The District Court for the Northern District of California, applying California law, has held that a provision contained in an excess D&O policy that required notice to the excess carrier within sixty days of a claim did not unambiguously apply to claims made against the insured company when the endorsement that provided coverage for the entity was not provided to the court. Oakland-Alameda County Coliseum, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 2007 WL 2506458 (N.D. Cal. Aug. 30, 2007). The court also ruled that the sixty-day notice provision was sufficiently conspicuous to be enforceable, if it were subsequently determined that the notice provision applied to the insured company. The court denied summary judgment to the insurer regarding the insured's defense that failure to comply with the notice provision was equitably excused, stating that questions of fact precluded that determination on summary judgment.
This coverage dispute arose between one excess insurer and its policyholder. The insured company had purchased primary and excess D&O liability insurance from one primary and eight excess insurers. No later than May 8, 1997, a sports team threatened litigation against the company. On July 31, 1997, the company notified its broker of the threatened litigation. The broker then forwarded this notice to the insurance wholesaler. The excess insurer denied coverage based on a provision in its policy requiring that notice be provided within 60 days of the claim.
The company first argued that the sixty-day notice provision applied only to claims made against directors and officers, but not against the insured entity. The policy provided coverage for the entity through an endorsement, but neither the insurer nor the insured had provided a copy of the endorsement to the court. The court therefore held that the endorsement was ambiguous because it was unable to examine the actual language of the endorsement in the context of the policy as a whole. The court indicated that ambiguities would be construed in favor of the insured and denied the insurer's motion, subject to reconsideration should a copy of the endorsement be provided.
The court then considered the insured's argument that the sixty-day notice provision was "unenforceable as insufficiently conspicuous" because the excess policy purportedly followed form to the primary policy that did not contain any such limitation and because the provision was otherwise insufficiently emphasized in the excess policy. The court rejected this argument, stating that the "policy clearly directs the reader to explicit exclusions from the general form-following framework" and that a "reasonable insured . . . should have noticed the sixty-day provision and understood its operation." With respect to the insurer's argument that the defense of equitable excuse based on the insured's supposed "de minimis noncompliance" with the notice provision was inapplicable, the court stated that there were factual issues that precluded resolution of that issue as a matter of law.