The United States Court of Appeals for the Ninth Circuit, applying California law, has held that a strict compliance standard applies to satisfying the notice requirement under a claims-made-and-reported policy. Heritage Bank of Commerce v. Zurich Am. Ins. Co., 2024 WL 810447 (9th Cir. Feb. 27, 2024).

The insured bank purchased a claims-made-and-reported policy. The policy stated that notice of a claim or potential claim needed to be sent in writing to the insurer’s claims department at a specified address. During the policy period, the bank learned of a potential claim. Rather than timely sending notice of the potential claim to the specific address, the bank emailed the notice to an underwriter. The insurer denied coverage due to the bank’s failure to comply with the policy’s notice provision, and the bank sued.

In the coverage litigation, the district court granted the insurer’s motion to dismiss, concluding that the bank’s failure to substantially comply with the notice provision barred coverage. Although the bank agreed with the application of the substantial compliance standard, it disagreed with the court’s ruling that it had not substantially complied. Wiley’s summary of the district court’s ruling can be found here.

On appeal, the court found that a strict compliance standard applied. It stated that because the Supreme Court of California “has not addressed whether strict compliance or substantial compliance with notice requirements in a claims-made-and-reported policy is required,” it predicted how that court would decide the issue. The court looked to intermediate state court decisions and decisions from other circuits as instructive and concluded that because notice provisions in claims-made-and-reported policies “directly bear on the insured risk,” the Supreme Court of California would likely find that strict compliance is required. Thus, the court affirmed the district court’s decision and held that the bank had not strictly complied with the notice provision.

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