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(Article from Insurance Law Alert, November 2017)

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A California federal district court ruled that an insurer need not establish prejudice when an insured violates a time-specific notice provision in a claims-made-and-reported policy, even if the notice was provided within the policy period.  Centurion Med. Liab. Protective Risk Retention Grp., Inc. v. Gonzalez, No. CV 17-01581 (C.D. Cal. Nov. 1, 2017).

The professional liability policy provides coverage for claims “first made against the insured and reported to the [insurer] in writing during the policy period.”  The policy requires the insured to provide written notice of a claim “not more than 20 days after receiving such claim.”  Based on these provisions, the insurer denied coverage for claims that were served on the insured in November 2016, but not tendered to the insurer until January 2017.  The court upheld the denial.

The court noted that under California law, the notice-prejudice rule applies to both occurrence-based policies and claims-made policies that do not require the claims to be reported within the policy period or within a specified period of time.  However, the court declined to extend the notice-prejudice rule to the scenario presented here – when a claim was not reported within the policy’s specified time frame, but was reported within the policy period.  Emphasizing the restrictive nature of claims-made-and-reported policies, the court stated that “[c]ase law has yet to make a distinction between a claim reported within the policy period but outside of an additionally imposed time limit, and a claim reported outside of the policy period.”