Insured Not Justified in Ignoring Claims-Made-and-Reporting Requirements
An insured’s attempt to circumvent the claims-made-and-reporting requirements of its professional liabilty policy, by arguing that the doctrine of promissory estoppel applied, was thwarted when a court ordered summary judgment in favor of the insurer on grounds that there was no clear and unambiguous promise by the insurer, and no justifiable reliance by the insured. Hamman-Miller-Beauchamp-Deeble, Inc. v. Liberty Mutual Agency Corp., United States District Court, C.D. California, No. CV 13-07129-RGK (VBKx) (July 7, 2014).
Plaintiff Hamman-Miller-Beauchamp-Deeble, Inc. (HMBD), an insurance broker, received two letters in 2010 from an attorney claiming that his client had sustained damages as a result of HMBD’s negligence. The attorney asserted that HMBD improperly advised the client that a health insurance policy it sold her would cover treatment from a non-contracted provider. HMBD waited until it was served with a lawsuit two years later to provide notice of the claim to its Insurance Professionals Errors and Omissions Liability insurer. General Insurance Company of America (General) denied coverage on the basis that (1) HMBD was aware of the accusation of negligent services prior to the inception of the policy; and (2) the claim was not both made against and reported by HMBD while the policy was in effect. HMBD sued General for breach of contract, bad faith and promissory estoppel.
In opposing General’s summary judgment motion, HMBD argued that the demand letters did not constitute a “Claim” triggering its duty to report. The Court disagreed. First, the letter informed HMBD that it was “legally responsible for … damages” and thus contained a demand for damages. It also informed HMBD that the damages were the result of “negligence” and, therefore, alleged a wrongful act arising out of HMBD’s services. The Court further found that, even if the letters were not “Claims,” the Policy would not provide coverage because HMBD knew of the wrongful act giving rise to the lawsuit and/or had a basis to reasonably anticipate that the lawsuit would be filed before the policy incepted.
In its promissory estoppel claim, HMBD asserted that, in handling a different HMBD claim in 2008, General’s claim representative told HMBD’s president that “he probably didn’t have to put General on notice of the Temple matter unless and until a lawsuit was filed.” The Court found the alleged statement did not constitute a clear and unambiguous promise supporting promissory estoppel. It also found that HMBD’s reliance on the alleged statement was unjustified as a matter of law when the parties entered a new insurance contract with contrary terms.