Facts
- A law firm, Dolan, Fertig & Curtis, held a claims-made professional liability policy issued by Gulf Insurance Company for November 20, 1978 to November 20, 1979.
- The Gulf policy limited coverage to claims arising from professional services during the policy period, first made against (or known to) the insured during the policy period, and reported to Gulf during the policy period.
- Gulf offered an optional extended reporting endorsement purchasable shortly after policy termination; the firm did not buy it.
- The firm did not renew with Gulf and instead obtained a claims-made policy from another insurer for November 20, 1979 to November 20, 1980, with retroactive coverage but excluding claims based on occurrences known to the insured before that policy period.
- On November 19, 1979, the last day of the Gulf policy period, a former client sent the firm a letter alleging gross negligence and requesting that the firm notify its malpractice carrier.
- The firm notified the subsequent insurer in early December 1979; that insurer denied coverage in January 1980 based on the prior-knowledge exclusion.
- The firm then notified Gulf in February 1980; Gulf denied coverage because notice was not given within the Gulf policy period.
- The former client obtained a malpractice judgment against the firm exceeding $50,000.
- The firm sought declaratory relief to determine coverage obligations; the trial court granted summary judgment to Gulf based on late notice under the claims-made policy.
Issues
- Whether a court may imply a “reasonable” post-expiration period to report a claim under an unambiguous claims-made professional liability policy that requires reporting within the policy period.
- Whether failure to report within the policy period defeats coverage without any requirement that the insurer show prejudice.
Decision
- The Florida Supreme Court quashed the district court’s decision that had implied a reasonable post-expiration reporting period.
- The Court enforced the claims-made policy as written and held that courts may not add a judicially created “reasonable time” for reporting beyond the policy term.
- The Court reinstated the trial court’s summary judgment for Gulf, resulting in no coverage under the Gulf policy for the malpractice judgment.
Legal Principles
- In a claims-made policy, the requirement that a claim be reported within the policy period is a defining element of coverage, not merely a notice condition.
- When claims-made policy language is clear and unambiguous, courts must enforce the temporal reporting requirement and may not rewrite the contract to expand coverage.
- Imposing a post-expiration “reasonable time” to report would extend the insurer’s risk beyond the agreed term and premium and is not a proper judicial remedy.
- Where timely reporting is a condition precedent to coverage in a claims-made policy, late reporting defeats coverage and the insurer need not prove prejudice.
Conclusion
The court held that an unambiguous claims-made legal malpractice policy requiring notice within the policy period must be enforced as written, and a court cannot imply a reasonable post-expiration reporting period to create coverage that the insured did not purchase.