In a decision I previously reported on, Anderson v. Aul, the Court of Appeals was asked to examine the reporting requirements of a claims-made-and-reported policy of insurance, which is a common type of policy in the context of errors and omissions and professional liability coverage. Claims-made-and-reported policies differ from “occurrence” policies, because occurrence policies generally provide coverage for injuries that “occur” during the policy period even if the claim for the resulting injury is not filed until after the policy expires. In contract, claims-made-and-reported policies contain two requirements to trigger coverage: 1) the claim must be made during the policy period; and 2) the insured must give written of the claim within the policy period.
The appellate court examined a claims-made professional liability policy written by Wisconsin Lawyers Mutual Insurance Company with a policy period of April 1, 2009 to April 1, 2010. However, WLMIC did not receive notice of the claim of malpractice against the insured attorney until March 9, 2011. Despite this delay and despite the language of the policy requiring notice to be made during the policy period, the appeals court held that a “finding of untimeliness is not solely dispositive” of the coverage question and that the circuit court must also determine whether the untimely notice prejudiced the insurer. In its published opinion, the Court of Appeals looked to the reasonableness standard set forth in Wisconsin statutes and held that unreasonably late notice is not per se prejudicial to an insurer. The appellate court’s decision was a blow to insurers who relied on the claims-made-and-reported type of policy to limit their exposure and to keep premiums low.
On review of the Court of Appeals’ decision, the Wisconsin Supreme Court reversed. The court noted that Wisconsin’s notice-prejudice statutes, Wis. Stat. §§ 631.81(1) and 632.26(2) provide that an insured’s failure to furnish timely notice of a claim as required by the terms of a liability policy will not bar coverage unless timely notice was “reasonably possible” and the insurance company was “prejudiced” by the delay. ¶ 4. However, the court held that these statutes do not supersede the policy’s notice requirements. ¶ 7.