LAW NOTES from the Law Offices of
Kay & Andersen, LLC
June, 2015
What Every Insurer Should Know . . . . . . . . . . . . . . .
ABOUT THE INTERPLAY BETWEEN CLAIM NOTICE PREJUDICE STATUTES
AND POLICY REPORTING REQUIREMENTS
Kay & Andersen, LLC
June, 2015
What Every Insurer Should Know . . . . . . . . . . . . . . .
ABOUT THE INTERPLAY BETWEEN CLAIM NOTICE PREJUDICE STATUTES
AND POLICY REPORTING REQUIREMENTS
Disclaimer: The information contained on this page is not legal advice. The information provided on this website is for general informational purposes and is not necessarily updated to account for changes in the law. You should consult with an attorney for legal advice regarding your individual circumstances.
Wisconsin has two “notice-prejudice” statutes that provide that an insured’s failure to furnish timely notice of a claim will not bar coverage unless timely notice was reasonably possible and the insurance company was prejudiced by the delay. At the same time, many claims-made policies require timely notice be given to the insurer of a potential claim. Do these principles conflict and if so, how can they be reconciled? That question was recently addressed by the Wisconsin Supreme Court in Anderson v. Aul, 2015 WI 19, 361 Wis. 2d 63, 862 N.W.2d 304, found at: http://www.wicourts. gov/sc/opinion/DisplayDocument.html?content=html&seq No=135569. On December 23, 2009, an attorney received a letter from new counsel from two of the attorney’s former clients alleging that the attorney had represented the clients in a real estate transaction while having an unwaivable conflict of interest. At the time the letter was received, the attorney was insured under a claims-made professional liability policy. However, the attorney did not report the claim to the malpractice insurer until March, 2011, nearly a year after the policy period expired. The former clients subsequently filed a malpractice suit against the attorney in March 2012. The attorney’s malpractice insurer intervened in the lawsuit and sought a declaration that its policy did not provide coverage for the claim. The attorney argued that Wis. Stat. §631.81(1) and Wis. Stat. §632.26 trumped any policy provision that would otherwise preclude coverage for failing to timely notify the insurer of the claim because the insurer was not prejudiced. The insurer argued that those statutes were not intended to apply to claims-made policies such as the one at issue here and a contrary interpretation would defeat the purpose of claimsmade policies. The Supreme Court agreed with the insurer and concluded that the claim was barred under the policy. The Supreme Court noted that nothing in the statutory text or history indicated that the legislature intended to invalidate claims-made policies. Id, ¶83. Furthermore, other courts have held that a claims-made policy’s restriction of coverage to claims made and reported during a policy period is enforceable despite statutory or common law notice-prejudice rules similar to the aforementioned statutes. Id, ¶97. The Court concluded that the benefits of claims-made policies, the statutory history underlying Wisconsin’s notice-prejudice statutes, the persuasive authority of other jurisdictions, and the unreasonable results a contrary holding would produce compelled the Court to find that an insurance company may deny coverage without a showing of prejudice when an insured fails to report a claim within a claimsmade and reported policy period. Id,¶98. In any case, requiring an insurance company to provide coverage for a claim reported after the end of a claims-made policy would be per se prejudicial to the insurance company because it would expand the grant of coverage. Id, ¶100. Thus, insurers issuing claims-made policies in Wisconsin may still generally rely on the policy notice requirements in spite of Wisconsin notice-prejudice statutes.
Law Offices of Kay & Andersen, LLC is recognized for securing favorable verdicts and settlements for insurance companies and their insureds and has received an AV rating from Martindale-Hubbell. We are also proud to be listed in Best’s Directory of Recommended Insurance Attorneys and Adjusters. Feel free to contact us with any of your insurance defense needs.
Law Offices of Kay & Andersen, LLC is recognized for securing favorable verdicts and settlements for insurance companies and their insureds and has received an AV rating from Martindale-Hubbell. We are also proud to be listed in Best’s Directory of Recommended Insurance Attorneys and Adjusters. Feel free to contact us with any of your insurance defense needs.