Second Circuit Determines Letter Threatening Litigation Constitutes A Claim First Made Prior To The Policy Period

WR
Wiley Rein

Contributor

Wiley is a preeminent law firm wired into Washington. We advise Fortune 500 corporations, trade associations, and individuals in all industries on legal matters converging at the intersection of government, business, and technological innovation. Our attorneys and public policy advisors are respected and have nuanced insights into the mindsets of agencies, regulators, and lawmakers. We are the best-kept secret in DC for many of the most innovative and transformational companies, business groups, and nonprofit organizations. From autonomous vehicles to blockchain technologies, we combine our focused industry knowledge and unmatched understanding of Washington to anticipate challenges, craft policies, and formulate solutions for emerging innovators and industries.
The insurer issued a claims-made-and-reported professional liability policy to the insured property development and management company.
United States Insurance
To print this article, all you need is to be registered or login on Mondaq.com.

The United States Court of Appeals for the Second Circuit, applying New York law, has held that a letter asserting legal liabilities and threatening litigation constitutes a claim first made prior to the policy period. Pine Mgmt., Inc. v. Colony Ins. Co., 2024 WL 1266244 (2d Cir. Mar. 26, 2024).

The insurer issued a claims-made-and-reported professional liability policy to the insured property development and management company. The policy period ran from August 1, 2018, to December 1, 2019, with a retroactive date of March 1, 2016. The policy defined "claim" as "a written demand received by [the insured] for monetary, nonmonetary, or injunctive relief" arising from a "Wrongful Act."

During the policy period, the property company received a complaint naming it as a defendant and sought coverage from its insurer. The plaintiff in the underlying action had appended a letter dated July 17, 2018, as an exhibit to the complaint. Drafted and delivered by the plaintiff's counsel before the policy's inception, the letter asserted that the insured "breached its fiduciary duty," "failed to disclose material facts," and "breached provisions of the governing Operating Agreements" between the parties. Additionally, the letter demanded that the insured produce certain documents and that it repay funds allegedly owed. Finally, the letter threatened suit, inviting the insured to resolve the issue without "costly and unnecessary litigation." The carrier denied coverage, concluding that the relevant claim was the letter and that such claim was first made prior to the policy's inception.

The district court granted the insurer's motion for judgment on the pleadings, and the Second Circuit affirmed. The insured argued that the letter did not constitute a claim because it was not a "sufficiently clear demand for relief" and because it "failed to put [the insured] on proper notice of the demand." The court rejected these arguments, noting that the letter "set out specific legal claims, including facts, legal theories of liability, and sufficiently clear demands for relief." Therefore, the letter "constituted a 'Claim' within the meaning of the Policy." As a result, the appellate court concluded that the insurer had properly denied coverage in the first instance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Second Circuit Determines Letter Threatening Litigation Constitutes A Claim First Made Prior To The Policy Period

United States Insurance

Contributor

Wiley is a preeminent law firm wired into Washington. We advise Fortune 500 corporations, trade associations, and individuals in all industries on legal matters converging at the intersection of government, business, and technological innovation. Our attorneys and public policy advisors are respected and have nuanced insights into the mindsets of agencies, regulators, and lawmakers. We are the best-kept secret in DC for many of the most innovative and transformational companies, business groups, and nonprofit organizations. From autonomous vehicles to blockchain technologies, we combine our focused industry knowledge and unmatched understanding of Washington to anticipate challenges, craft policies, and formulate solutions for emerging innovators and industries.
See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More