Eighth Circuit Finds Notice Within Policy Period Still Violated Claims Made Policy’s Notice Provision 

Global Insurance Alert

June 6, 2017

On May 25, 2017, the Eighth Circuit Court of Appeals handed down its decision in Food Market Merchandising Inc. v. Scottsdale Indemnity Co. The decision is noteworthy because the court joined a limited number of other courts that have held that when an insured fails to provide notice “as soon as practicable” as required under a “claims made” insurance policy, the insurer may avoid coverage even when the notice was given within the policy period, and without the insurer needing to demonstrate prejudice.

The insured, Food Market, had been sued in January 2014 by a salesperson for more than $250,000 in allegedly unpaid commissions. Food Market provided notice of this suit to its insurer, Scottsdale, in August 2014, within the policy period. Scottsdale denied coverage on the ground of untimely notice.

The Eighth Circuit held that the insured’s provision of notice within the policy period did not save coverage, explaining: “Here, the policy did not require notice to be given during the policy period, but instead only required that notice be given as soon as practicable, but in no event later than sixty (60) days after the end of the policy period.” The court continued: “Food Market presented no evidence that providing notice over seven months after being sued was as soon as practicable.”

Nor was Scottsdale required to show prejudice. The court (and evidently the parties) acknowledged that the policy made compliance with the “as soon as practicable” notice provision a condition precedent to coverage, which made prejudice unnecessary.

In so concluding, the decision places Minnesota alongside courts in Pennsylvania, New Jersey, and Connecticut that likewise afford to the insurer solid grounds for an “untimely notice” defense, even when notice was given within the policy period. The insurer’s position arguably is strongest when the policy expressly states that notice “as soon as practicable” is a condition precedent to coverage. However, even when such language is absent, an insurer may validly contend “claims made” policies implicitly make timely notice a condition precedent to coverage.

Related Practices

To discuss any questions you may have regarding the issues discussed in this Alert, or how they may apply to your particular circumstances, please contact Richard C. Mason at (215) 665-2717 or rmason@cozen.com