Question of Fact When “Claim” “First Made” Where Insured Allegedly Did Not Become Aware of Claim Until After Policy Period

The U.S. District Court for the Northern District of Illinois, applying Illinois law, has concluded that a question of fact exists regarding when a “claim” was “first made” where the recipient of a “claim” sent via email allegedly did not become aware of the claim until days after it was received in the recipient’s inbox, after the end of the policy period.  Lloyd’s Syndicate 3624 (Hiscox) v. Clow, 2020 WL 4194213 (N.D. Ill. July 21, 2020).

The insureds, co-trustees of a trust, maintained trustees professional liability policies effective December 8, 2017 through December 8, 2018 (2017 Policy) and December 8, 2018 through December 8, 2019 (2018 Policy).  Both policies required the insured to give notice within 60 days after the end of the policy period of claims “first made” “against you” during the policy period.  On December 3, 2018, purchasers of property from the trust emailed a letter to the insureds’ attorney explaining that a previously undisclosed gas tank had caused contamination to the property.  The letter stated that “the Trust must pay the costs to remediate the contaminated soil at the Property. We respectfully request that the Trust fully indemnify the Buyers for any and all costs for investigation and remediation” and reserved “the right to take all actions necessary to recover from the Trust, including the filing of legal proceedings.”  The insureds’ attorney alleged that the letter was sent to a dormant email account, and that he did not receive the email until it was forwarded to his active email inbox on December 7, 2018.  Furthermore, the attorney alleged that he did not recall seeing the email until December 10, 2018 and provided copies of the letter to the insureds for the first time on December 11, 2018.

On April 25, 2019, the purchasers sued the insureds in connection with the property contamination.  On July 16, 2019, the insureds provided notice of the lawsuit to the insurer.  The insurer filed a declaratory judgment action and moved for judgment on the pleadings, seeking a declaration that no coverage was available for the lawsuit because the December 3, 2018 letter was the operative claim first made during the 2017 policy period, but the insureds failed to report it within the required reporting period, and the 2018 Policy was not triggered because the claim was not made during the 2018 policy period.

The court denied the insurer’s motion for judgment on the pleadings.  As a preliminary matter, the court concluded that the December 3, 2018 letter was a “claim” against the insureds under the policies, which defined “claim” as “any written assertion of liability or any written demand for financial compensation or nonmonetary relief.”  The court further concluded, however, that a question of fact existed as to when the operative “claim” was “first made.”  The court held that the attorney’s knowledge of the claim was imputed to the insureds but found there was an issue of fact regarding when the insured’s attorney “became aware of the email and its contents.”  For that reason, the court could not resolve at the pleadings stage whether the “claim” was “first made” during the 2017 or 2018 policy period.