The New York Supreme Court, Appellate Division, has held that under New York law, an insurer had no duty to defend or indemnify a personal injury action in which the insured failed to provide notice of the claim during the policy period or the extended reporting period as is required under the claims-made-and-reported policy. The case is Certain Underwriters at Lloyd's London Subscribing to Policy No. PGIARK01449-05 v. Advance Tr. Co., Inc., 2020 N.Y. App. Div. LEXIS 6906.
Lloyd's London issued a claims-made-and-reported policy to Advance Transit Company with a policy period between October 30, 2016 to October 30, 2017. On May 30, 2017, Advance Transit Co. was sued in a personal injury action. The policy provided coverage for certain claims that were made and reported to Lloyd's London during the policy period or the extended reporting period, which extended 60 days past the expiration of the policy period. Advance Transit Co. failed to notify Lloyd's of the personal injury action until January 8, 2018. Lloyd's denied coverage for the claim, basing the denial on the basis that the claim was not timely reported to the insurer.
In the ensuing coverage suit, Advance Transit argued that the claim should have been covered under the policy because it was reported during the policy period of the renewed policy. Advance also argued that, under New York Insurance Law § 3420 (a) (5), which provides that "[w]ith respect to a claims-made policy, however, the policy may provide that the claim shall be made during the policy period, any renewal thereof, or any extended reporting period," claims-made policies that are issued or delivered in New York must include a provision that claims arising during the policy period may be reported during the renewal policy period.
The trial court disagreed with Advance and granted Lloyd's motion for summary judgment, finding that the insured failed to provide timely notice. The court noted that the statute, which used "or" rather than "and," appeared to give insurers the option of requiring notice to be made during any or all of the three time periods provided. The court explained that a claims-made policy can set a definite time frame for reporting a claim, irrespective of prejudice, which can include "the policy period, any renewal thereof, or any extended reporting period."
On appeal, the New York Supreme Court, Appellate Division agreed with the trial court, holding that "[b]ased upon the plain and ordinary meaning of the term 'however' within § 3420(a)(5), a claims-made policy can set a definite time frame for reporting claims, irrespective of prejudice, which can include 'the policy period, any renewal thereof, or any extended reporting period."
The court held that the insurer did not have to provide defense or indemnification to the insured and was entitled to reimbursement from Advance Transit for expenses incurred in the defense because the insurer had defended under a reservation of the right to recoup those amounts in the event the claim was found to not be covered.
Editor's Note: Here is yet another example of how plain language can affect how a term applies in a given situation. Although the statute seemed to provide a broad reporting period, the "or" indicated to the court that, depending on the language of the policy, the reporting period could be all or any of the listed periods. Since the policy specifically stated that Advance had 60 days after the expiration of the policy to report the claim to Underwriters, the insurer had no obligation to defend or indemnify Advance for the claim.