The Claims Made Policy Revisited
| Publication year | 1993 |
| Pages | 535 |
| Citation | Vol. 22 No. 3 Pg. 535 |
1993, March, Pg. 535. The Claims Made Policy Revisited
In June 1989, The Colorado Lawyer published an article by this author entitled "The Claims Made Policy--- A Trap for the Unwary Lawyer?"(fn1) At that time, there was only one reported Colorado decision dealing with this type of policy.(fn2) Colorado's appellate courts have since decided two additional cases. Although neither case deals with an insured attorney, both are of significance to Colorado lawyers. This article examines these cases and their implications.
The first of the two cases was decided in 1991. In St. Paul Fire and Marine Insurance Company v. Estate of John R. Hunt, M.D.,(fn3) a doctor was served in August 1985 with a suit charging him with medical malpractice. He failed to answer the complaint, and a default judgment was entered against him in April 1987. The claim was reported to the doctor's insurer, St. Paul, in July 1987 after the policy had expired. The doctor died in 1988, and St. Paul brought a declaratory judgment suit in that same year.
The jury found that the doctor was unable to give notice of the claim in question from August 1985 to July 1987 because he was mentally impaired and his inability to give notice was not reasonably foreseeable to him when he purchased the policy. Based on these findings, the trial court declared that St. Paul had coverage.
The Colorado Court of Appeals reversed, stating that the act which invokes coverage under a claims made policy is notice to the insurer. It contrasted the claims made policy with the occurrence policy, where notice is subsidiary to the event that triggers coverage, the occurrence itself. The court pointed out that the claims made policy provides a certain date after which the insurer knows that it is no longer liable under the policy, a feature which enables the insurer to more accurately fix its reserves and premiums and to offer insurance for substantially lower cost than occurrence policies.
The court's holding draws a clear line between occurrence policies, where a delay in reporting may be excused,(fn4) and the claims made contract, where failure to report, for whatever reason, results in no coverage at all.(fn5)
The attorney who resists reporting a claim, perhaps motivated by the happy thought that it may go...
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