Most businesses have a variety of insurance coverage that they hope never to have to utilize. If and when the time does come to exercise one’s rights to the benefit of such a policy, however, the last thing any in-house counsel wants is to be unaware of a technicality that could lead her company to forfeit those rights. Unfortunately for The Saint Consulting Group (“Saint”), that is exactly the situation in which it recently found itself.
In April of 2010, Saint purchased an insurance policy that covered “a Wrongful Act” made by “Insured Persons.” As often is the case with insurance policies, while the actual insurer was The Hartford, Saint had purchased the policy through an agent, the Eastern Insurance Group, LLC.
On June 23, 2010, Saint was sued on a variety of theories of liability arising out of the work that it undertook on behalf of a client. Because Saint wanted to avail itself of the benefits of its insurance policy with The Hartford, which included the cost of defending the litigation, Saint sent Eastern Insurance notice of the lawsuit and included copies of the complaint and first amended complaint at issue. While Eastern Insurance forwarded on that documentation to Saint’s comprehensive general liability insurer (which was not The Hartford), Eastern Insurance failed to forward such documentation on to The Hartford for seven months. When The Hartford finally did receive notice, it denied coverage, claiming that it received notice too late, and Saint to filed a coverage suit.
Under the insurance policy, notice of a claim had to “be given to the insurer as soon as practicable after [Saint became] aware of such claim ….” Further, the policy specifically provided notice of claims other than kidnapping or ransom/extortion be given to “The Hartford Claims Department, Hartford Financial Products, 2 Park Ave., 5th Floor, New York, New York 10016.” As such, The Hartford took the position that notice was not given to it until Eastern Insurance forwarded the documentation that Saint had sent it, seven months earlier.
Not surprisingly, Saint argued that giving notice to Eastern Insurance was sufficient, as Eastern Insurance was The Hartford’s agent and, in any event, there was no prejudice to The Hartford in connection with the delay in its actual receipt of notice. Unfortunately for Saint, Judge Paul Wilson of the Massachusetts Superior Court disagreed. According to Judge Wilson:
[T]he language of the policy was specific in requiring that notice be sent to Hartford’s claims department in New York. This court is obligated to ‘construe the entire [policy] without rendering any of its language superfluous.’… To conclude that notice sent to … Eastern Insurance was sufficient would impermissibly render the provision requiring that notice be sent to Hartford’s claims department superfluous.
As far as Saint’s argument that delay of actual notice to The Hartford caused no prejudice, Judge Wilson also rebuffed that claim, ruling that “the purpose of the policy’s notice provision is to produce fairness in rate setting by minimizing the time between the insured event and the payment. No further determination of prejudice to the insurer need be made.”
As The Saint Consulting Group, Inc. v. Eastern Insurance Group, LLC makes clear in gory detail, in-house counsel need to diligently scrutinize their companies’ insurance policies and/or ensure that someone else does, not simply to be aware of the coverage they provide, but also to ensure that if/when they can be implemented, the company does not waive its rights by making a technical error.