No Coverage Where Claim Reported After Extended Reporting Period

A Wisconsin intermediate appellate court has held that coverage was unavailable for a claim reported after the termination date of an extended reporting period purchased by the policyholder.  Sheffield v. Darwin Nat. Assur. Co., 2017 WL 3149792 (Wisc. Ct. App. July 25, 2017). 

An insurer issued a claims-made-and-reported lawyers malpractice policy to a law firm for the period of January 11, 2012 to January 11, 2013.  When the named partner of the firm departed for another firm, the firm cancelled the policy, effective September 4, 2012.  At the same time, the firm purchased a two year extended reporting period (“ERP”).  After the termination of the ERP on September 4, 2014, the law firm reported a claim made against it.  The insurer denied coverage on the ground that the claim was not timely noticed.

In the ensuing coverage litigation, the court granted summary judgment to the insurer, holding that the claim was not timely noticed during the ERP.  The policyholder had argued that the ERP did not commence until after a sixty-day “Automatic Extended Reporting” period in the policy.  However, the court noted that the insurer added the ERP by endorsement, which clearly stated that the ERP “shall begin on September 4, 2012 and shall end on September 4, 2014.”   In addition, the court noted that the ERP was clearly an option offered in the alternative to the Automatic Extended Reporting period based upon the policy language.