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Insurer off hook because initial complaint predates policy

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HDI-Gerling America Insurance Co. did not have a duty to defend a manufacturer in a defective product action because a claim was made against the policyholder before the effective date of its claims-made policy, says a federal appeals court in upholding a lower court ruling.

No later than early 2008, Racine, Wisconsin-based Burlington Graphic Systems Inc. reported to Cleveland-based Ritrama Inc., which manufactures pressure-sensitive flexible films and cast vinyl films for various applications, that there were problems with the product Ritrama had sold it, according to Monday's ruling by the 8th U.S. Circuit Court of Appeals in St. Louis in Ritrama Inc. v. HDI-Gerling America Insurance Co.

In September 2008, Burlington sent Ritrama a spreadsheet detailing three claims for monetary damages based on the product failures totaling $53,000, according to the ruling. The following month, Ritrama sent Burlington a settlement proposal agreeing to pay half of the total.

Ritrama bought a claims-made commercial general liability insurance policy from Chicago-based Gerling in early 2009. Although the policy defined “suit,” it did not define “claim.” Under the policy Gerling provided coverage for damages and had a duty to defend Ritrama in any suits against it between March 31, 2009 and March 31, 2010.

Burlington sued Ritrama in the dispute in April 2011, and in June 2011, Gerling denied coverage and refused to defend Ritrama in that suit, according to the ruling. Ritrama filed suit in January 2013, in U.S. District Court in Minneapolis, claiming Gerling had breached its duty to defend under the policy.

Gerling argued that Burlington had made a claim against Ritrama within the meaning of the policy before it took effect, and the District Court agreed. The District Court granted Gerling summary judgment dismissing the case, and a three-judge appellate panel unanimously upheld the ruling.

The definition of claim used by the District Court in granting the insurer summary judgment, “an assertion by a third party that the insured may be liable to it for damages within the risks covered by the policy,” is entirely consistent with dictionary definitions, consistent with the policy as a whole and not contrary to the primary purpose of claims-made insurance policies, said the panel, in upholding the case's dismissal.