Philadelphia Consolidated Holding Corp. v. LSI-Lowery Systems, Inc., 775 F.3d 1072

Background

LSi (technology consultant) implemented business software for Hodell in Dec 2004; system went live March 1, 2007, and immediately exhibited performance problems.
From March 2007 through Jan 2008 Hodell repeatedly complained by email, threatened legal action, involved attorneys (July 2007 demand letter), and in Jan 2008 proposed a refund as resolution.
Hodell sued LSi in Ohio on Nov 21, 2008 (claims: fraud, breach, negligence, negligent misrepresentation).
LSi first notified its insurer, Philadelphia Insurance Companies (PIC), on Dec 8, 2008. PIC had issued consecutive claims-made professional liability policies covering 4/23/2007–4/23/2008 and 4/23/2008–4/23/2009.
Each policy required notice during the policy period of any claim or any circumstance that could reasonably be expected to give rise to a claim; the 2008 policy broadened the definition of “claim” to expressly include demands for money or services and barred coverage for wrongful acts the insured had reason to believe might give rise to a claim.
The district court granted PIC summary judgment, holding LSi failed to give timely notice under the 2007 policy and that Hodell made a claim before the 2008 policy period began, so there was no coverage under either policy. The Eighth Circuit affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether LSi gave timely notice under the 2007 policy	LSi/Hodell argued disputes began earlier but did not trigger a reportable claim during 2007 policy period	PIC argued no notice of any claim or potential claim was given during the 2007 policy term	No — undisputed that no notice was given during the 2007 policy period, so no coverage under 2007 policy
Whether communications before 4/23/2008 constituted a "claim" under the 2008 policy	LSi/Hodell contended pre-2008 communications were dissatisfaction/contract disputes, not a claim for money or services	PIC argued emails and attorney letter constituted demands and threats to pursue legal remedies, i.e., a claim made before the 2008 policy began	Yes — the court found emails and the July 2007 attorney letter amounted to a demand for money/services and manifestation of intent to pursue legal remedies, so the claim was first made before the 2008 policy period
Whether LSi needed to notify PIC absent an explicit demand for a dollar amount	LSi/Hodell argued no specific dollar amount was demanded so no claim existed	PIC argued a proposed refund and settlement offer qualified as a demand for money even without a specific figure	Held for PIC — a proposal for refund/settlement qualified as a demand for money under either policy definition
Whether insurer must show prejudice to deny coverage for late notice under claims-made policy	LSi/Hodell argued Missouri regulation requires prejudice when denying for late notice	PIC argued prejudice is irrelevant under Missouri law for claims-made policies	Held for PIC — under Missouri law and controlling precedent, timely notice is essential for claims-made policies and insurer need not show prejudice

Key Cases Cited

Munroe v. Cont’l W. Ins. Co., 735 F.3d 783 (8th Cir. 2013) (standard of review for summary judgment and policy interpretation)
Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129 (Mo. banc 2007) (insurance-policy language given ordinary-person meaning)
Wittner v. Poger Rosenblum & Spewak, P.C., 969 S.W.2d 749 (Mo. banc 1998) (claims-made policy coverage triggered by notice to insurer; no prejudice requirement)
Lexington Ins. Co. v. St. Louis Univ., 88 F.3d 632 (8th Cir. 1996) (timely notice defines insurer’s obligation under claims-made policy)
Berry v. St. Paul Fire & Marine Ins. Co., 70 F.3d 981 (8th Cir. 1995) (attorney demand letter can qualify as a claim under a policy)