A claims-made and reported professional liability policy will not cover a Massachusetts lawyer who failed to notify three different insurers about a potential suit against him, the First Circuit Court of Appeals has ruled.
The decision – which pitted lawyer Paul A. Gargano against insurers Liberty International Underwriters, Greenwich Insurance Co. and NCMIC Insurance Co. – upholds the ruling of a lower, district court.
Gargano had sued each of the insurers for failure to pay a claim against him. Each company had issued successive claims-made and reported liability policies for Gargano and his firm between Sept. 2004 and Sept. 2007.
Garagano was sued in 2005 by another lawyer, Christopher N. Hug, for failure to pay a lien on a workers’ compensation case which Gargano had taken over from Hug at a client’s request.
In 2007, a court in Massachusetts awarded a $102,000 judgment to Hug over the lien. Garagano sought coverage under his professional liability policy.
However, because the claim was first made in 2005 and not reported by Gargano until 2007, all three insurers declined to pay it, citing the claims-made and reported exclusion.
Garagano had argued that his failure to notify the insures of a potential claim should not relieve them of their obligation to pay, since the timing of the notification did not affect their ability to defend against it.
A Massachusetts District Court dismissed that argument, siding with the insurers. The Circuit Court agreed.
“Because Gargano has not alleged a claim that was first made and reported during the coverage period of any of the policies at issue, the complaint states no plausible breach of contract claim for denial of coverage,” the court stated in its opinion.
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