Insurance Law

Extended Reporting Period Held to Apply Only to Claims First Made During That Period and Not Claims Made During the Original Policy Period

PCCP, LLC v. Endurance Am. Specialty Ins. Co. , 2013 U.S. Dist. LEXIS 114400 (N.D. Cal. Aug. 13, 2013) [enhanced version available to subscribers]

PCCP, LLC v. Endurance American Specialty Insurance Co. concerned the interpretation of an Automatic Extended Reporting Provision (“AERP”) which, by its terms, provided coverage only for “[c]laims first made against the Insured during the” AERP itself, and not for claims first made during the original policy period. In PCCP, an underlying claim was first made against the insured during the original policy period, but that claim was not reported to the carrier until approximately one month after the policy period lapsed. The policy’s AERP provided coverage for claims reported to the carrier within 60 days after the policy period lapsed, but only if the claim was first made during the AERP. The carrier denied coverage for the claim on the basis that it was not timely reported, and the policyholder sued. The parties filed cross-motions for summary judgment, and the PCCP court ruled in favor of the carrier.

In reaching its ruling, the PCCP court acknowledged that legal community generally understands AERPs to provide an extended reporting period for claims first made during the policy period. Based on this understanding, the court held that the carrier’s labeling of the above-cited provision as an AERP created “some appeal” for the policyholder’s position that the claim against it should be covered. However, the PCCP court went on to hold that “it is hornbook law that ‘how parties label their contract is not determinative of its nature’” and that the language of the AERP in the subject policy was clear and unambiguous. Accordingly, the court found that the AERP provided coverage only for claims first made during the 60-day period following the original policy period, and granted the carrier’s motion for summary judgment.

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