The United States District Court for the Western District of Louisiana, applying Louisiana law, has held that an insured failed to satisfy a condition precedent to coverage when it gave notice to the insurer of a claim 18 to 20 months after the claim was first made. Williams v. Synergy Care, Inc., 2008 WL 2945918 (W.D. La. Jul. 29, 2008).
At issue was a claims-made policy providing employment practices liability coverage to a health care company for the period of July 1, 2005 to July 1, 2006. The policy explicitly provided that, “as a condition precedent” to coverage, an Insured must give notice to the insurer of a Claim “as soon as practicable after it is first made.” The policy defined “Claim” to mean “written notice received by an Insured that any person or entity intends to hold any Insured responsible for a Wrongful Act.”
On July 22, 2005, a former employee filed an EEOC Charge of Discrimination alleging wrongful termination by the company. The company received the charge no later than September 1, 2005 but did not provide notice of it to the insurer. Sixteen months later, on January 18, 2007, the former employee filed a lawsuit against the company based on the same allegations previously asserted in the EEOC charge. The company first notified the insurer of the former employee’s allegations of discrimination on March 1, 2007, the same day on which the company was served with the complaint in the lawsuit. The insurer denied coverage based on late notice.
In the coverage dispute that followed, the insurer moved for summary judgment on the grounds that the EEOC charge constituted a Claim under the policy and that the insured’s failure to provide timely notice of such presented an absolute bar to coverage. The court agreed and granted the insurer’s motion. In doing so, the court first rejected the insured’s argument that the former employee’s allegations of wrongdoing did not give rise to a Claim until the lawsuit was filed and held that the charge of race discrimination asserted before the EEOC in September 2005 constituted written notice that the former employee intended to hold the company responsible for a Wrongful Act.
Next, the court recognized that Louisiana law distinguished between claims-made and occurrence based policies, “strictly constru[ing]” notice provisions in the case of the former. In this connection, the court concluded that notice provided 18 to 20 months after the Claim was first made was not notice “as soon as practicable” and that the insurer need not “make a particular showing of actual prejudice” to avoid coverage based on the breach of this condition precedent.