Why it matters: Can a spreadsheet listing monetary damages sent by a client to an insured constitute a "claim," triggering the notice requirements of an insurance policy? Applying a broad interpretation of the term, a panel of the Eighth Circuit Court of Appeals answered in the affirmative, defining a claim as "an assertion by a third party that the insured may be liable to it for damages within the risks covered by a policy." A client of the insured sent the company a spreadsheet prior to filing suit to document "the specific total of how much monetary damages" the client had sustained allegedly caused by the insured's product failures. When the client later filed suit, the insurer refused to provide a defense, arguing that a claim was made prior to the effective date of the claims-made policy, eliminating coverage. While a mere request for information would be insufficient to constitute a claim, "a demand for relief" like that presented in the spreadsheet "generally constitutes a claim," the Eighth Circuit said. Affirming summary judgment for the insurer, the federal appellate panel noted that the policyholder itself treated the spreadsheet like a claim and, as such, notice had to be provided under the prior policy and could not be made under a subsequent claims made policy. This case highlights the need to be extremely mindful of the need to give notice when even potential claims come to a policyholder's attention.

Detailed discussion: Ritrama, Inc. manufactures pressure-sensitive flexible films and cast vinyl films for various applications. For client Burlington Graphics System, Ritrama sold more than $8 million worth of cast vinyl film products to manufacture graphic decals for customers in the recreational vehicle (RV) industry.

In early 2008, Burlington reported to Ritrama that RV owners were having problems with the graphics. The parties began a series of discussions about how to solve the issues and how to allocate payment for the losses Burlington had sustained. In July, a Ritrama manager sent an e-mail about a meeting with a Burlington representative with comments including: "Ritrama will discuss the Keystone claim on Monday during conference call" and "Mark will be compiling a summary of the re-work claims submitted to them."

On September 9, 2008, Burlington sent Ritrama a spreadsheet detailing three claims for monetary damages based on the product failures, totaling $53,219.37. A Ritrama e-mail in response noted that a group "went over the claim summary" and had questions such as "What is [Burlington's] expectation of Ritrama on this claim? Is there a certain percentage split you have in mind? When we settle on what the split will be, will this be it?"

The companies continued to discuss dollar amounts without reaching an agreement. Burlington filed suit against Ritrama in April 2011. Ritrama looked to HDI-Gerling America Insurance Co. for defense coverage pursuant to a commercial general liability policy that covered the time period between March 31, 2009 and March 31, 2010. Gerling denied coverage and Ritrama filed suit against the insurer.

Gerling moved for summary judgment in the coverage dispute, arguing that Burlington made a "claim" within the meaning of the policy prior to March 31, 2009 and thus the claim was covered, if at all, under a prior policy. A federal district court granted the insurer's motion and Ritrama appealed to the Eighth Circuit.

Applying Minnesota law, the federal appellate panel found the term "claim" as used in the policy to be unambiguous, adopting the definition used by the district court: "an assertion by a third party that the insured may be liable to it for damages within the risks covered by the Policy."

This definition was "entirely consistent" with dictionary definitions, the court said, as well as with the policy as a whole. "Ritrama believes the term 'claim' should carry a similar meaning to 'suit' because the terms are used 'side-by-side,' but the Policy specifically defines the term 'suit' and does not define the term 'claim'—suggesting they carry different meanings within the Policy," the panel wrote. The definition was also not contrary to the primary purpose of claims-made insurance policies and consistent with the general principle that insurance policies are meant to cover risks of future events—not known losses, the court said.

Neither was the definition inconsistent with Eighth Circuit and Minnesota law (which has made clear "that the focus of whether a claim has been made is whether a demand for relief has been made") and case law from other jurisdictions, the court said, citing opinions from the Second and Fifth Circuits.

"Our review of the law indicates that a mere request for information is generally insufficient to constitute a claim, whereas a demand for relief generally constitutes a claim," the panel wrote. "In light of the uniform case law, we believe that to be considered a 'claim' under this policy, the third-party must make some kind of demand or assertion of a legal right. Here, the district court used the word 'assertion,' which we read to mean something more than just a mere statement of facts already occurred but rather an assertion of a right to relief, i.e., demand for relief. This definition is not only consistent with the case law but also with Black's Law Dictionary, which defines a claim as '[t]he assertion of an existing right.'"

The definition would not lead to absurd results requiring insureds to provide notice of garden-variety product quality communications, the court added, as "[m]ere complaints of a defective product without a demand for relief would not fall within the general definition of a claim."

Ritrama told the court that no communications from Burlington satisfied this definition of "claim," but the panel determined the spreadsheet was sufficient. "In the context of the surrounding communications and already developed discussions on the issue between the parties, there is no reasonable way to interpret the spreadsheet as anything other than a demand for relief," the court wrote. "Ritrama itself treated the spreadsheet of damages as a claim and demand for payment and aggressively attempted to settle the claim before the damages reached even higher amounts. Ritrama cannot now, in the heart of litigation, contort its prior words into something else."

The court affirmed summary judgment for Gerling. "On the record before us, in the absence of any evidence to suggest why Burlington would send Ritrama a detailed list of damages other than to demand payment, and in light of Ritrama's own repeated acknowledgements that Burlington submitted a claim, we believe the spreadsheet cannot reasonably be understood as anything other than a demand for relief," the panel said.

To read the opinion in Ritrama v. HDI-Gerling America Insurance Company, click here.