## Facts

- Thoracic Cardiovascular Associates, Ltd. and physician Thomas Trahan held a claims-made professional liability policy issued by St. Paul Fire and Marine Insurance Company (St. Paul).
- The policy provided coverage only when a claim was made and reported to St. Paul during the policy term (or during any optional reporting-endorsement period purchased after termination).
- On February 16, 1988, the insureds canceled the policy.
- After termination, St. Paul and the insureds’ St. Paul insurance broker separately sent letters warning that the policy was claims-made and that, without replacement insurance or St. Paul’s optional reporting endorsement (“tail” coverage), claims based on pre-termination acts but reported after termination would not be covered.
- On October 15, 1987, a medical-malpractice lawsuit was filed against the insureds.
- The insureds maintained they were not aware of the malpractice lawsuit during the policy period.
- The insureds did not notify St. Paul of the lawsuit until August 30, 1988—more than six months after cancellation and outside the policy period.
- St. Paul denied coverage because the claim was not reported during the policy term (and no reporting endorsement had been purchased).
- The insureds filed a declaratory-judgment action seeking a ruling that St. Paul had a duty to defend (and provide coverage) for the malpractice suit.
- The trial court granted summary judgment for the insureds, and St. Paul appealed.

## Issues

1. Whether a claims-made professional liability policy provides coverage when a lawsuit was filed during the policy term but was not reported to the insurer until after the policy ended, where the insured lacked knowledge of the suit during the policy term.
2. Whether impossibility (or similar equitable doctrines) excuses noncompliance with a claims-made policy’s within-the-policy-period reporting requirement.

## Decision

- The Arizona Supreme Court reversed the judgment for the insureds.
- The court held that, under a claims-made policy, timely reporting within the policy period (or within a purchased extended reporting period) is a condition that defines the scope of coverage.
- Because the insureds first reported the malpractice claim after the policy terminated and did not purchase the optional reporting endorsement, coverage did not attach and St. Paul owed no duty to defend or indemnify.
- The court rejected impossibility as a basis to excuse late reporting, reasoning that excusing late notice would rewrite the policy’s time limits and convert claims-made coverage into a different kind of insurance.

## Legal Principles

- A claims-made policy can limit coverage to claims that are both made and reported within the policy period (or within a contracted extended reporting period).
- In a claims-made policy, the reporting requirement is not merely a post-loss notice condition; it is part of the coverage grant itself.
- Courts generally enforce clear claims-made reporting deadlines as written and will not extend coverage beyond the policy’s stated time boundaries through equitable doctrines.
- Where an insurer offers optional extended reporting coverage and the insured declines it, the insured bears the risk that a claim will be asserted or discovered too late to be reported within the policy term.

## Conclusion

Thoracic Cardiovascular Associates holds that a claims-made professional liability policy’s requirement that a claim be reported within the policy term (or within a purchased reporting-endorsement period) is coverage-defining, so an insured’s lack of knowledge of a lawsuit during the policy term does not excuse late reporting, and the insurer has no duty to defend or indemnify a claim first reported after termination.


Thoracic Cardiovascular Associates, Ltd. v. St. Paul Fire and Marine Insurance Company, 891 P.2d 916 (Ariz. 1994)