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Maryland High Court holding late notice is no bar to cover



Maryland Supreme Court recently claimed that the policyholder's failure to file a trial for two and a half years was not the basis for a denial of coverage. Court in Nat Union Fire Ins. Co., Pittsburgh, PA v. Fund for Animals, Inc. held that, because the National Union could not prove that it led to "actual prejudices" as a result of the late announcement, Fund For Animals, Inc. ("FFA") is entitled to receive the coverage it contracted under its non-profit protection policy ("Policy").

The scope case included two underlying legal proceedings involving the FFA. In the first, the FFA had sued Ringling Brothers and others for alleged violations of the Law on Endangered Species relating to the circus business's treatment of elephants ("ESA case"). On the second day, the owner of Ringling Brothers FFA sued and others claimed that actions taken by FFA in the ESA case ̵

1; including paying a witness – violated the Racketeer Influenced and Corrupt Practices Act ("RICO case"). Although the RICO case was filed and served in September 2007, FFA did not report the National Union until March 2010. The National Union refused coverage for the RICO case on the grounds that FFA did not comply with the policy requirement.

Ultimately, the Court of Appeal in Maryland rejected the National Union's position on the basis of a Maryland Statute requiring an insurance company to consider the evidence that the late declaration of a policyholder's assurance "resulted in actual prejudice against the insurer . " The Court held that the national union did not in fact suffer any actual prejudices based on the delay in receiving the notification, since the RICO case had ceased to exist on its submission and its final settlement value (including a settlement fee of $ 2.54 million by FFA) was based on actual results in the ESA case, which the national union did not have the right to participate in or influence .. Thus, despite FFA's breach of the policy association to provide notice as soon as possible, the court addressed that judgment in favor of the FFA.

This decision is an important reminder to the policyholders that many jurisdictions now have statutory and other authorities that require the insurer to have a basic basis for denying coverage. Technical violations of political requirements may not be enough. Animal Fund is therefore a reminder that the insurer's refusal of coverage is often not the end of the issue and should therefore not discourage policyholders from pursuing their rights when coverage is due.


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