Late Notice Bars Coverage for Claim Noticed to Insurer After 60 Days of Insured’s Receipt of Claim

The United States Court of Appeals for the Ninth Circuit, applying California law, has held that no coverage was available under an employment practices liability insurance policy because the insured failed to give notice within 60 days of the insured’s receipt of the claim. AV Builder Corp. v. Houston Cas. Co., 2023 WL 6566510 (9th Cir. Oct. 10, 2023).

The insured company purchased an EPL policy, which required that the insured “must see to it that we or our authorized representative are notified within sixty (60) days or as soon as practicable after a ‘claim’ is made.” It also provided that the insured “must see to it that we receive written notice of a ‘claim’ as soon as practicable, but in no event later than sixty (60) days after your actual notice or receipt of the ‘claim,’ or thirty (30) days after the expiration, termination, or cancellation of the Policy or any Extended Reporting Period, whichever comes first.” The insurer denied coverage for a sexual harassment lawsuit based on the insured’s failure to report the claim within 60 days of the insured’s receipt of the claim, and the district court held that such late notice precluded coverage.

First, the appellate court held that the “claim,” defined as a “written demand received by the insured alleging damages or the filing of a ‘suit,’” was made on or before August 14, 2018, by which point the insured had received communications from the claimant stating “that [the former employee] had been negotiating severance payments related to the contested end of her employment, that [the former employee’s] negotiation emails referred to her sexual relationship with [the insured’s president], that the proposed severance agreement would have released [the former employee’s] Title VII claims, that [the former employee] was unhappy with the amount of money offered to release her ‘claims,’ and that she had hired her own lawyer to sue [the insureds].” Because the insured received the communications by August 14, 2018, the court held that the “claim” was first made before the policy’s expiration on August 19, 2018.

Second, the court then held that the insured did not provide timely notice. The Ninth Circuit assume[d], without deciding, that the longer [60-day] notice period controls, because even applying the sixty-day notice provision and construing the facts in the light most favorable to [the insured],” the insured’s report to the insurer on October 15, 2018 was untimely because it came more than 60 days after the insured was on notice of the claim.