In Childrens Hospital v. Lexington, Childrens (CHC) was sued for professional negligence. It failed to provide notice to its insurer, Lexington, “as soon as practicable”, but gave notice within the “date certain” notice requirement of the claims-made policy. As a result, the court determined it could use the notice prejudice rule to determine if the notice was timely.
Professional liability policies are often claims made policies, which have different requirements for giving the insurance company notice of claims than the more common occurrence liability policies. Generally, claims made policies require a policyholder to provide notice of a claim as soon as practicable, but in any event within the policy period. In this case, Childrens gave notice of the claim within the policy period, but 9 months after suit was filed. Thus, Childrens did not provide notice to Lexington “as soon as practicable.” But, Lexington’s own failures to promptly follow up on the notice when it did receive it, failure to request specific information or request that settlement be explored meant that Lexington’s failures, not Childrens, was the cause of any prejudice to the insurer, Lexington. As a result, Lexington had to cover the judgment.
. . . Lexington failed to make any inquiry about the case, exhibit any desire to learn about, comment on, or participate in preparation and trial, or otherwise exercise any claimed right under the Policy to monitor or work with CHC’s attorney in settlement negotiations, investigation, or trial. This failure completely undermines Lexington’s speculative and unsupported position that it was prejudiced because with earlier notice it would have been able to avoid or mitigate the liability it now faces by resolving the [underlying] lawsuit for less than the ultimate judgment entered against CHC.
Case 1:15-cv-01904, United States District Court, Colorado, 04/13/17