Hermanson Company LLP v. Siriuspoint Specialty Insurance Corporation, 2:23-cv-00431

Hermanson Company, a mechanical contractor, held a professional liability insurance policy issued by Siriuspoint Specialty Insurance for a project in Puyallup, Washington, covering March 1, 2021–March 1, 2022.
Hermanson incurred substantial costs ("Redress Expenses") to address design and engineering issues before notifying Siriuspoint, aiming to avoid or mitigate professional negligence claims from the general contractor, Anderson Construction.
Hermanson tendered a claim to Siriuspoint within the policy period, but after incurring the Redress Expenses.
Siriuspoint denied coverage, asserting Hermanson breached a policy requirement by failing to obtain prior written consent before incurring the expenses.
Hermanson sued in federal court, claiming breach of contract, bad faith, and statutory violations; both parties moved for summary judgment focusing on the "Contractor’s Professional Redress Coverage" prior consent requirement.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Prior Consent Clause is a condition requiring insurer to show prejudice for denial	The prior consent clause is a post-loss condition; Siriuspoint must show actual and substantial prejudice to deny coverage	The prior consent clause is a core coverage requirement; breach allows denial of coverage without prejudice	It is a condition; insurer must prove actual and substantial prejudice to deny
Applicability of notice-prejudice rule under Washington law	Applies to breach of notice/consent/cooperation conditions	Not applicable to core coverage requirements, which are strictly enforceable	Notice-prejudice rule applies here
Whether Hermanson’s notice breached “claims-made-and-reported” requirements, precluding coverage	No breach; claim was reported within policy period, only prior consent condition breached	Prior consent is part of coverage grant, so breach precludes coverage irrespective of prejudice	No; only prior consent condition breached, not "claims-made-and-reported" requirement
Effect of potentially ambiguous contract language or multiple consent-related clauses	Ambiguity, if any, must be resolved in favor of coverage for Hermanson	Clauses are clear, threshold requirements, and strictly enforceable	Ambiguities resolved against insurer; policy must be construed to favor insured

Oregon Auto. Ins. Co. v. Salzberg, 85 Wash. 2d 372 (establishes insurer must show actual and substantial prejudice to deny coverage for breach of cooperation clause)
Mut. of Enumclaw Ins. Co. v. T & G Const., Inc., 165 Wash. 2d 255 (applies prejudice rule to cooperation clause violations)
Pub. Util. Dist. No. 1 of Klickitat County v. Int’l Ins. Co., 124 Wash. 2d 789 (extends prejudice rule to consent-to-settle clause violations)
Safeco Title Ins. Co. v. Gannon, 54 Wash. App. 330 (distinguishes notice-prejudice rule for occurrence vs. claims-made policies)