Westrec Marina Management, Inc. v. Arrowood Indemnity Company
filed June 16, 2008, Second District, Div. Three
Cite as 2008 SOS 3511

Insurer’s Denial of Coverage Affirmed

Arrowood issued a directors and officers liability insurance policy to Westrec effective from July 1, 2002 – July 1, 2003 and issued a second policy from July 1, 2003 – July 4, 2004. Each policy provides coverage for losses incurred in connection with claims first made during the policy period and reported within 30 days after the expiration of the policy.

The policies also stated that all claims arising from the same events or series of related facts would be deemed a single claim.

Bette Clark an employee of Westrec filed a complaint in the Department of Fair Employment and Housing (DFEH) on April 14, 2003, alleging employment discrimination by Westrec and requesting a right-to-sue notice.

DFEH notified Westrec of the complaint and stressed that the complaint was closed immediately on April 14, 2003 because the complainant had requested an immediate right to sue notice. DFEH issued a right-to-sue notice on April 15, 2003. Westrec did not notify Arrowood of these events within 30 days after the expiration of the first policy.

On December 19, 2003 Clark filed a complaint against Westrec alleging discrimination and wrongful termination. Westrec notified Arrowood about the action only on January 30, 2004 tendered its defense and requested for indemnity.

Arrowood declined to indemnify its insured and contends that either the complaint to the DFEH or that of Clark’s letter or both constituted a claim as defined in the policy or that Westrec failed to provide timely notice of the claim.

The court ruled that the complaint to DFEH is not a claim within the meaning of the policies but Clark’s letter is a claim because it is a demand for monetary settlement.

Whether or not a letter from a third party claimants attorney to Westrec is a claim and if it was, did Westerc failed to timely report the claim.

1. Rules of Contract Interpretation
   

   We interpret insurance policy using the same rules of interpretation applicable to the contracts. The mutual intention of the contracting parties at the time the contract was formed governs. The court interpreted the contract in accordance with ordinary and popular sense, unless the words are used in a technical sense or a special meaning is given them by usage.

2. The letter of Clark’s attorney is a claim as defined in the policies.
   

   The letter of Clark’s attorney had been subjected to employment discrimination and wrongful termination and that she had received a right to sue notice from the DFEH. It clearly expressed Clark’s intent to sue Westrec for employment discrimination if an appropriate settlement could not be reached.

   We construe the letter as a settlement demand seeking monetary compensation for the alleged wrongdoing. Although it did not expressly demand payment, its meaning was clear that Clark would commence a lawsuit against Westrec. The attorney’s request for compensation while threatening litigation was a “demand” as the word is ordinarily understood.

   In Phoenix Ins. A client asked his attorney to work without pay to correct a problem with a mechanics lien that the attorney had drafted. The policy did not define the term “claim” relying on the ordinary meaning of the term “a demand for something as a right, or as due”; we held that the client’s request was a sufficient “demand” to constitute a claim.

   Similarly here, we conclude that the insistence on compensation by way of settlement in lieu of litigation constituted a demand for “civil damages or other relief” within the ordinary meaning of those words. We conclude that the letter was a “written demand for civil damages or other relief” and that the letter therefore was a “claim” as defined in the policies.

3. The lawsuit and the prior letter constituted a single claim, and Westrec failed to timely report the claim.
   

   Clark’s lawsuit and his attorney’s letter constituted a single claim that was first made. Westrec received Clark’s letter 30 days after the expiration of the policy, as required. Westrec subsequent notice of the lawsuit during the second policy concerned the same claim and therefore was untimely.

Westrec is not entitled to coverage under the policies because it failed to timely report the claim. The trial court properly entered judgment in favor of Arrowood.

The judgment is affirmed. Arrowood is entitled to recover its cost on appeal.