Claim Must Be Made During Policy Period to Obtain Coverage on a Claims Made Policy

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Heart Rendering Damages Not Enough to Require Insurer to Defend or Indemnify

When he was just about two years old, Braylon Jordan swallowed small magnets, “Buckyballs,” manufactured by Maxfield & Oberton Holdings (M&O). Once ingested, the magnets shredded his internal organs, necessitating surgery to remove most of his intestines, leaving Braylon severely disabled for the rest of his life, and consigning his parents to provide near constant care for their son for the rest of theirs. This heart-rending situation came to the Fifth Circuit for the second time; the latest appeal involves not the merits of the Jordans’ claims but a dispute over whether there is insurance coverage for M&O’s defense and for a partial settlement of the Jordans’ claims.

In Meaghin Jordan v. Evanston, No. 20-60716, USCA, Fifth Circuit (January 17, 2022) the Fifth Circuit answered the question.

FACTS

As discovery proceeded in the underlying case, Evanston Insurance Company, one of M&O’s excess liability insurers, confirmed that it denied coverage for the Jordans’ claims against M&O and declined to defend M&O against the Jordans’ suit. The evidence focused primarily on three things: news reporting of Braylon Jordan’s story, reactions to several articles by M&O and its insurers, and the insurance policies themselves.

M&O’s various insurance policies were claims-made policies. Generally, claims-made policies provide coverage for claims made against insured parties within a defined policy period.

The Fifth Circuit agreed with Evanston that the district court erred and held that the Jordans failed to demonstrate that they made any claim against M&O during the policy period. As a result there was no coverage, and Evanston had no obligation to indemnify M&O’s CEO for the parties’ settlement.

The policy itself does not define “claim,” the court found that a “claim” is an assertion by a third party that, in the opinion of that party, the insured may be liable to it for damages within the risk covered by a policy. 

The insured’s awareness of an alleged injury is not enough to constitute a claim. [Titan Indem. Co. v. Williams, 743 So.2d 1020, 1025 (Miss. Ct. App. 1999)].

Because no claim arising from Braylon Jordan’s injuries was timely made against M&O during Evanston’s policy period Evanston owes nothing.

ZALMA OPINION

Claims Made and Reported policies are different than the common “Occurrence” policies. Failure to make a claim while the policy is in full force and effect defeats a claim for defense or indemnity.  The claim by the Jordan’s lawyer, arriving almost four months after expiration of Evanston’s policy defeated the M&O claims.

© 2022 – Barry Zalma