Thoracic Cardiovascular Associates, Ltd. v. St. Paul Fire and Marine Insurance Company

Thoracic Cardiovascular Associates, Ltd. and Thomas Trahan (plaintiffs) had a “claims-made,” or claim-based, professional liability policy with St. Paul Fire and Marine Insurance Company (St. Paul) (defendant). This policy only covered claims “arising out of acts performed prior to the termination for which a claim may be made after the termination date.” On February 16, 1988, the plaintiffs canceled the policy. After the policy was terminated, both St. Paul and the plaintiffs’ St. Paul insurance broker separately sent the plaintiffs letters notifying them that their policy only covered claims made and reported during the policy term and that, unless the plaintiffs purchased either another policy or St. Paul’s optional reporting endorsement coverage, they would not be covered for claims that occurred prior to policy termination or were reported subsequently to policy termination. On October 15, 1987, a medical-malpractice suit was filed against the plaintiffs. The plaintiffs notified St. Paul about this suit on August 30, 1988, more than six months after the plaintiffs’ St. Paul policy terminated. The plaintiffs were not aware of this lawsuit during the policy period. St. Paul denied coverage for the malpractice claim because the claim was not reported during the policy period. The plaintiffs filed a declaratory-judgment action against St. Paul requiring St. Paul to defend the malpractice claim. The trial court granted summary judgment in favor of the plaintiffs. St. Paul appealed.