December 24, 2004
Cases—Notice—Provision in claims-made policy is condition precedent even absent prejudice
A clause requiring an insured to notify its insurance carrier "as soon as possible" is a condition precedent to recovery under a claims-made policy, according to the U.S. Court of Appeals for the Fifth Circuit in an unpublished opinion relying on Texas law.
The case arose when a company called SingleEntry hired ThinkSpark to design and build a web site. Things went wrong, and SingleEntry sued for breach of contract, fraud, and violations of the the Texas Deceptive Trade Practices Act. Although ThinkSpark learned of the action no later than December 7, 2000, it waited until September 18, 2001, to notify the insurance carrier, St. Paul.
Judge Jerry E. Smith refused to import a prejudice requirement into the claims-made policy. Claims-made policies are different from occurrence policies, he noted. "Courts will not rewrite policies to permit notice-prejudice to be applied to claims-made policies, because to do so would interfere with the right to contract. A party rightly should be held to know the conditions of the policy and the conscious choice that it made in selecting a claims-made policy instead of an occurrence policy." (Citations omitted.) SingleEntry.com, Inc. v. St. Paul Fire & Marine Ins., 2004 U.S. App. LEXIS 25070 (5th Cir. Dec. 7, 2004).
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