Background
Henry Walton Bishop Jr., an 87-year-old vulnerable adult placed in a J&S Assisted Living facility, wandered away unsupervised in July 2012 and was struck and killed by a logging truck. State agencies investigated the death. J&S manager Richard Marshall reported the death and investigations to the facility’s insurance agent, but no one had then made a demand for damages or threatened suit.
J&S held a claims-made policy issued by National Assisted Living Risk Retention Group (NALRRG) for 2012. The policy was later cancelled retroactively for asserted nonpayment, and J&S did not obtain extended reporting coverage or timely renew without a coverage gap. The Estate sued J&S in 2014, obtained a $20 million wrongful-death judgment, and was assigned J&S’s rights under the 2012 policy. After a bench trial, the circuit court held NALRRG liable for $50,000 in policy limits for failing to defend and cover J&S.
The Court’s Holding
The First District reversed. The 2012 policy unambiguously was claims-made, meaning coverage required a claim for damages to be made during the policy period or an applicable extended discovery period. A report of an injury or occurrence that might later produce a claim is not itself a claim.
Marshall’s 2012 call reporting Bishop’s death and the regulatory investigations did not constitute a claim under the policy. Nor did agencies’ inquiries about whether J&S maintained required insurance: those investigations were not brought on Bishop’s or the Estate’s behalf and did not seek damages or services. The first qualifying claim was the Estate’s 2014 wrongful-death suit, well after the 2012 policy expired. The court did not reach theories concerning the later policies because the Estate had dismissed those claims with prejudice.
Key Takeaways
- Under a claims-made policy, notice of an incident is distinct from a demand for damages or a suit.
- Government regulatory and criminal investigations do not become a claim merely because agencies ask about insurance coverage.
- An assignee in proceedings supplementary obtains only the insured’s existing rights, subject to the policy’s reporting and coverage limits.
Why It Matters
The decision underscores that claims-made coverage turns on when a qualifying claim is made, not simply when the underlying injury occurs or when the insurer learns of it. Insureds facing a potential claim must preserve reporting rights through timely renewal or available extended reporting coverage.