booklet test

SCOPE OF COVERAGE
A. CLAIMS MADE COVERAGE
Coverage under the MCPL policy applies only to Claims that are first made against the insured during the policy
period. Coverage under the policy is not triggered when a Wrongful Act occurs, but rather when a “written
demand for money damages” is made to an insured within the policy period.
Future Claims. An insured might become aware, during the policy period, of a Wrongful Act or other circumstances
that it believes may give rise to a future Claim against an insured, but an actual Claim has not yet been made.
In that event, if the insured provides written notice to Underwriters, and identifies the Wrongful Act, potential
claimants and damage that may result, then any future Claim arising from those circumstances shall be deemed
to have been made at the time such written notice was given. (Condition VI.B.).
Matters that Preceded the Policy Period. The MCPL policy excludes coverage for events and circumstances that
were the subject of a Claim or notice under a prior policy. (Exclusion O.1). It also excludes coverage for any Loss
that results from any events or circumstances, known to the insured prior to the policy’s “Coverage Date,” that
would cause a reasonable person to believe that a Claim for a Wrongful Act may be made. (Exclusion O.3). The
“Coverage Date” is set out in the Policy declarations. The date typically coincides with the inception date of the
first policy issued to the insured by Underwriters. An insured is not excused from giving notice on the basis that
it thought the Claim lacked merit. The insured must give notice of circumstances if a reasonable person would
believe that a Claim may ensue
Underwriters also request that applicants disclose in the policy application any circumstances that they are
aware of prior to policy inception that could lead to a Claim. If an applicant is aware of circumstances and facts
prior to policy inception that ultimately lead to a Claim during the relevant policy period—but fails to disclose
those facts or circumstances in the policy application—the insurer may deny coverage or possibly rescind the
policy. Courts often rely upon both the insurance application and policy language when ruling that the prior
knowledge exclusion defeats coverage for the named insured based on knowledge of a single insured who failed
to identify facts or circumstances in the policy application that could lead to a Claim.
Interrelated Wrongful Acts. The MCPL policy provides that Claims arising out of “a single Wrongful Act or
Interrelated Wrongful Acts shall be treated as single Claim…and such Claims shall be subject to the same Limit
of Liability.” (Condition V.C.). The Policy defines “Interrelated Wrongful Acts” as Wrongful Acts that have “as a
common nexus any fact, circumstance, situation, event or transaction or series of facts, circumstances, situations,
events or transactions.” (Condition III.G.).
To the extent two Claims arise from Interrelated Wrongful Acts, they are treated as a single Claim, and each single
Claim is considered first made when the earliest of the Claims was first made. The Claims are subject to the same
Limit of Liability and to a single Retention amount. (Condition V.C.).
Whether two or more Claims arise from Interrelated Wrongful Acts depends on the facts alleged. For example, a
letter from a claimant demanding payment and a subsequent suit brought by the same claimant to enforce the
payment obligation would likely be deemed to arise from Interrelated Wrongful Acts. Also, multiple suits brought
against the insured by different claimants based on a common scheme or pattern of alleged wrongful conduct
by the insured may also be interrelated.
Class action complaints may raise issues of interrelatedness, i.e., that Claims asserted by the respective class
members are interrelated and thus subject to a single limit of liability.
9 · PROFESSIONAL LIABILITY COVERAGE