No Coverage for Claim First Reported to Insurer Two Years After Expiration of Claims-Made-and-Reported Policy

The Minnesota Court of Appeals has held that an insurer has no duty to defend or indemnify a default judgment against an insured where the claim was first reported two years after the expiration of the claims-made-and-reported policy.  LeCuyer v. West Bend Mut. Ins. Co., 2014 WL 3396491 (Minn. Ct. App. July 14, 2014).

An employee of the insured company sent a letter to the insured company in January 2009 alleging wrongful termination following her complaints of sexual harassment, and filed a suit against the insured in April 2009.  A bench trial was held in 2010, but the insured company did not appear and a default judgment of approximately $500,000 was entered against the insured.  In June 2011, the employee provided notice to the insured company’s employment practices liability insurer seeking coverage for the default judgment.  The policy provided that coverage was availalable “only if . . . [a] ‘claim’ is both . . . made against any insured . . . during the policy period . . . and [r]eported to us . . . during the policy period . . . .”  The insurer denied coverage on the grounds that the claim was not first made and reported during the July 25, 2008 to July 25, 2009 policy period.  In the coverage litigation that followed, the trial court granted summary judgment in favor of the insurer, and the employee appealed.

On appeal, the Minnesota intermediate appellate court affirmed, stating that “[b]ecause [the insurer] did not receive timely notice of [the employee’s] claim against her employer so as to trigger its obligation under the terms of the insurance contract, [the insurer] is not liable.”  The court rejected the employee’s contention that the language concerning when a claim is first made is ambiguous, holding that “[e]ven if the policy language determining when a claim is made is unclear, the language about when a claim is ‘[r]eported to’ the insurer is not, and the policy requires both a claim and a report to the insurer before coverage . . . .  Because neither [the insured company] nor [the employee] reported the claim to [the insurer] within the period mandated under the policy, the policy unambiguously requires no coverage.”