Expert Commentary

Check the Address When Reporting Claims

It seems simple. When you are sending a letter, make sure you have it addressed correctly. Yet it is easy to make a mistake and send a letter to the wrong place. Such inattention when managing notices under historic commercial general liability (CGL) policies can potentially cost the policyholder millions in foregone indemnity and defense coverage.

June 2010

In IMC Global v. Continental Ins. Co., 378 Ill. App. 3d 797, 883 N.E.2d 68 (2007), the insured acquired an abandoned fertilizer plant that was leaking toxic chemicals. At a town hall meeting, local residents demanded $175 million to relocate the community and to compensate them for past "injustices." Sixteen months later, they filed a class action in federal court.

The insured's legal department sent over a stack of materials to the risk manager with instructions to notify the company's historic CGL insurers on the risk from 1910 to 1986. The paperwork contained copies of notice letters the company had previously sent out regarding a 1996 claim at the plant. One of the 1996 notice letters concerning 1967–68 CGL policies was addressed to "Employer's Mutual Casualty Company" in Des Moines, Iowa. The risk manager did not verify the accuracy of the address and sent notice of the class action to the same place. When the class action was dismissed and refiled, the risk manager sent another notice using the same Iowa address block as before.

As it turned out, the 1967–68 policies were issued by "Employer's Mutual Insurance Company" of Wisconsin (which had been taken over by Wausau), not the "Employers Mutual Casualty Company" of Des Moines, Iowa. The two companies were unrelated. So Wausau never received the risk manager's letters. Eventually the insured's defense counsel notified Wausau, demanding that it pay 100 percent of the ongoing defense costs, but by that time it was too late.

On these facts, the appellate court held:

  • The risk manager's wayward letters sent to Iowa were not sufficient to serve notice to Wausau.
  • Accidentally sending notices to the wrong insurer does not legally excuse the policyholder from its obligations under the policy.
  • Notice sent to Wausau by outside counsel, some 13 months after the original suit, and 6 months after the refiled suit, was unreasonable as a matter of law.

The trial court had held that Wausau was prejudiced as a result of the late notice, and the insured did not appeal that part of the decision. Therefore, the appellate court affirmed the trial court's judgment that no coverage was owed under the 1967–68 policies.

Several steps should have been taken to avoid this kind of mistake.

  1. It should be the risk manager's responsibility (not legal's) to keep correct and current contact information on each of the company's historic CGL insurers.
  2. The risk manager should not have relied on the address blocks from old notice letters sent in 1996 when issuing new notices 4 or 5 years later. Things could have changed in the interim.
  3. The risk manager should have double-checked the address blocks of all notice letters against the insurer identified in the policies themselves. This, of course, would require the risk manager to keep copies of all policies for future reference.
  4. The risk manager should have kept up with the merger/acquisition activity of the 70 or so primary and excess insurers providing legacy coverage. He should have known that Wausau took over as the insurer for the 1967–68 policies at issue.
  5. The risk manager should have maintained a chart showing which of the 70 primary and excess insurers did or did not respond to each notice letter sent.
  6. There should have been a tickler system to prompt the risk manager to follow up if one of the insurers in the notice matrix did not respond in a timely fashion.

As they say, the devil is in the details. When trying to notify legacy insurers, one of the critical details is to make sure you are sending notices to the correct insurer (or the correct successor to the correct insurer). If you don't pay close attention to details like that, you may lose your opportunity for coverage.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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