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President v. Jenkins2/6/2003
should be construed to afford coverage effective January 1, 1998, the date applicable to the group policy, rather than February 1, 1998, the date applicable to Jenkins as an individual "additional insured," so as to encompass the underlying incident of January 3 and 4, 1998. We disagree as to both claims.
In support of his first contention, Jenkins relies exclusively on Sparks v. St. Paul Ins. Co., 100 N.J. 325 (1985), wherein the Court held that provisions of a policy limiting coverage to claims brought for negligence committed during the policy term and providing only limited retroactive coverage were unenforceable as violating public policy absent factual circumstances that would render such limited retroactive coverage both reasonable and expected. In Sparks, the insurer, St. Paul, had issued consecutive "claims made" policies to its insured, which only covered claims arising from the performance of professional services subsequent to the retroactive date and then only to claims first made during the policy year. Unlike the standard "claims made" policies that provide unlimited retroactive coverage for all errors and omissions occurring prior to the policy's inception, provided the claim is reported during the policy period, St. Paul's policy provided no retroactive coverage whatsoever in its first year, and only limited retroactive coverage during the renewal years, i.e., to the retroactive or effective date of the original policy. Although the legal malpractice incident in Sparks occurred during the policy period, it was not reported until after the policy had been canceled and, due to the cancellation, there was no "extended reporting" protection. Therefore, St. Paul denied coverage. The Court, however, refused to enforce the policy's coverage limitations as failing to conform to the objectively reasonable expectations of the insured that, in "claims made" policies, are to extend coverage for negligence occurring prior to the policy's inception, and as violative of public policy. 100 N.J. at 339. The Court reasoned: ndeed, St. Paul's policy combines the worst features of "occurrence" and "claims made" policies and the best of neither. It provides neither the prospective coverage typical of an "occurrence" policy, nor the "retroactive" coverage typical of a "claims made" policy. During the first year that the policy was in force, it provided no retroactive coverage for occurrences prior to the effective date of the policy. Thus, it afforded the insured only minimal protection against professional liability claims. Only claims asserted during the policy year, based on negligence that occurred during the policy year, and that were subsequently communicated to the company during the policy year were under the umbrella of coverage.
[Ibid.] Sparks, however, did not set a precise standard by which the reasonableness of retroactive coverage is to be measured in every instance where coverage is claimed to be unreasonably narrow. On the contrary, it expressly recognized certain factual circumstances and contexts that would render such limited retroactive coverage both reasonable and expected.
Id. at 340. Thus, for instance, "claims made" policies with no retroactive coverage "might be appropriate" where "offered at a reduced premium to the professional in his very first year of practice, or to the professional who changes from 'occurrence' to 'claims made' protection." Id. at 340 n.4.
Such is the case here. Zurich's policy immediately followed a prior period of "occurrence" coverage, thus obviating the need for any greater retroactive coverage than was bargained for and obtained by Jenkins. Based on both the oral and written representations of the insured, Zurich insured Je
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