(Article from Insurance Law Alert, July/August 2026)
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Holding
A Maryland federal district court denied an insurer’s motion for summary judgment, holding that a potential claim was first brought to the insureds’ attention during the policy period and that, under Maryland’s notice-prejudice statute, the insurer could not deny coverage based on the insureds’ failure to report the potential claim during the policy period absent a showing of actual prejudice. Aspen Specialty Ins. Co. v. Dormu, 2026 U.S. Dist. LEXIS 145327 (D. Md. June 30, 2026).
Background
This insurance dispute arose out of a medical malpractice claim against a surgeon and his medical practice. The insureds were covered under professional liability policies issued by the Medical Protective Company (“MedPro”) for the period October 9, 2020 to October 9, 2021.
The policies provided coverage for “any claim first made, or potential claim first brought to the Insured’s attention, during the term of this policy.” A “potential claim” was defined as “an incident which the Insured reasonably believes will result in a claim for damages.” The policies also required that potential claims be reported to MedPro during the policy period.
In August 2021, a former patient’s estate filed a medical malpractice claim with the Maryland Health Care Alternative Dispute Resolution Office (“HCADRO”), a statutory prerequisite to pursuing a medical malpractice claim in court. In September 2021, HCADRO mailed the insureds an Order of Transfer and accompanying cover letter identifying the malpractice proceeding and stating that it was being transferred to a federal or state court. HCADRO did not send the underlying Statement of Claim or Certificate of Merit.
The claimant subsequently filed a civil complaint against the insureds. The insureds received the complaint after the MedPro policies expired and reported it to MedPro on October 19, 2021, ten days after expiration. MedPro denied coverage and a coverage action was commenced. MedPro moved for summary judgment, arguing that the requirements for coverage under its claims-made-and-reported policies had not been satisfied.
Decision
The court denied MedPro’s motion for summary judgment. The court first held that the HCADRO Order of Transfer constituted notice of a “potential claim” during the policy period. Although the insureds had not received the underlying Statement of Claim, the Order of Transfer and accompanying cover letter identified the formal medical malpractice proceeding, identified the parties, and stated that the matter was being transferred to state or federal court. The court therefore concluded that the documents concerned an incident that the insureds reasonably would have believed would result in a claim for damages.
The court further held that the potential claim was first discovered or brought to the Insureds’ attention during the policy period. HCADRO mailed the Order of Transfer to the insureds in September 2021, before the policies expired on October 9, and the court applied Maryland’s presumption that a properly mailed document was received by its addressee.
The court then addressed the insureds’ failure to report the potential claim to MedPro during the policy period. Applying Maryland Insurance Code § 19-110, the court held that MedPro could disclaim coverage based on that failure only if it established by a preponderance of the evidence that the late notice caused actual prejudice. The court explained that Maryland’s notice-prejudice rule applies to claims-made-and-reported policies where the event triggering coverage occurs during the policy period but the insured fails to comply with the policy’s reporting requirement.
The court concluded that MedPro failed to establish actual prejudice. MedPro received notice only ten days after the policy expired and five days after the civil complaint was formally served. The record contained no evidence that the delay impaired MedPro’s ability to investigate or defend the claim, participate in settlement, present potentially outcome-determinative evidence, or otherwise protect its interests. Accordingly, the court held that MedPro could not disclaim coverage based on the insureds’ failure to report the potential claim during the policy period.
Comments
The decision illustrates the potentially significant effect of Maryland’s notice-prejudice rule on claims-made-and-reported coverage. Where the event triggering coverage occurs during the policy period, an insured’s failure to satisfy a requirement that the matter also be reported during that period may be treated as a breach of a notice provision rather than a failure of a condition necessary to create coverage. In that circumstance, the court held that § 19-110 requires the insurer to establish actual prejudice before disclaiming coverage based on late notice.