A federal court in Georgia recently held that an insured could not avoid a policy’s notice requirement by relying on a subjective belief that it was not liable for an offense and that cease and desist letters that notified the insured of an alleged offense were sufficient to trigger the insured’s duty to provide notice to the insurer. Allstate Ins. Co. v. Airport Mini Mall, LLC, 2017 WL 4280628 (N.D. Ga. Sept. 26, 2017), appeal filed (11th Cir. Oct. 26, 2017).
The insurer issued a CGL policy to a mall. The mall was raided by the Department of Homeland Security, and multiple counterfeit items were seized and some of the mall’s tenants were arrested. A retailer sent the insured two cease and desist letters relating to the sale of counterfeit sunglasses, which advised that the insured could be held liable for trademark violations. The retailer filed a contributory trademark infringement action against the insured, but the insured did not notify the insurer of the lawsuit until almost two months after the filing of the lawsuit. The insurer filed a declaratory judgment action seeking a determination that the insured failed to comply with the policy’s notice provision that required the insured to notify the insurer of an occurrence or an offense which may result in a claim “as soon as practicable.” The parties filed cross-motions for summary judgment. The insurer argued that the insured’s delay in providing notice of a potential occurrence under the policy deprived it of its opportunity to investigate the circumstances, consider pre-suit options or prepare to defend the insured in the ensuing trademark infringement lawsuit. The insured argued that it did not notify the insurer of the claim until after the lawsuit was filed because there was no indication it could be held responsible for the sale of counterfeit goods by its tenants, and it did not believe it was liable for the acts of its tenants.
The district court granted the insurer’s motion for summary judgment, noting that an insured’s failure to comply with a valid notice provision bars coverage under Georgia law as the notice requirement is a proper condition precedent to coverage. The court explained that Georgia courts have interpreted the phrase “as soon as practicable” in notice requirements as “requiring ‘immediate’ notice based on the reasonable diligence of the insured under the circumstances.” The court held that the insured could not avoid the notice requirement by relying on a subjective belief that it had no liability and that an insured’s duty to provide notice to its insurer is triggered when the insured actually knew or should have known of the possibility that it might be held liable for the offense in question. The court found that the cease and desist letters provided the insured with information sufficient to trigger the duty to provide notice.