Claims-Made Policy and Late Notice

Our insured has a claims-made directors and officers policy with employment practices coverage. Our insured terminated an employee due to reorganization. The employee filed a claim with the Massachusetts Commission Against Discrimination. Before the Commission made a finding, the employee also filed a suit in superior court. The insured filed a claim with the carrier, which was denied for late reporting.

The policy states, “Such notice shall be given as soon as practicable, but in no event later than ninety (90) days after the end of the Policy Period.”

What does Massachusetts say about denying claims for late reporting?

Massachusetts Subscriber

In general, Massachusetts courts have determined that prejudice must be shown in order to deny a claim on a liability policy because of late notice. See Johnson Controls v. Bowers, 409 N.E.2d 185 (1980).

However, the Supreme Judicial Court of Massachusetts, in Chas. T. Main, Inc. v. Firemen's Fund Ins. Co., 551 N.E.2d 28 (1990) held that “requirement that notice of claim be given in policy period or shortly thereafter in claims-made policy is of essence in determining whether coverage exists and there is no requirement that insurer be prejudiced by late notice before coverage may be denied.” This position was reinforced by the Massachusetts Supreme Court's ruling in Tenovsky v. Alliance Syndicate, Inc., 677 N.E.2d 1144 (1997), in which the court stated that notice under the claims-made policy in question should have been filed with the insurer within sixty days of the end of the policy period in order to support the need for fairness in rate setting.

Therefore it would appear that the wording of your claims-made policy, requiring that notice of claim be given within ninety days of the end of the policy period, has been upheld in Massachusetts.

 

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