To Report, Or Not To Report?
That is the question!
When an insured becomes aware of a circumstance — whether through their own actions or through notice from another — that may give rise to a claim, should they report it? Are they bound by the confines of the policy to report it? Does the insured have a choice in whether or not they report circumstances or claims?
This is a really, really important question, for to get this wrong could be the difference between coverage afforded and coverage voided.
I’m writing this article in response to a guest post on the D&O Diary entitled “Dealing with Potential Claims Under Claims-Made and Reported Policies“ by Chris Quirk. In this article Quirk examines a court decision that, interestingly enough, I also examined and wrote about, also published in the D&O Diary. My article “Wait, YOU Also Wanted Coverage? Why Didn’t You Say So!“ examined the same case, albeit I draw a very different conclusion from Quirk.
First I’ll recount the case before articulating the different conclusions Quirk and I drew. Then I’ll give my two cents as to why my conclusions are correct (sorry Chris!).
I do want to acknowledge at the outset: I am not a lawyer nor the son of a lawyer. I’m approaching this as a layperson who cares deeply about getting these questions right. Ultimately what’s at stake here are the insureds who may or may not get bad advice, act upon that advice, and expect coverage to come through for them when they need it most.
The Case
First, the case (as summarized in my original article):
Background: HRC Fertility is a fertility clinic management company. The underlying dispute involved allegations of wrongful termination and claims that individual physicians participated in various alleged kickback schemes, including arrangements with a pharmacy vendor that allegedly prioritized financial incentives over patient care.
The Timeline:
8/29/2018 – 8/29/2019: HRC Fertility’s D&O/EPL policy period
3/14/2019: Claimant, a doctor whose employment at HRC Fertility had been terminated, puts HRC on notice for wrongful termination. This notice was sent and accepted by the carrier. At this point, only the named insured was listed as the subject of a potential claim.
11/27/2019: 90 days from policy expiration comes and goes without any further developments.
12/4/2020: The claimant filed her action against the insured. It is here where the list of defendants expanded to include the individual doctors.
The carrier took an interesting coverage position that was upheld in court: the insured entity would be covered, but the individual insureds would not. Why? Because the insured never reported that the individual insureds were potentially going to be sued.
The court in this case (Evanston Insurance Company v. Frederick, 2025 WL 2019379 (C.D. Cal. June 12, 2025)) meticulously examined the reporting requirements as stated in the policy and concluded that the insured failed to report in a timely manner. Therefore the carrier was correct; the individual insureds were on their own.
As I pointed out in my original article: when the insured was put on notice, only the named insured was listed. It was not apparent that the claimant would later modify her suit and name the individual insureds. In order to have fully complied with the reporting requirements, the insured would have needed access to a time machine. Receive the 2019 notice, hop in, travel forward to December 2020 when the expanded lawsuit names the individuals, update the notice accordingly, travel back, and submit. Everyone covered. No problem.
A Correction to My November Article
I need to make one correction to my November article. I rhetorically asked, “Do related claim definitions only matter when it’s to the carrier’s benefit?” I noted that if the related claim definition had been applied, the insured could have argued that since the 2020 suit was related to the 2019 notice, coverage should be afforded to all insureds. I was perplexed that this argument didn’t seem to be fleshed out in any way, shape or form
Turns out the court did address this… and arrived at a baffling conclusion.
The carrier had already filed a motion, which the court granted, seeking a ruling that only one single policy limit applied because these claims were related.
Great, well the individual insureds should be good to go!
But when the individual physicians tried to use that same “one claim” logic to establish that the originally reported notice covered them too, the court responded:
“But again, the Policy plainly provides that each Insured must provide written notice of the Claim as a condition precedent to coverage.”
Why didn’t you guys predict that you were going to get sued?
I really don’t understand the court’s reasoning here, other than they took an uber-libertarian “the contract’s the contract” reading, tortured as it is, reasonable expectations be damned.
Having reread the court decision, I still conclude that the denial of coverage to the individual insureds was wrong.
Where Quirk and I Part Ways
Quirk draws a different conclusion. I recommend reading his article in its entirety, but this particular passage encapsulates his thesis:
“It is important to recognize that HRC Fertility’s predicament was, in a meaningful sense, self-inflicted.”
