SW Legal Educational Publishing

Letter Raising Possibility of Claim Against Insured Did Not Trigger Notice to Insurer Requirement
Description Appeals court held that an insured had not violated the insurance contract provision requiring that notice of claims must be made in a timely fashion. The insured was sued more than two years after it first knew of a potential liability issue. Since there was no specific claim made originally, the insured did not have a duty to notify the insurer at that time of the initial correspondence.
Topic Insurance
Key Words Claim, Notice
C A S E   S U M M A R Y
Facts Photographer Dauman took a photo of Jacqueline Kennedy that was published in Life magazine. Dauman owned the copyright on the photo, which was used by the artist Andy Warhol in various artworks. In 1994, Dauman sent a letter to Warhol's foundation demanding compensation for use of the photo and assurances that there would be no further infringement. Negotiations to settle the matter failed and Dauman sued for infringement. The day Dauman filed suit, late in 1996, the foundation notified its insurance company, Federal, that there was a claim against the foundation, which might be covered by insurance. Federal denied coverage due to failure to notify Federal until more than two years had passed from the time when the foundation was first aware of the claim, stating it was a breach of the terms of the policy regarding notification of possible claims. The foundation sued Federal. The district court held for Federal; the foundation appealed.
Decision Reversed. "Under the terms of the policy ... compliance with the notice provision is a condition precedent to the insurer's obligations under the policy." The policy does not define the term "claim." Ambiguous language "should be construed in accordance with the reasonable expectations of the insured when he entered into the contract." The letter sent to the foundation in 1994 was not sufficient to trigger the existence of a claim against Federal. The letter was not specific, it only suggested that there was a possibility of a dispute. It did not request damages from the insured, so the notice requirement of the policy was not triggered at that time.
Citation Andy Warhol Foundation for the Visual Arts, Inc. v. Federal Insurance Co., - F.3d - (1999 WL 626650)

Back to Insurance Listings

©2000  South-Western, a division of Cengage Learning, Inc. Cengage Learning is a trademark used herein under license.