FAILURE TO GIVE TIMELY NOTICE BARS COVERAGE FOR ALL RELATED CLAIMS

The Fifth Circuit recently examined coverage for multiple related claims under a claims-made directors and officers policy. ADI Worldlink, L.L.C., v. RSUI Indem. Co., No 17-41050, 2019 WL 3521815, (5th Cir. Aug. 2, 2019) (slip op.).  The policy contained language deeming all claims based on the same or related facts to be one claim, all first made at the time of the earliest such claim. The policy also required that all claims first made during the policy period must be reported no later than the end of that policy period.

During 2014 and 2015, a number of Worldlink’s employees made claims for failure to pay overtime wages. While the first such claim was made in August 2014, Worldlink did not report it to the carrier until September 2015, by which time numerous other employees had also brought similar claims. Worldlink admitted the initial claim was not timely reported during the 2014 policy period, but argued the later claims were timely reported during the 2015 policy period.

Worldlink did not dispute that all the claims were related, but nevertheless argued the policy was ambiguous when applied to the later claims which were made in 2015 and reported during the 2015 policy period.   After examining existing Texas law on the subject, the court concluded the policy unambiguously required all claims must be reported by the end of the policy period during which they were first made, and the later claims related back to the first claim. Therefore, Worldlink’s failure to timely report the first claim – a failure which is prejudicial as a matter of law under a claims-made-and-reported policy – barred coverage for all the claims.