Insured’s untimely notice precluded coverage despite lack of prejudice to D&O insurer

by Chris Graham and Joseph Kelly

Secure Energy, Inc. v. Philadelphia Indemnity Insurance Company, Case No. 4:11CV1636TIA (E.D. Mo. May 15, 2013)

Philadelphia Indemnity issued D&O policies to Secure Energy, Inc. annually from October 11, 2007 to October 11, 2012.

On December 28, 2007, Secure Energy’s Board of Directors received a demand from its salesman for money owed for commissions. The salesman filed suit on May 16, 2008, but not against Secure Energy. Secure Energy was added as a defendant on April 13, 2009. The suit was voluntarily dismissed on June 25, 2009 and re-filed on July 8, 2009. Secure Energy didn’t give notice to its D&O insurer until May 4, 2011.

The policy provided, in pertinent part:

“In the event that a Claim is made against the Insured, the Insured shall, as a condition precedent to the obligations of the Underwriter under this Policy, give written notice to the Underwriter as soon as practicable after any of the directors, officers, governors, trustees, management committee members, or members of the Board of Members first become aware of such Claim, but, no later than 60 days after the expiration of this Policy, Extension Period, or Run-Off Policy, if applicable.”

Philadelphia moved for summary judgment arguing there was no coverage under its policy due to Secure Energy’s late notice.

Relying on Missouri Supreme Court precedent, the District Court stated that “Notice must be given to the insurer during the policy period. If the insured does not give notice within the contractually required policy period, there is simply no coverage under a claims made policy, whether or not the insurer was prejudiced.”

Secure Energy’s late notice thus precluded coverage even without prejudice to Philadelphia.

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