Notice-Prejudice Rule Does Not Apply to Claims-Made Professional Liability Policies

The United States District Court for the District of Colorado, applying Colorado law, has held that claimants were not entitled to coverage for default judgments because the insured dentist failed to provide notice of the claims. Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Estate of Calendine, 2022 WL 17486796 (D. Colo. Dec. 7, 2022). Making an “Erie guess,” the court reasoned that the Colorado Supreme Court would be unlikely to hold that the insurers needed to demonstrate prejudice from late notice to deny coverage. 

Dental patients sent demand letters to an insured dentist and later filed suit against him. The dentist did not notify his insurers of the claims and later committed suicide. After the lawsuits went into default, the claimants contacted the insurers through the dentist’s insurance broker. The insurers denied coverage on the basis that the dentist had never provided notice as required by their policies. 

In coverage litigation, the court rejected the claimants’ arguments that the insurers were not entitled to deny coverage based on late notice. First, the court held that the policies unambiguously required a claim to be made during the policy period and reported during the policy period or extended reporting period. Second, the court held that deposition testimony failed to establish that the insurers had proper notice of the claims. Third, the court rejected the argument that the insurers must show prejudice from late notice in order to deny coverage. The court analyzed Colorado law and reasoned that the Colorado Supreme Court would decline to extend the notice-prejudice rule to claims-made policies, even if the notice provision arguably only required “prompt” notice of a claim.