Late notice deemed to be no issue in D&O insurance coverage case

By Carrie Salls | Mar 27, 2017

ANNAPOLIS, Md. (Legal Newsline) – National Union Fire Insurance Co. of Pittsburgh, Pennsylvania lost its appeal of a Court of Special Appeals decision that hinged on whether late notice of a Racketeer Influence and Corrupt Organizations case against Fund for Animals Inc. (FFA) hurt National Union in related litigation. 

According to an opinion filed by the Maryland Court of Appeals on Jan. 27, an insured party is deemed to have breached an insurance contract when that party does not notify the insurer of a claim filed against it within a specific time period. Such a breach allows the insurer to deny coverage if it can prove that the late notice “results in an actual prejudice to the insurer.”


In the case in question, FFA sued Ringling Bros. and parent company Feld Entertainment Inc. in an Endangered Species Act case for mistreatment of elephants.

Feld filed a RICO claim against FFA and other plaintiffs in the mistreatment case “for paying a witness to testify in order to establish standing to sue Feld in the ESA case and concealing those payments during discovery," and FFA filed a lawsuit against National Union for failure to provide coverage related to the RICO case, court documents state.


The FFA coverage case falls under the purview of directors and officers liability insurance, which covers officers or an organization for losses or legal defense costs.


“In the coverage case, National Union was not able to establish any evidence of actual prejudice that it suffered as a result of the late notice from FFA of the RICO Case,” wrote the Court of Appeals, Maryland's highest court.

“The outcome of the ESA case and those adverse factual findings would not have changed had National Union been notified earlier of the RICO case.”


In addition, the appeals court said the insurer was not entitled to “intervene in, impact or influence” the mistreatment case.


According to a blog post published by Kevin M. LaCroix, an attorney and executive vice president of RT ProExec, National Union denied FFA’s coverage request after the insured did not notify it of the RICO claim for 2.5 years after it was filed.


“The court’s ruling underscores the importance of the notice prejudice rule in protecting policyholder’s rights under liability insurance policies,” LaCroix wrote.


Appeals Court Judge Clayton Greene Jr. wrote the unanimous seven-judge opinion that upheld the ruling against National Union.


“The Court of Special Appeals noted that if FFA had moved for judgment in the coverage case, the court would have directed the Circuit Court to enter judgment in favor of FFA on liability,” the opinion said. “Further, if FFA did move for judgment on remand the trial court should enter judgment in FFA’s favor.”

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