Harvard’s $15M Insurance Loss May Prompt Notice Reckoning
A Zurich unit’s $15 million coverage win over Harvard University underscores the need for institutions to scrutinize their policies’ notice provisions to make sure they’re not left holding the bag for millions in defense costs because of a technical miscue, legal experts say.
Justin Lavella, an insurance recovery partner at Blank Rome LLP, said the ruling reinforces that policyholders should always give notice to their excess carriers.
“Every coverage counsel in the country is going to tell you that you need to notice early and notice often,” Lavella said. “Now, it’s ‘notice early, notice often and notice up the tower.’”
Lavella said the ruling reinforces the “Draconian” nature of insurance law in many states, where policyholders can be denied coverage based solely on a technical blunder.
“Generally, we have moved away from such hyper-technical application of the law, whether it be in contract law, in criminal law, or anywhere else,” Lavella said. “It is surprising to me that insurance law is backsliding on this issue.”
Lavella pointed to the distinction between “claims made and reported” policies and “claims made” policies. The former — like Harvard’s contract with Zurich — requires not only that a claim be made against a policyholder during a policy period, but also that it be reported during that period or some post-policy reporting window that lasts for a set amount of time. In a pure claims-made policy, the reporting requirement is eased.
“Policyholders will probably be pushing back to get the ‘and reported’ language out,” Lavella said.
The Harvard ruling could also lead to a renewed legislative push to get states to mandate that carriers adopt language with less stringent reporting requirements. Lavella pointed to New York as an example, where he said changes were made to the law that have incorporated more flexible notice requirements into claims-made policies.
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“Harvard’s $15M Insurance Loss May Prompt Notice Reckoning,” by Josh Liberatore, was published in Law360 Insurance Authority on November 4, 2022.