A-18-14 Templo Fuente De Vida Corp v. National Union Fire Insurance Company of Pittsburgh, 129 A.3d 1069

Background

Plaintiffs (Templo and Fuente) sued Merl/First Independent after a failed real-estate financing transaction; the first-amended complaint was served on or about Feb 21, 2006.
First Independent held a $1 million Directors & Officers "claims-made" policy issued by National Union covering Jan 1, 2006–Jan 1, 2007, which required written notice of any claim "as soon as practicable" and within the policy period (or within 30 days after its end under certain conditions).
First Independent received the complaint in February 2006 but did not notify National Union until August 28, 2006 (≈ six-month delay); National Union denied coverage based on late notice and other defenses.
Plaintiffs and some defendants settled for over $3 million; First Independent assigned its rights under the policy to plaintiffs, who then sued National Union for declaratory relief and coverage.
Trial court granted summary judgment for National Union, concluding the six-month delay was not "as soon as practicable" and that National Union need not show prejudice to deny coverage under this claims-made policy; Appellate Division affirmed.
The Supreme Court granted certification to decide whether an insurer must show prejudice to disclaim coverage for an insured's failure to comply with a notice condition in a claims-made D&O policy.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether insurer must show appreciable prejudice to deny coverage when insured fails to give timely notice under a claims-made policy	Cooper prejudice rule should apply; insurer must prove prejudice even if notice given within policy period	Claims-made policies differ from occurrence policies; where policy language is clear and parties are sophisticated, insurer need not prove prejudice	Held: No requirement to show appreciable prejudice; insurer may decline coverage for breach of clear notice condition in a claims-made D&O policy between sophisticated parties
Whether the six-month delay satisfied the policy requirement to notify "as soon as practicable"	Delay could be excused given circumstances; factual inquiry required	Six-month unexplained delay was untimely under precedents like Associated Metals	Held: On this record the unexplained six-month delay did not satisfy "as soon as practicable"; breach of condition precedent established
Whether Zuckerman should be limited to reporting outside the policy period (vs. late reporting within the period)	Zuckerman should not permit denial absent prejudice when notice is late but within policy period	Zuckerman applies to claims-made policies generally; Cooper prejudice doctrine does not apply	Held: Court reaffirmed Zuckerman’s principle that Cooper’s prejudice requirement does not apply to bona fide claims-made policies that match insureds’ expectations
Whether the policy was a contract of adhesion such that public-policy concerns require imposing prejudice requirement	Plaintiffs: public-policy/adhesion concerns should trigger Cooper protections	National Union: policy was negotiated between sophisticated parties (broker involved); not adhesion	Held: Policy was the product of sophisticated negotiation; not a contract of adhesion, so public-policy concerns did not warrant imposing Cooper rule

Key Cases Cited

Zuckerman v. National Union Fire Ins. Co., 100 N.J. 304 (1985) (distinguishes claims-made from occurrence policies; holds Cooper prejudice doctrine inapplicable to bona fide claims-made policies)
Cooper v. Government Employees Ins. Co., 51 N.J. 86 (1968) (establishes that insurer must show appreciable prejudice before forfeiting coverage under an occurrence policy due to late notice)
Associated Metals & Minerals Corp. v. Dixon Chemical & Research, Inc., 82 N.J. Super. 281 (App. Div. 1963) (held a five-and-one-half month notice delay was not "as soon as practicable")
Werner Indus., Inc. v. First State Ins. Co., 112 N.J. 30 (1988) (enforced plain language of claims-made policy negotiated by sophisticated parties; remanded for factual inquiry into parties’ expectations)
Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 N.J. 231 (2008) (rules of contract/policy interpretation: unambiguous policy language governs; do not rewrite the policy to favor insured)
Sparks v. St. Paul Ins. Co., 100 N.J. 325 (1985) (discusses rationale for claims-made policies and insurer exposure/tail issues)