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Vol. 8 - Issue3
March 20, 2019


“Claims Made” Insurers Take Notice: Policy Language Deficient For “Relation Back” Argument 


The Ninth Circuit’s decision in Attorneys Insurance Mutual Risk Retention Group, Inc. v. Liberty Surplus Insurance Corp., No. 17-55597 (Feb. 15, 2019) is very short – about a page.  But it still has a lot to say.  And it is a decision that insurers, that write “claims made” policies, should pay close attention to. 

At issue was coverage for attorney J. Wayne Allen, under professional liability policies issued by Liberty Surplus Insurance Corp., for claims arising out of a probate case and related action.  [Attorneys Insurance Mutual Risk Retention Group had been defending Allen and was seeking contribution for defense costs.]

Liberty had issued a 2009-2010 policy and a 2010-2011 policy.  A probate case had been filed against Allen during the 2009-2010 policy period.  A related civil action was filed against Allen during the 2010-2011 policy period.
Liberty maintained that it owed no coverage by asserting a commonly-used “relation back” argument.  Specifically, Liberty argued that Allen failed to report the probate case to it during the 2009-2010 policy period.  Thus, when Allen sough coverage for the related civil action, under the 2010-2011 policy, Liberty argued that none was owed, because it related back to the earlier probate case.  Thus, the civil action was also considered to have not been reported during the 2009-2010 policy period.

Liberty’s argument was based on the following provision contained in the 2010-2011 policy:

“Claims alleging, based upon, arising out of or attributable to the same or related acts, errors or omissions shall be treated as a single Claim regardless of whether made against one or more than one Insured.  All such Claims, whenever made, shall be considered first made during the Policy Period or any Extended Reporting Period in which the earliest Claim arising out of such acts, errors or omissions was first made, and all such Claims shall be subject to the same Limits of Liability.”

Critical to the court’s analysis was the 2010-2011 policy’s definition of “Policy Period:” “the period from the Inception Date of this Policy to the Policy Expiration Date as set forth in the Declarations or its earlier termination date, if any.”  (emphasis added).  The “Declarations” identified the policy period as July 31, 2010 until July 31, 2011.

Here’s where it got problematic for Liberty.  Under the definition of Policy Period – which refers to this policy -- the later related civil action, filed against Allen during the 2010-2011 policy period, was considered first made during the 2010-2011 policy period.  In other words, the language of the 2010-2011 policy did not support relation back to the 2009-2010 policy. 

The 2010-2011 policy’s reference to “policy period” is clearly intended to be a reference to an earlier policy’s policy period.  However, the language did not support it.  The court stated: “As the district court correctly noted, ‘[a]dopting Liberty’s interpretation would require the court to give different meanings to the same term used in the same policy, which would run afoul of the rules of contract interpretation.’”

Claims made insurers – check your policies.  It is an easy fix.


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