U.S District Court holds that letter informing insurer of potential claim does not trigger policy endorsement

In Panagora Asset Mgt., Inc. v. St. Paul Mercury Ins., __ F.2d __, 2009 WL 4827478 (D. Mass.), Panagora, an asset management firm, sought insurance coverage for an error it made in an asset portfolio which caused its client to suffer a $2 million loss. Panagora notified its insurer, Travelers, of the error and loss within days of discovering it, before its client had taken any action. It requested coverage under a claims-made policy issued to it by Travelers.

Travelers argued that the notification brought the claim within an "Extension Endorsement" under which Travelers agreed to reimburse Panagora for costs Panagora incurred to mitigate or correct direct monetary damages to a customer. Travelers made this argument because claims within the endorsement were subject to a significantly higher self-insured retention than claims that did not come within the endorsement.

The court held that the letter from Panagora to Travelers did not bring the claim within the endorsement. At the time that Panagora sent the letter it had not received a claim from its own customer and was not seeking reimbursement from Travelers for costs it had incurred in repaying the loss.