SDV Insights

It is well known that insurance policies universally impose a requirement that a “claim” be timely submitted. Unfortunately, this basic coverage condition is so well known that policyholders often overlook what exactly constitutes a “claim” under their insurance policy. A decision rendered by the United States District Court for the Southern District of New York earlier this year is a reminder that policyholders must carefully read their insurance policies to understand exactly what constitutes a “claim” to avoid forfeiting coverage simply because of a misunderstanding of whether a claim as defined by the policy is a “claim.”

In Pine Management, Inc. v. Colony Insurance Company,¹  the parties disputed whether a July 17, 2018, letter (the “Letter”) received by the insured, Pine Management, Inc. (“Pine”), constituted a “claim” under a claims-made and reported policy with a policy period of August 1, 2018, to December 1, 2019. The insurer, Colony Insurance Company (“Colony”), argued the Letter was a “claim” first made against Pine before the policy incepted to avoid providing coverage for a related lawsuit filed against Pine on July 26, 2019.

The District Court began its analysis noting the policy defined a “claim” as “a written demand received by [Pine] for monetary, nonmonetary, or injunctive relief.” Turning to the Letter itself, the District Court held that the Letter plainly met the definition of a “claim” under the policy. The District Court supported its holding by highlighting several aspects of the Letter:   

1. The Letter “advised [P]ine of claims by the Schneider/Schwartz Group against Pine.”
2. The Letter contended that “there are many serious issues arising from Pine’s management . . . and such claims should survive a motion to dismiss and a motion for summary judgment.”
3. The Letter detailed numerous allegations, including that Pine “breached its fiduciary dut[ies],” “ha[d] not acted in good faith,” “breached provisions of the governing Operations Agreements,” “failed to disclose material facts,” was “involved in related party transactions,” and “failed to provide key documents.”
4. The Letter alleged that “Pine was paid $622,742 in fees in 2017, despite the fact that Pine had ‘no authority to pay itself fees.’”
5. The Letter requested “non-monetary relief in the form of an accounting and demands ten categories of documents for inspection.”
6. The Letter “suggest[ed] that a meeting be scheduled to resolve the Schnieder/Schwartz Group’s concerns” in an effort to “bring amount a mutually satisfactory resolution of these claims without having to commence litigation that would be costly to all parties involved.”

Pine attempted to overcome the Letter’s importance by advancing several unsuccessful arguments.

First, Pine contended that the Letter simply recited points of law and requested a review of documents. The District Court rejected this argument by relying on Second Circuit and New York case aw holding that a letter demanding documents or that the insured rectify a problem was sufficient to constitute a claim under an insurance policy.²

Second, Pine argued the Letter used “precatory language” that failed to put Pine “on notice of the drastic legal repercussions that could result from noncompliance.” The District Court rejected this argument as well because the assertion contradicted the plain language of the Letter, which explicitly mentioned litigation that allegedly would survive pre-trial motion practice. 

Finally, Pine tried to create a question of fact by arguing it was unclear from the Letter what the requested meeting would entail. The District Court rejected this argument citing to previous case law from the court holding that “[a]lthough counsel did not specifically state the purpose of meeting was to demand monetary damages or other relief, the implication is that counsel requested the meeting for this reason.”³

In short, the District Court held the Letter was a “claim” predating the policy period and, therefore, Pine was barred from receiving coverage for the subsequent lawsuit filed against it. Under the District Court’s holding, if Pine had comparable coverage in place prior to the insurance policy in dispute, Pine would needed to have tendered a claim under that earlier policy when it received the Letter.

The outcome in Pine Management, Inc. is a blunt reminder that policyholders must pay close attention to the definition of “claim” within their insurance policies to avoid forfeiting coverage that may otherwise be available but for failing to timely report a “claim.” Coverage counsel can assist policyholders with the assessment and reporting of claims to maximize coverage.

For more information, please contact Kyle A. Rudolph at KRudolph@sdvlaw.com.

*Special thanks to Eddie Williams for contributing to this case alert.

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¹No. 1:22-cv-02407 (MKV), 2023 WL 2575082 (S.D.N.Y. Mar. 20, 2023)
²See Weaver v. Axis Surplus Ins. Co., 639 F. App’x 764, 766-67 (2d Cir. 2016); McCabe vv. St. Paul Fire & Marine Ins. Co., 814 N.Y.S.2d 814, 916 (N.Y. App. Div. 2010).
³Seneca Ins. Co. v. Kemper Ins. Co., No. 02 CIV. 10088 (PKL), 2004 WL 1145830 (S.D.N.Y. May 21, 2004), aff’d 133 F. App’x 770 (2d Cir. 2005).