Sherwood Brands, Inc. v. Great American Insurance
13 A.3d 1268
| Md. | 2011Background
- Sherwood Brands and Great American issued a 2007–08 Directors', Officers' and Employment Practices Liability Insurance policy to Sherwood.
- Policy required notice of a claim within the policy period or within 90 days after the end of the period for certain claims; the policy is described as a claims-made policy with a reporting component.
- Koelsch filed claims in Massachusetts during the policy period; Sherwood did not notify Great American until after the 90-day window elapsed.
- Sherwood also faced an Israeli civil suit served during the policy period; notice to Great American followed more than 90 days after policy end.
- Great American denied coverage, arguing late notice breached the policy; Sherwood sought declaratory relief and damages for breach.
- Maryland Insurance Article § 19-110 requires prejudice to deny coverage based on late notice when the insured breaches the policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 19-110 applies to this policy | Sherwood argues § 19-110 governs all liability policies regardless of policy type. | Great American argues § 19-110 does not apply to claims-made policies or to policies where breach is not shown to prejudice. | § 19-110 applies where there is a breach (late notice treated as breach) and prejudice must be shown; not dispositive that T.H.E. controls entirely, but requires prejudice analysis for this case. |
| What type of policy governs the case and how notice is triggered | Sherwood contends the 2007–08 policy is a claims-made policy with notices governed by the policy’s covenants, not a strict condition. | Great American contends the policy is a traditional claims-made or claims-made-and-reported form requiring prejudice analysis. | Court distinguishes the policy’s structure and holds that § 19-110 applies where the act triggering coverage occurs during the period and notice is not timely; Sherwood’s breach triggers prejudice inquiry. |
| Resolution of summary judgment given the statute and policy form | Sherwood sought summary judgment on coverage and declared that Great American must pay. | Great American sought summary judgment denying coverage due to late notice and non-prejudice analysis. | The circuit court’s grant of summary judgment is vacated; remanded for proceedings consistent with § 19-110’s prejudice standard. |
| Role of T.H.E. decision in the present case | Sherwood argues T.H.E. controls and excludes § 19-110 prejudice requirement for late notice in a claims-made policy. | Great American urges following T.H.E. as controlling on claims-made policies. | T.H.E. is not dispositive; Maryland’s own text and policy considerations in § 19-110 govern, with a tailored prejudice inquiry for this case. |
Key Cases Cited
- Watson v. United States Fidelity and Guaranty Co., 231 Md. 266 (Md. 1963) (notice-prejudice rule originated; strict notice typically required unless prejudice shown)
- St. Paul Fire & Marine Ins. Co. v. House, 315 Md. 328 (Md. 1989) (established prejudice doctrine and distinction between occurrence vs. claims-made policies)
- T.H.E. Insurance Co. v. P.T.P. Inc., 331 Md. 406 (Md. 1993) (limited prejudice requirement in late-notice scenarios for claims-made policies)
- Local Gov't Ins. Trust v. Johns Hopkins Univ., 388 Md. 162 (Md. 2005) (adopted prejudice rule; statutory context for notices and cooperation)