Koransky, Bouwer & Poracky, P. v. Bar Plan Mutual Insurance Comp
2013 U.S. App. LEXIS 6558
7th Cir.2013Background
- Koransky & Bouwer represented a Buyer in a Lima, Ohio Rite Aid purchase; executed contracts were drafted by the firm for four transactions, but the executed contract for the fourth deal was misfiled and not delivered to Seller.
- Seller rescinded the fourth contract after learning it never received the Buyer’s executed contract; Buyer sought malpractice coverage from The Bar Plan Mutual Insurance Co.
- The Bar Plan denied coverage under a 2007-08 policy, relying on a discovery clause and an exclusions provision that preclude unreported acts predating the policy period if the insured knew or should have known of potential claims before the policy took effect; earlier litigation in Alabama and Ohio arose from the same misdelivery.
- Koransky & Bouwer held a renewal application for 2007-08 with a negative answer about knowledge of any incident that might give rise to a claim; the policy period ran from April 15, 2007, to April 15, 2008.
- The district court granted summary judgment for The Bar Plan, holding that the claim was not covered because notification occurred after the relevant pre-policy conduct and within the prejudicial window, and the Seventh Circuit affirmed, applying Indiana law and the policy’s terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of notice under a claims-made policy | Plaintiff argues notice occurred when Buyer filed a formal claim in August 2007. | Defendant contends Koransky & Bouwer knew of potential malpractice in February–March 2007 and should have notified before the 2007-08 policy period began. | Notice given during policy period was untimely; knowledge before policy onset triggers exclusion. |
| Effect of prejudice on untimely notice in a claims-made policy | Prejudice should not be required for coverage under a claims-made policy. | Prejudice is irrelevant or not required to extend coverage if untimely notice occurs before the policy period. | Prejudice is legally irrelevant under the policy; timely notice is the controlling factor. |
| Renewal misrepresentation and coverage response | Misrepresentation in renewal application could foreclose coverage or allow rescission. | Misrepresentation supports rescission or exclusion of coverage under the policy terms. | Court did not resolve rescission issue on appeal; affirmed based on notice interpretation and policy terms. |
Key Cases Cited
- Paint Shuttle, Inc. v. Cont'l Cas. Co., 733 N.E.2d 513 (Ind. Ct. App. 2000) (notice is material to insurer's liability; 'claims-made' policy requires timely notification)
- Ashby v. Bar Plan Mut. Ins. Co., 949 N.E.2d 307 (Ind. 2011) (clarifies notice requirements under professional liability policies)
- St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531 (U.S. 1978) (noting general principles of insurance and notice)
- London Guarantee & Accident Co. v. Siwy, 66 N.E. 481 (Ind. Ct. App. 1903) (early authority on notice obligations in insurance context)
- Mass. Bay Ins. Co. v. Vic Koenig Leasing, Inc., 136 F.3d 1116 (7th Cir. 1998) (reinforces interpretation of 'claims-made' policies)