, 2016 to December 10, 2017 policy period providing coverage for claims “first made against the Insured during the Policy Period . . . and reported to the Company pursuant to the terms herein.” The policy stated, in relevant part, that “[i]t is a condition precedent to coverage afforded by this Coverage Part that the Insured shall give to the Company written notice . . . as soon as practicable of any Claim first made against the Insured during the Policy Period or the Extended Reporting Period, if exercised,” (the “Notice Provision”). The insured did not notify the insurer of the lawsuit until June 2019. The insurer denied coverage because the insured failed to comply with the Notice Provision. The trial court granted summary disposition to the insurer, and the insured appealed.

The appellate court affirmed summary disposition to the insurer, concluding that, as a matter of law, the insured failed to provide notice of the lawsuit “as soon as practicable,” barring coverage. Rejecting the insured’s argument that the phrase “as soon as practicable” is “ambiguous,” the court opined, regarding the insured’s delay in providing notice, that “[n]early two years is not a reasonable amount of time in any circumstance where [the insured] fully participated in the lawsuit with the same attorneys it has now and has offered no justifiable excuse and identified no impediment to informing [the insurer] of the [underlying lawsuit] prior.” The court also concluded that the insurer did not need to demonstrate “prejudice” from the insured’s late notice given that the policy was a “claims made” policy.