Today, the Indiana Court of Appeals issued an important decision in an insurance case involving a claims-made policy. The issue in
, ___ N.E.2d ___ (Ind. Ct. App. 2011), Cause No. 49A05-1011-PL-670, was whether the policy allowed the insurer to deny coverage for claims made during the policy period that were similar to claims made prior to the policy period. The Court found that the insurer could not deny coverage and, in doing so, appears to allow large corporations to take advantage of the principle that ambiguities in an insurance contract are construed against the insurer.
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In 1999, a class-action lawsuit was filed against Anthem in Connecticut, claiming that Anthem's subsidiary failed to timely and adequately reimburse for medical services. In 2000, Anthem entered into a claims-made insurance policy with Twin City Fire Insurance Company. Beginning in 2001, Anthem became subject to a series of over ten additional state and federal lawsuits alleging improper denial of reimbursement. Anthem sought coverage for these lawsuits from Twin City, which denied coverage because the post-2000 lawsuits related back to the 1999 lawsuit. Twin City moved for summary judgment and the trial court granted that motion.
On appeal, Twin City argued that two different policy provisions demonstrated that there was no coverage. The first was a limitation of liability.
If additional claims are subsequently made which arise out of the same Wrongful Act or series of continuous, repeated or interrelated Wrongful Acts as Claims already made and reported to the Insurer, all such Claims, whenever made, shall be considered first made within the Policy Period or the Discovery Period in which the earliest Claim[] arising out of such Wrongful Act or series of continuous, repeated or interrelated Wrongful Acts was first made and reported to the Insurer, and all such claims shall be subject to one such limit of liability.
The Court held that this policy provision was prospective, rather than retrospective, and, therefore, Twin City could not deny a claim during the policy period simply because a similar claim was made prior to the policy period.
The bottom line is that Section 6 is prospective in nature and contemplates (a) initial coverage between an insured and insurer, (b) a first claim made and reported to that insurer during that coverage period, and (c) subsequent claims made and reported to that insurer down the road. And the intended outcome of Section 6 is that, if the subsequent claims are based on the same, repeated, or interrelated wrongdoing as the first, the insured receives coverage for all claims though subject to a single liability limit.
The second provision that Twin City relied upon to deny coverage was a claim reporting requirement, which provided as follows:
If written notice of a Claim has been given pursuant to Clause 8(a) above, then a Claim which is subsequently made against the Insureds and reported to the Insurer alleging, arising out of, based upon or attributable to the facts alleged in the Claim for which such notice has been given, or alleging any Wrongful Act which is the same as or related to any Wrongful Act alleged in the Claim of which such notice has been given, shall be considered made at the time such notice was given.
The Court again held that this provision was prospective, rather than retrospective.
The upshot is that Section 8(b), like Section 6, is prospective in nature and contemplates (a) initial coverage between an insured and insurer, (b) notice of a first claim made to that insurer pursuant to Section 8(a), and (c) subsequent claims made and reported to that insurer in the future. And the outcome of Section 8(b) is that the insured receives coverage for the subsequent claims if based on wrongful acts related to the first.
The Court noted that the parties could have drafted the contract to have a retrospective, exclusionary effect, but chose not to do so.
In this case, the Court did not specifically state that it was construing any ambiguity in the insurance policy against the insurer, but it appears to have imported that concept when it stressed that exceptions, limitations, and exclusions to coverage must be plainly expressed. It arguably could have elected not to apply this legal principle, as Anthem is in a much better position to negotiate the terms of an insurance contract than a typical insurance consumer. This is a point that attorneys representing larger companies in insurance disputes should note.
