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Insurer successfully denies payment on seven-figure claim, citing delay in notice by insured

Westport Insurance Company successfully appealed and struck down a judgment against it, entered in favor of its insured's insurance agent, Boudreau.   The judgment arose out of a liability claim against Terri's Lounge that resulted in a $3 million dollar default judgment against the lounge.  In turn, the Lounge secured a $1.5 million dollar bench judgment (since over-turned) against its agent for mis-handling the claim and stumbling into the default.  When the agent sued Westport, the insurer denied coverage, citing a one-year delay in providing notice of the claim.  When both parties sought summary disposition, the trial court denied Westport's motion because Westport had not documented any resulting prejudice.  The Court of Appeals reversed and granted Westport summary disposition.  It concluded that the insured and agent owed a duty to report the claim during the prior policy year and that the insurer need not demonstrate prejudice from the late notice if the underlying policy is a "claims-made" policy, rather than an "occurrence" policy.
Thompson O’Neil, P.C.
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Traverse City, Michigan 49684
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