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Thoracic Cardiovascular Associates v. St. Paul Fire and Marine Insurance Co.9/13/1994
TOCI, Judge
Thoracic Cardiovascular Associates, Ltd. and Thomas J. Trahan (collectively, "Thoracic") sued St. Paul Fire and Marine Insurance Company ("St. Paul") seeking a declaratory judgment requiring St. Paul to provide coverage on a claims made professional liability insurance policy. St. Paul appeals from the trial court's grant of summary judgment in favor of Thoracic.
We must decide whether coverage exists under a claims made professional liability insurance policy when a claim is not reported to the insurer within the policy period. In order to resolve this question, we must also decide whether the doctrine of impossibility excuses untimely reporting of a claim under a claims made policy.
We conclude that the trial court erred in granting summary judgment against St. Paul. We hold that because notice of a claim within the policy period is a material part of the consideration for a claims made policy, to invoke coverage a claim must be made and reported to the insurer during the policy period. We further hold that the doctrine of impossibility does not excuse late reporting of claims under claims made policies. Accordingly, we reverse the trial court's grant of summary judgment against St. Paul and remand with directions to enter judgment for St. Paul.
I. FACTS AND PROCEDURAL HISTORY
St. Paul issued a claims made professional liability insurance policy to Thoracic for the period from November 1, 1987 through May 1, 1988. The policy stated two requirements for coverage: (1) "the professional service must have been performed (or should have been performed) after retroactive date that applies," and (2) "the claim must also first be made while this agreement is in effect." Under the policy, a "claim is made on the date [the insured] first reports an incident or injury to" St. Paul or its agent.
The policy also contained a provision allowing Thoracic to purchase an optional extension of coverage, referred to as a "reporting endorsement." This endorsement would have allowed Thoracic to report claims to St. Paul after the policy term and before the end of the term of the reporting endorsement. The policy provided that St. Paul would sell the reporting endorsement to Thoracic for a premium based on the rules and rating plans being used on the day coverage would begin. According to the policy, the reporting endorsement must be requested in writing within thirty days after the end of the policy term.
On February 16, 1988, before the end of the policy term, Thoracic canceled the liability policy issued by St. Paul. On March 4, 1988, sixteen days after the policy was canceled, St. Paul's underwriting department sent a certified letter to Thoracic advising Thoracic that its policy covered only claims made within the policy term. The letter warned that unless Thoracic purchased the optional reporting endorsement coverage within the time stated in the policy or obtained coverage under a replacement policy, it would not be covered for claims arising out of acts performed prior to the termination date that were not reported until after the termination date. Specifically, the letter stated:
This is a "claims made" form of coverage. This means you do not have coverage for claims arising out of acts performed prior to the termination for which a claim may be made after the termination date, unless you purchase reporting endorsement coverage.
Reporting endorsement coverage extends the time in which a claim may be made for acts which occurred before the termination date. . . .
You may not need this endorsement extension if you have obtained a replacement policy providing coverage for prior ac
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