Insurer avoids responsibility for E and O claim because of late notice
Daniel Johns sued his title company's Errors and Omissions insurance carrier, Evanston Insurance Company, after the title company conducted a closing that allegedly relied upon a forged deed. Johns' took an assignment of the title company's coverage rights, allowing him to attempt to pursue the company's insurance coverage.
Immediately after the suspect closing, the attorney for Johns--a purported buyer of the subject property--had written to Johns' title insurance agency, alerting the company to Johns' third-party interest in the property. The involved parties attempted to negotiate a settlement unsuccessfully, and Johns ultimately took the assignment from the title company and sued the E and O carrier for coverage.The insurer claimed that the post-closing letter from the victim's attorney constituted a "claim" which the title company was obligated to turn over to the carrier. Since the title company did not alert the insurer to receipt of the notice, the insurer argued that it voided his coverage. The insurer also argued that if the 2005 letter was not a "claim," the coverage was still voided by the title company's failure to disclose the issue on its 2007 renewal application.
The Court of Appeals held that the 2005 letter was not a "claim" under the policy language, since it did not make a demand for compensation. Nevertheless, the court agreed with the insurer that the title insurance company's E and O coverage was nullified for a 2007 claim by its failure to notify the insurer of the outstanding claim when the policy was renewed that year.