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(Article from Insurance Law Alert, March 2020)

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The Ninth Circuit ruled that a “claims first made” provision in a liability policy was ambiguous as to whether a pre-policy demand letter and an action filed during the policy period could be considered a single claim “first made” prior to policy inception.  National Union Fire Ins. Co. v. Zillow, Inc., 2020 WL 774366 (9th Cir. Feb. 18, 2020).

The policy at issue provided coverage “solely with respect to Claims first made against an Insured during the Policy Period . . . and reported to the Insurer.”  A Washington district court ruled that the policy did not cover a copyright infringement suit brought against Zillow by VHT, Inc. during the policy period.  The court reasoned that the VHT action was based on the same wrongful conduct as that alleged by VHT in a demand letter sent to Zillow prior to the policy’s inception, and that the demand letter and action comprised a single claim that was “first made” before the policy period.

The Ninth Circuit reversed, ruling that policy language did not explicitly allow or require factually-related claims to be considered a single claim for purposes of the “claims first made” provision.  In so ruling, the court noted that “unlike a number of other claims-first-made policies cited by both parties, the Policy does not contain a provision expressly providing for the integration of factually related Claims.”  The court deemed the policy ambiguous as to whether the pre-policy demand letter and subsequent action could be considered a single claim.  The court remanded the matter for consideration of extrinsic evidence to resolve this ambiguity.