No Coverage for Claim Made During Initial Policy Period but Reported During Renewal Policy Period

Applying Ohio law, an Ohio appellate court has held that renewal of a claims-made policy does not extend the time by which an insured may report a claim.  ISCO Indus., Inc. v. Great Am. Ins. Co., 2019 WL 6353709 (Ohio Ct. App. Nov. 27, 2019).  The court further held that the “notice prejudice” rule does not apply because coverage under a claims-made policy is generally restricted to claims made and reported during the policy period.

The insured originally purchased a claims-made D&O policy with a policy period of March 19, 2013 to March 19, 2014.  The insured renewed the policy twice, for the consecutive periods of March 19, 2014 to March 19, 2015, and March 19, 2015 to March 19, 2016.  The insured was named as a defendant in a lawsuit on February 25, 2014, during the initial policy period, but did not notify its insurer until August 20, 2015, during the second renewal policy period.  The insurer argued that notice was untimely and refused to provide coverage for the lawsuit.  In subsequent coverage litigation, the trial court dismissed the insured’s complaint, and the insured appealed.

The appellate court affirmed the trial court’s ruling and held that the original policy did not provide coverage for the lawsuit against the insured because the insured did not report the claim during the policy period in which it was made.  Citing the policy’s plain language stating that “notice shall be given as soon as practicable from the date the General Counsel, Risk Manager, or person with equivalent responsibility has knowledge of the Claim, and in no event later than ninety (90) days after the end of the Policy Period,” the court rejected the insured’s argument that the reporting period was extended because it renewed the policy.  The court further determined that the 90-day notice “cushion” negated the insured’s concern that a claim made at or near the end of a policy period would impair its ability to provide timely notice.

The court rejected the insured’s argument that the insurer must provide coverage if it was not prejudiced by the late notice.  The court held that the notice-prejudice rule does not apply in the context of a policy that requires an insured to provide notice of a claim by a specific deadline.