First Circuit Confirms That Late Notice Bars Coverage Under Claims-Made-And-Reported Policy

The United States Court of Appeals for the First Circuit, applying Massachusetts law, affirmed the United States District Court for the District of Massachusetts’s holding that a university’s late-noticed claim was not covered under a claims-made-and-reported insurance policy. President & Fellows of Harvard Coll. v. Zurich Am. Ins. Co., 2023 WL 5089317 (1st Cir. Aug. 8, 2023). The court found that Massachusetts law was well-settled that the failure to give notice according to the policy’s terms and conditions forfeits any right to coverage. The insurer did not need to show it was prejudiced by the late notice and it was irrelevant whether the insurer may have had actual notice of the claim during the reporting period.

The insured university had an excess claims-made-and-reported insurance policy for the Policy Period of November 1, 2014 to November 1, 2015. The policy provided that all claims must be reported in writing to the insurer no later than 90 days after the end of the Policy Period (i.e., January 30, 2016). During the Policy Period, the university was named in a lawsuit alleging that its admissions policy discriminated against Asian American students. The suit was not reported to the insurer until May 23, 2017. The insurer denied coverage based on late notice. The United States District Court for the District of Massachusetts granted the insurer’s motion for summary judgment, and the university appealed.

The First Circuit affirmed, finding Massachusetts law to be clear that the notice requirements in a claims-made-and-reported policy are strictly enforced, and the insurer need not show that it was prejudiced by the late notice in order to deny coverage. The court reasoned that this position was consistent with the type of coverage afforded by claims-made policies, which insure claims made against the insured during the policy period, regardless of when the event or act that instigated the claim happened. The court found it irrelevant whether the insurer may have had actual knowledge of the lawsuit, finding that to effectively be a backdoor way of requiring prejudice. Finally, the court refused to consider the university’s argument, raised for the first time on appeal, that the policy was ambiguous as to how a claim could be reported and that news stories about the lawsuit could qualify. The court found the case not to present the kind of “extraordinary circumstances” where such new legal theory could be broached for the first time on appeal.