A federal court in Kentucky has held that a policyholder that failed to timely report a claim to its D&O insurer was not entitled to coverage under either of two claims-made and reported policies. C.A. Jones Management Group, LLC v. Scottsdale Indemn. Co., 2015 WL 1393261 (W.D. Ky. March 25, 2015).
The policyholder faced a series of related lawsuits arising out of alleged fraud and breach of contract. It sought coverage under two D&O policies, each of which obligated the policyholder to provide notice to the insurer no later than sixty days after the expiration of the policy. The first suit was filed during the first policy but the policyholder did not place the insurer on notice until more than sixty days after the expiration of the first policy during the period of the second policy.
The insurer denied coverage and the policyholder filed suit to enjoin the insurer from denying the claim and to force it to provide a defense. The court denied the motion for preliminary injunction, concluding that the claims were covered but likely excluded. The insurer sought reconsideration of this ruling in its favor, arguing that the court’s threshold determination that the policy provided coverage was incorrect. The court granted the motion for reconsideration.
It then held that the claims asserted in all of the lawsuits arose out of the same facts and thus constituted a single claim. The court held that this claim was made during the first policy period when the first suit was filed. However, because the insured did not report the claim until more than sixty days after the first policy expired and since the claim was made before the second policy was in force, it could not satisfy the requirements for either policy, which the court held it must do. The court departed from the rationale of the Kentucky Court of Appeals in an unpublished decision that reached a contrary result. The court noted that as an unpublished decision, it was not binding precedent and suggested that the Kentucky Supreme Court would likely reject it.