One of the points Quirk zeros in on is the court’s reading of the notice of circumstance provision, which requires written notice containing:
“…3. The identity of the Insureds who may be the subject of the potential Claim.”
Quirk correctly points out that the policy requires the insured to report the identity of insureds who MAY become the subject of the potential claim, and this insured neglected to do that. Their initial report only named the insured entity.
Can we acknowledge how insane this requirement is? This policy genuinely expects the insured to prognosticate how a claim may evolve, predict that individual insureds may get sued, and if their notice did not include those prognostications, then the carrier gets to leave the individual insureds out in the cold.
But regardless — Quirk is correct that the insured did not report who MAY become the subject of the potential claim, and therefore did not fully comply with the reporting requirement of the policy.
It’s Quirk’s assertion that this was “self-inflicted” where we part ways entirely.
How was it self-inflicted? Quirk explains:
“HRC was not obligated to file a notice of circumstances under this policy. Had it declined to file an NOC and instead reported the claim when it was actually made in December 2020, the then-current policy would have responded, and all insureds (including the individual defendants) would have been eligible for coverage under that in-force policy (subject, of course, to its terms and exclusions). By electing to file an NOC, however, HRC Fertility voluntarily subjected itself to a technical procedure that carried strict conditions, among them, the requirement to identify all insureds who might be the subject of the potential claim.”
This entire analysis is predicated on that very first sentence: the insured was not obligated to file a notice of circumstances (NOC) under this policy.
Given Quirk’s otherwise scrupulous analysis, I was disappointed that this assertion was not backed up by citations to the court documents. Was there something in the policy that specifically clarified the insured did not have to report?
Quirk later remarks, “Although NOCs are often optional, there are situations in which they become effectively mandatory.”
Often optional? Often, like — most of the time? I’m genuinely not sure where this assertion comes from. I would never advise anyone to consider not reporting a circumstance. And in this particular case, if the insured had decided to sit on the claim and wait, the results would have been even more devastating than having only the insured entity covered.
What HRC Actually Received
I had to dig into the actual court documents on this one.
On March 4, 2019 — ten days before the Acord was filed with the carrier — the insured received a formal demand letter from retained counsel. Attorney Steven Goldsobel of the Law Offices of Steven Goldsobel sent a five-page confidential settlement communication to Huntington Reproductive Center Medical Group and its counsel at Buchalter Nemer. The letter alleged:
Wrongful termination in breach of the employment agreement
Defamation — false statements to patients and in the community damaging the claimant’s professional reputation
Retaliation — terminated for refusing to participate in and for reporting illegal conduct
Breach of contract — immediate termination without the 60-day notice required by the employment agreement
Lost wages and underpaid bonuses
Emotional distress damages
Punitive damages
Would Quirk seriously advise someone who received that letter to sit tight and wait to see if a lawsuit actually materialized?
Because that is precisely what “the NOC was optional” advice suggests.
If the insured had waited until December 2020 when the lawsuit was filed, the carrier would have been well within its rights to deny coverage entirely — for everyone, entity and individuals alike — based on failure to report a known circumstance. You cannot sit on a formal demand letter from retained counsel, renew your coverage, get hit with a lawsuit twenty months later, and then put the carrier on notice expecting coverage.
Quirk’s “self-inflicted” conclusion mistakes an execution failure for a strategic choice. HRC didn’t choose wrong when they decided to report. They chose wrong when they neglected to say that the other individual owners might also get sued.
That’s not a coverage trap created by filing a NOC.
The individual insureds lost their coverage not because their employer reported a potential claim. They lost it because their employer’s HR administrator apparently didn’t look into their crystal ball to see how the claim would evolve before reporting.
So what’s the moral of the story here?
Report. Always report.
Or don’t. Hamlet ended up dead anyways just like the insured individual’s efforts to get coverage.
This analysis is provided for educational purposes only and is based on publicly available court filings in Evanston Insurance Company v. Frederick, Case No. 8:23-cv-00882-FWS-KES (C.D. Cal.). It does not constitute legal advice. The facts described herein are drawn from court documents including the parties’ statements of uncontroverted facts and supporting declarations. Readers should not rely on this analysis as a statement of applicable law in their jurisdiction. For specific coverage questions, consult qualified coverage counsel.
Until next time agents, stay bindin and grindin 🫡