No Duty to Defend When Demand Letter Received Prior to Policy Period

The Court of Appeals of Arkansas, applying Arkansas law, has affirmed a trial court’s decision that an insurer had no duty to defend where the insured received a demand letter constituting a claim under the policy prior to the policy period.  White v. Great Am. Assur. Co., 641 S.W.3d 668 (Ark. App. Feb. 23, 2022).

The insured, a realtor, sought coverage under its professional liability insurance policy for a lawsuit filed during the policy’s May 13, 2018 to May 13, 2019 policy period.  The underlying plaintiffs alleged that the realtor was responsible for damage sustained to the plaintiffs’ house during an open house.  Prior to filing the lawsuit, the plaintiffs sent letters to the realtor on April 22, 2018 and May 2, 2018 asserting that the realtor was liable for the damage to the house and asking for insurance contact information.  The policy provided that it “applies only to those claims that are first made against an insured during the policy period” and defines “claim” to include “a written demand for money or services received by an Insured.”  The insurer denied coverage for the lawsuit on the grounds that the relevant claim was first made prior to policy inception, when the realtor received the demand letters.  The realtor sued the insurer, seeking a declaration that the insurer had a duty to defend the realtor.  The trial court granted summary judgment to the insurer, concluding that no coverage was available under the policy, and therefore the insurer had no duty to defend.

The court of appeals affirmed, concluding that the two letters received prior to the policy period “clearly qualify as a ‘claim’” and therefore the relevant claim was first made prior to the policy period.  The appellate court reasoned that, among other things, the letter informed the realtor that the plaintiffs held the relator “responsible for the damages to them and to their home,” that they expected the realtor to pay for repairs, and asked for insurance information.  In sum, “[t]reating the letters as other than a claim requires a tortured construction of [the policy’s] text and plain meaning.”