Oregon Schools Activities Association v. National Union Fire Insurance Company of Pittsburgh, Pa.

2008 WL 2151443 (9th Cir., May 22, 2008)

Ninth Circuit Holds That Insured's Failure to Provide Timely Notice of Claim Bars Coverage Under Oregon Law

In the underlying lawsuit, the Oregon Schools Activities Association (OSAA) was sued by students from the Portland Adventist Academy because the OSAA refused to adjust the high school basketball tournament schedule to avoid the students’ games being scheduled during their Sabbath. Although the OSAA had a National Union insurance policy at the time the claim was made against it, it did not notify National Union of the claim during the policy period. When the OSAA later notified National Union of the claim, National Union denied coverage because of the late notice.

The National Union policy was a "claims made and reported" policy, which provided that there was only coverage for claims that were made during the policy period and also reported during the policy period. Such policies are different from "occurrence" policies, which can generally provide coverage for claims made after the expiration of the policy, provided that the claim is based upon an occurrence that took place during the policy period.

Because this was a diversity case from Oregon, the Ninth Circuit was required to follow Oregon law. The Oregon state courts have ruled that an insured’s failure to provide timely notice with respect to an occurrence policy will not defeat coverage unless the insurer is able to show that it was prejudiced by the untimely notice. However, the Oregon state courts have not addressed untimely notice in the context of a claims made and reported policy.

The OSAA argued that Oregon law required a showing of prejudice before an insurer can disclaim coverage based upon untimely notice, regardless of the type of policy. The Ninth Circuit disagreed. It held that even though the Oregon courts had not yet addressed the issue, those courts would likely conclude that a claims made and reported policy is fundamentally different from an occurrence policy. In the former type of policy, it is the making and reporting of a claim that triggers coverage, unlike the latter type of policy where coverage is triggered if an occurrence takes place during a policy period. Where coverage already exists under an occurrence policy, the subsequent failure to timely report the claim will not void the existing coverage unless the insurer is prejudiced by the failure.

The Ninth Circuit recognized the differences between the policies, however. Because the OSAA did not report the claim during the policy period, coverage was never triggered and thus never existed under the OSAA’s policy. The court therefore held that whether National Union was prejudiced by the late notice was irrelevant and that the OSAA was not entitled to coverage for the underlying lawsuit, affirming the lower court’s decision to grant summary judgment in National Union’s favor.