A spreadsheet detailing asserted monetary damages constituted a claim first made against the insured company prior to the policy period, and thus the company was not entitled to coverage under its claims-made policy. Ritrama, Inc. v. HDI-Gerling American Ins. Co., No. 14-3392, 2015 U.S. App. LEXIS 14018 (8th Cir. Aug. 11, 2015).
Ritrama, Inc. (Ritrama) manufactured pressure-sensitive flexible films and cast vinyl films for various applications, including for vehicle graphic products. One of Ritrama’s customers, Burlington Graphics Systems (Burlington), purchased more than $8 million worth of cast vinyl film products from Ritrama over a number of years. No later than early 2008, Burlington reported several issues with the film products to Ritrama. Subsequently, Burlington and Ritrama met to discuss the product failures and damages sustained by Burlington. At those meetings, Burlington informed Ritrama that it would submit a summary of expenses and damages. On September 9, 2008, Burlington sent a spreadsheet detailing Burlington’s claims for monetary damages based on the product failures. Thereafter, Ritrama’s made a number of inquiries into the settlement of Burlington’s claims for monetary damages.
Following Burlington’s claims for damages, in early 2009, Ritrama purchased a commercial general liability insurance policy from HDI-Gerling American Insurance Company (the Gerling Policy). The Gerling Policy provided coverage for claims made between March 31, 2009 and March 31, 2010. The policy further provided that a claim seeking damages will be deemed to have been made at the earlier of: (1) When notice of such claim is received and recorded by any insured or by us [Gerling], whichever comes first. All claims for damages because of “property damage” causing loss to the same person or organization will be deemed to have been made at the time the first of those claims is made against any insured. The policy did not define “claim.”
On July 17, 2009, after Ritrama purchased the Gerling Policy, Ritrama advised its insurance agent of its issues with Burlington. The insurance agent then sent a “notice of occurrence” to Gerling. Subsequently, on January 6, 2011, Burlington sent a formal demand for payment to Ritrama through its litigation counsel and thereafter filed suit on April 21, 2011. Gerling denied coverage for the Burlington lawsuit. Ritrama filed suit against Gerling, claiming that Gerling breached its duty to defend under the Gerling Policy.
The District Court granted summary judgment in favor of Gerling, finding that Burlington made a “claim” against Ritrama prior to the inception of the Gerling Policy. The District Court found that, even though the Gerling Policy did not define “claim,” the term was unambiguous and encompassed “an assertion by a third party that the insured may be liable to it for damages within the risks covered by the Policy.” Ritrama appealed to the U.S. Court of Appeals for the 8th Circuit.
The 8th Circuit held that the spreadsheet clearly constituted a claim first made prior to the Gerling policy period. The court found that the definition of “claim” adopted by the district court was consistent with the dictionary definition as well as the Gerling Policy as a whole. It rejected Ritrama’s argument that “claim” should carry a similar meaning to “suit,” as those terms were used side-by-side. Because the Policy specifically defined the term “suit” and not the term “claim,” those terms must carry different meanings within the Policy. The 8th Circuit further found that the District Court’s definition was not contrary to the primary purpose of claims-made insurance policies, but rather reaffirms the purpose of such policies by recognizing that a claim is made when a demand has been made or when the claim is brought to the insurer’s attention. The definition was consistent with the general principle that insurance policies are meant to cover risks of future events, not known loss. Finally, the district court’s definition was consistent with 8th Circuit and Minnesota law, which have made clear that the focus of whether a claim has been made is whether a demand for relief has been made.
The court then rejected Ritrama’s argument that the term “claim” was ambiguous as used in the Gerling Policy. It found that Burlington’s spreadsheet detailing its damages clearly constituted a demand for relief in light of the surrounding communications regarding Ritrama’s product failures. Ritrama’s subsequent settlement offers demonstrated that Ritrama also understood the spreadsheet to be a claim. Ritrama could not contort its prior words and activities into something else by denying that the Burlington spreadsheet of damages constituted a claim. The spreadsheet of damages therefore constituted a claim first made prior to the policy period, and Gerling had no duty to defend Ritrama under the Gerling Policy.
The 8th Circuit’s decision makes clear that courts will interpret the term “claim” to uphold the purpose of a claims-made policy. Claims-made policies are intended to accurately fix the insurer’s potential liabilities, not provide coverage for claims of which the insured is already aware prior to the policy period. Accordingly, an insured cannot obtain coverage when it is aware of a demand for monetary damages prior to the inception of the policy. As made clear by the court, both the nature of the demand itself and the insured’s conduct following receipt of the demand will be considered in determining whether such a demand constitutes a “claim.”