An Expensive Lesson About Notice of a Professional A/E Malpractice Claim

The University of Pittsburgh has come out on the losing end of coverage battles with two different malpractice carriers for the architecture firm, The Ballinger Co., hired by Pitt to design a renovation project to Pitt’s Salk Hall (named for Jonas Salk).

Lexington Insurance provided a policy to Ballinger expiring at 12:01 a.m. on February 1, 2012. AXIS Insurance Company provided a policy commencing at 12:01 a.m. on February 1, 2012. On January 31, 2012, Ballinger sent notice to Lexington stating that there were "circumstances arising from its Professional Services at the Salk Hall Project that were reasonably likely to result in a claim being filed against [Ballinger]." An email from a Ballinger executive the same day was even more vague, saying things like "this project is already experiencing significant delays" and "a future delay claim is inevitable."

Lexington refused to defend Ballinger based on the inadequate notice of any claim being provided within the policy period. Lexington’s position was upheld by a federal district court judge earlier this year. The judge noted at that time the obligation of Ballinger to "provide more than a simple statement conveying that there is ‘trouble brewing at Pittsburgh.’”

The current decision came on a motion by AXIS for a determination that its policy did not cover any claim for which the insured, Ballinger, had given notice or attempted to give notice before commencement of the policy period. AXIS argued that either (1) Ballinger had given notice, or attempted to give notice, or (2) Ballinger had knowledge of a claim or potential claim against it, prior to the onset of the AXIS policy period.

The court has agreed also with AXIS. Even though the Ballinger notice was insufficient to comply with Lexington’s notice of claim requirements, it still represented knowledge on Ballinger’s part of a potential claim, prior to the AXIS policy period. Thus, coverage under the AXIS policy was not invoked.

The lesson? Make sure notice of a claim is sufficient under the current policy, since inadequate notice may fail to invoke the current policy and yet foreclose coverage under the upcoming policy. The case is Univ. of Pittsburgh v. Lexington Ins. Co., 2016 U.S. Dist. LEXIS 170285 (W.D. Pa, Dec. 8, 2016) (LEXIS subscription required).