Notice of Accident Constitutes Timely “Claim” Based on Insurers’ Conduct

The United States District Court for the Southern District of Mississippi has held that notice of an underlying accident sent to the insured’s three insurance carriers represented a timely “claim” under the claims-made general liability policies at issue in light of the insurers’ course of conduct upon receipt of the notice.  Jordan v. Maxfield & Oberton Holdings LLC, 2018 WL 1033318 (S.D. Miss. 2018).

The insured marketed and distributed small magnetic toys.  In April 2012, the insured saw a days-old news article describing a child’s serious injuries after the child swallowed the insured’s product.  Expecting a demand to be forthcoming, the insured immediately notified its primary and two excess insurers.  The ensuing coverage action concerned whether the article notifying the insurers of the loss was equivalent to notice of a “claim.”  Since none of the policies defined the term “claim,” the court, citing New York law, noted that “the determination of whether a given demand is a ‘claim’ within the meaning of a claims made policy requires a fact-specific analysis to be conducted on a case-by-case-basis.”

The court then examined the specific actions each insurer took in response to receiving the article.  With respect to the primary carrier, the court noted that it opened a claim file, assigned a claim number, indicated in its internal file that no coverage issues existed, and declined to renew the insured’s policy because of “claims activity.”  In its defense, the primary carrier argued that the article amounted only to a notice of an “occurrence,” and that it even informed the insured by the end of the policy period that no formal claims had been made.  The court rejected the primary carrier’s argument.  It held that the weight of the evidence revealed that the primary carrier treated the information as a “claim,” and that it was therefore futile to argue that it was anything but a “claim.”

The court also highlighted conduct by the two excess carriers that closely mirrored that of the primary carrier.  The court similarly rejected their attempts to classify the article as notice of an “occurrence.”  The court explained that information received and recorded as a timely “claim” would be deemed as such.