Eighth Circuit Affirms That Notice Given During Policy Period but Seven Months After Complaint Filed is Not “As Soon As Practicable”

The United States Court of Appeals for the Eighth Circuit, applying Minnesota law, has affirmed summary judgment in favor of an insurer, holding that the condition precedent of timely notice “as soon as practicable” was not met where the insured provided notice of a lawsuit seven months after the lawsuit was filed without offering any reasons for the delay, even though notice was provided during the claims made policy period.  Food Market Merch., Inc. v. Scottsdale Indem. Co., 2017 WL 2271363 (8th Cir. May 25, 2017).

The insured company was sued by a former employee seeking unpaid commissions.  Six months into the suit, the court granted partial summary judgment in favor of the former employee.  The next month – seventh months after the suit was first brought, but still within the policy period – the insured notified its insurer of the lawsuit, seeking defense and indemnification under its Business and Management Indemnity Policy.  In addition to the requirement that the claim be made within the policy period, the policy required that the insured, “as a condition precedent to their rights” under the policy, give the insurer written notice of any claim “as soon as practicable, but in no event later than sixty (60) days after the end of the Policy Period.”

The insurer tentatively denied coverage on the basis that the lawsuit was not within the scope of coverage, which prompted the insured to file suit.  The insurer then formally denied coverage on the basis that notice was untimely and its claim was outside the policy’s scope.

The trial court granted summary judgment in favor of the insurer after finding no genuine issue that the insured failed to notify the insurer of the litigation as soon as practicable, and that the insurer’s duty to defend was never triggered because timely notice is a condition precedent to coverage under the policy.

On appeal, the Eighth Circuit affirmed.  The court found that while it is generally the case that whether notice was given as soon as practicable is a fact-dependent question for the jury to determine, here, the insured had presented no evidence that providing notice over seven months after the lawsuit was filed was “as soon as practicable.”  The appellate court pointed to the trial court’s finding that, during those seven months, the insured “hired counsel, litigated the case, and negotiated with [the claimant], all without seeking [the insurer’s] involvement.”  In so deciding, the court rejected the insured’s attempt to insert a prejudice determination into the court’s consideration, which the court noted was not required where, as here, notice is a condition precedent to coverage. The court also held that the policy was unambiguous and that the insurer did not waive its timeliness argument by failing to raise it before it formally denied coverage.  According to the court, no precedent requires waiver based on preliminary coverage-related communications.