A common feature of D&O policies is that new claims “related” to lawsuits filed while an older policy was in force are covered under the old policy and not the new policy. D&O insurers police this requirement, in part, by excluding claims “reported” to older insurers. The language used in these exclusion varies somewhat, but its purpose is the same: to slot old claims with old insurers, and only new claims with new ones. But what claims are “related” is often not at all clear, especially early on in the new case. But these policies also demand immediate notice. In order avoid waiver under either policy,, brokers and policyholders ordinarily notice all new claims to all D&O insurers potentially on risk. Until each insurer reviews the claim, the policyholder does not know whether the carriers will consider the claims to be ”related.” Often the insurers themselves disagree as to whether the two claims are “related.”
On June 2, 2019, the Seventh Circuit unsettled this common, cautious practice of broad notice. In Emmis Communication Corp. v. Illinois National Ins. Co., 929 F.3d 441 (7th Cir. 2019), the court held that the term “as reported” in such an exclusion included notifying a carrier at any time, even long after the old policy had expired.
The claim in Emmis was a 2012 lawsuit that was potentially related to a claim filed back in 2010. After the 2012 lawsuit was filed, Emmis notified its current D&O carrier and the prior insurer that covered the 2010 claim. The district court held that the claims were not interrelated to the prior 2010 litigation and that the current insurer’s position that its exclusion barred coverage because Emmis had “reported” the claim to its prior carrier was wrong. The Seventh Circuit reversed and held that the term “as reported” had “no discernible temporal limitations,” and thus precluded coverage under the 2012 Illinois National policy because Emmis also “reported” the 2012 claim under the 2010 Chubb policy that covered the older claim.
Emmis filed a petition for rehearing or rehearing en banc. Because the decision would impact all D&O policyholders and insurance agents and brokers, United Policyholders, Shepherd Insurance, and MJ Insurance joined forces as amici curiae in support of Emmis’s petition.
Plews Shadley Racher & Braun represents the amici. In their brief we explained that the immense and unfair practical problems the decision created. These included unreasonably exposing brokers to malpractice liability (for noticing the “wrong” insurer at the start of what very often is a very complex case), eliminating coverage by imputed notice (if the broker was the insurer’s agent, because notice to such an agent is imputed as notice to that insurer), and inducing unnecessary expense and anxiety for policyholders who must determine, before reporting, whether their policy’s clause was too similar to the Emmis clause to risk reporting to all insurers.
As of August 21, the Emmis decision is no more. After Illinois’ National responded, the panel granted petitioner’s and amici’s request for rehearing, vacated and withdrew its July 2 opinion, and affirmed the district court without further comment. Such “no-opinion” affirmances are rare in appellate work, and even rarer on rehearing. It was a good day for Emmis and all policyholders and agents in the Seventh Circuit. The case also demonstrates the impact that amici can have in appellate cases. Complex cases often have unintended consequences. For good reason, judges are reluctant to upset existing business practices and only do so when there is a good reason for it. Where they do so, it is often useful to respectfully inform the court of the problem.