Where a jury found that a defendant insurance company breached a legal malpractice policy, the insurer’s motion for judgment notwithstanding the verdict should be allowed because the policyholder failed to give the insurer timely notice of the claim.

“This is a dispute over coverage under a ‘claims made’ insurance policy with a ‘prompt written notice’ requirement. Jurisdiction is based on diversity of citizenship.

“After a trial, a jury found that defendant State National Insurance Company breached its legal-malpractice policy with its insured, Peter T. Clark. The jury awarded $1,106,138.10 to plaintiff Joan Stormo, Clark’s assignee.

“State National has moved for judgment notwithstanding the verdict. It argues that Stormo was not entitled to recover because Clark failed to give timely notice of the claim, as required by the policy.

“The policy at issue is a ‘claims made’ policy (as opposed to an ‘occurrences’ policy) that provides coverage for claims made against the insured within the relevant period. The policy requires that notice of such a claim be given to the insurer during the policy period or within 60 days thereafter, and that in any event the insured must give ‘prompt written notice’ of such a claim.

“Here, the claim was made in October 2014, and notice was not given by the insured until December 2015, nearly fourteen months later. The notice was therefore provided well outside the time limits of the policy.

“Unfortunately for plaintiff, Massachusetts law provides for strict enforcement of specific notice requirements in a ‘claims made’ policy. That is true even if the insurer had actual notice of the claim; even if it suffered no prejudice from the late notice; and without regard to the possibility that strict enforcement might lead to an unfair result. Indeed, earlier this month, the First Circuit, applying Massachusetts law, affirmed those very principles. See President and Fellows of Harvard College v. Zurich American Insurance Co., 2023 WL 5089317 (1st Cir. Aug. 9, 2023).

“Whether that is a sound policy is certainly open to question. But as the same First Circuit opinion noted, any modification of the policy is a matter for the Supreme Judicial Court, not a federal court sitting in diversity. … Accordingly — and with considerable sympathy for plaintiff and her family, who have suffered significant financial harm that may never be redressed — the Court will grant the motion for judgment notwithstanding the verdict. …

“In light of that legal framework — and particularly in light of the First Circuit’s opinion in Harvard—it is difficult to see how the jury verdict here can stand. …

“It is undisputed that notice of the claim was not given during the policy period, or within the sixty days that followed. And while it is unlikely that State National did not have actual notice of the claim, and there is no evidence that it was prejudiced in any way, those facts are legally irrelevant; all that matters, in this context, is the date that the claim was reported. And that date — which was fourteen months after the end of the coverage period — was well outside the time limits of the policy.

“Under the circumstances, the Court sees no alternative but to grant the motion for judgment notwithstanding the verdict. While that is not an obviously sensible result, it is required by the terms of the policy and by Massachusetts law.

“In short, because Clark’s notice to the insurer of the malpractice action was too late, the policy does not provide coverage. By extension, plaintiff Stormo, as his assignee, cannot claim the benefits of the policy. Defendant is therefore entitled to judgment notwithstanding the verdict.”

Stormo v. State National Insurance Company (Lawyers Weekly No. 02-378-23) (12 pages) (Saylor, C.J.) (Civil Action No. 19-10034-FDS) (Aug. 25, 2023).

Click here to read the full text of the opinion.

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