(Article from Insurance Law Alert, September 2015)
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The Eighth Circuit ruled that a “claim” was made when a policyholder received a demand for money, even absent threats of litigation or attorney involvement. Because the record established demands for compensation prior to the inception of the policy period, the court concluded that the insurer had no duty to defend. Ritrama, Inc. v. HDI-Gerling Am. Ins. Co., 796 F.3d 962 (8th Cir. 2015).
In 2008, Ritrama, a manufacturer of cast vinyl film products, received notice from a customer that it was experiencing product quality issues. Throughout 2008, Ritrama and the customer corresponded about the problems. In 2011, having failed to resolve the dispute, the customer sued Ritrama. Ritrama’s insurer denied coverage and refused to defend because a “claim” was made before the March 2009 policy inception date. A Minnesota federal district court agreed and granted the insurer’s summary judgment motion. Although the policy did not define “claim,” the district court deemed it to mean “an assertion by a third party that the insured may be liable to it for damages within the risks covered by the Policy.” The Eighth Circuit affirmed.
In upholding the district court’s ruling, the Eighth Circuit rejected Ritrama’s assertion that a claim requires “a written, legal demand for monetary relief, within which is an express or implicit threat to sue.” Although the court noted that a mere complaint or request for information is generally insufficient to establish a claim, it explained that some type of demand or assertion for relief can constitute a claim. On the facts before it, the Eighth Circuit found that a claim was made prior to the inception of the policy. In particular, the Eighth Circuit concluded that a September 2008 communication from the customer to Ritrama, containing a detailed spreadsheet of damages incurred as a result of Ritrama’s product failures, constituted a “demand for relief.”
Ritrama rejects a bright-line rule that a written threat of legal action is required to establish a “claim.” The court emphasized the overall “context of the surrounding communications” between Ritrama and its customer during 2008, including the fact that Ritrama itself referenced a “claim” in correspondence about the dispute.