July 23, 2018 Practice Points

No Coverage Where Notice of Potential Claim is Untimely and Conceals Key Facts

This opinion offers three key lessons for insureds and insurers when addressing notices of potential claims under typical claims-made policies

by Charles C. Lemley and Margaret D. Thomas

The U.S. Court of Appeals for the Sixth Circuit recently underscored the importance of complying with a policy’s requirements for providing notice of potential claims, holding that an insured failed to provide timely notice of a claim because its prior notice of potential claim did not comply with the policy’s terms. First Horizon Nat’l Corp. v. Houston Cas. Co., --- F. App’x ---, 2018 WL 3359555 (6th Cir. July 10, 2018). The court unanimously affirmed summary judgment for the insurers because the insured’s notice of potential claim was untimely and concealed key facts regarding the matter. Wiley Rein briefed and argued the case on behalf of the primary carrier.

The insured bank was the subject of a U.S. Department of Justice False Claims Act investigation that began in 2012. In May 2013, the government met with the insured and made a 35-page presentation outlining the insured’s violations of the FCA, including serious deficiencies in a majority of its FHA insurance claims and “theoretical damages and penalties” upward of $1.19 billion. Then, in April 2014, DOJ made a $610 million settlement demand that it confirmed in a lengthy email explaining the bases for liability and damages.

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