Professional E&O Policy Supersedes Wisconsin Insurance Statutes

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March 25, 2015
Joe Trevino
SmithAmundsen Milwaukee Legal Update

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The Supreme Court of Wisconsin recently found that Wisconsin’s insurance notice statutes do not supersede the requirements set forth in a claims-made-and-reported professional liability policy. Anderson v. Aul, 2015 WI 19. The Supreme Court found that no coverage existed under a claims-made-and-reported policy when the attorney failed to report the claim during the policy period. This decision reversed a previously published decision by the Wisconsin Court of Appeals, in which the court of appeals held that Wisconsin’s insurance notice statutes superseded the professional liability policy.

The Supreme Court began by explaining the differences between the three types of professional liability policies; occurrence based, straight claims-made, and claims-made-and-reported. The court then explained Wisconsin Statute §631.81(1) and §632.26, which generally provide an extension for insureds to provide notice of a claim to the insurer. While these statutes state that they apply to all liability policies, the Supreme Court held that “after a close examination of the notice-prejudice statutes that they were not intended to supersede the reporting requirement specific to claims-made-and-reported policies.” Anderson v. Aul, 2015 WI 19, ¶ 59

The court noted that it was a very close decision whether to impose hardship on the allegedly aggrieved plaintiff who was injured initially by the attorney’s purported malpractice and then by the attorney’s failure to report the claim, or the insurance company that would be forced to insure for a risk that it was not paid for. In finding that the policy is not superseded by Wisconsin statutes, the court noted that many jurisdictions have found similarly, upholding the notice requirements of a claims made and reported policy.

Going forward, Wisconsin courts and insureds will be bound by the notice requirements of a claims-made-and-reported policy rather than the Wisconsin statute’s notice requirements. Any claim made and reported outside of the policy period will likely not be covered under the professional liability policy.