In Darwin Nat'l Assur. Co. a/k/a Allied World Specialty Ins. Co. v. Kentucky St. Univ., ___ S.W.3d ___, No. 2019-CA-1811-MR, 2021 WL 1045716 (Ky. Ct. App. March 19, 2021) (stated not final), the Kentucky Court of Appeals faced a question of first impression.
"The issue is whether the notice-prejudice rule applies entitling KSU to coverage under a claims-made-and-reported policy after providing notice of the claim to Allied World three days late." Darwin, 2021 WL 1045716, at *1. "KSU" is short for Kentucky State University, which is the policyholder in this case.
Darwin a/k/a Allied World issued a "claims-made-and-reported" professional liability policy to KSU. After a time, KSU was confronted with claims of wrongful discharge and intentional infliction of emotional distress. Darwin, 2021 WL 1045716, at *1.
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Darwin-Allied contended that KSU reported the claims late under the policy;
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KSU contended that Darwin-Allied had to prove that it was prejudiced by the allegedly late notice, and KSU argued that the carrier was not prejudiced.
To resolve this open question in Kentucky, the Court of Appeals turned to among other sources the Restatement of Liability Insurance (Am. Law Inst. 2019) and concluded that KSU failed to satisfy the "claims-reporting condition of the policy" after consulting the Restatement. Darwin, 2021 WL 1045716, at *5.
Further, on the facts including the parties' negotiations surrounding the insurance policy at issue in this case, the Court rejected "application of the notice-prejudice rule to claims-made policies." Darwin, 2021 WL 1045716, at *6.
Open questions make new law, one way or another; sometimes broad questions depend for their resolution on the facts of particular cases and policies.
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