This case presents the issue of whether an insurance company has a duty to defend under a claims-made and reported insurance policy when the insured made the claim outside the reporting period and after the cancellation of the policy. Plaintiffs, Southwest Disabilities Services and Support (Southwest), Reuben Goodwin, and Kimberly Goodwin, sought a declaratory judgment against defendant, ProAssurance Specialty Insurance Company (ProAssurance), for coverage regarding an underlying personal injury lawsuit. ProAssurance moved for judgment on the pleadings and plaintiffs filed a cross-motion for judgment on the pleadings. The circuit court granted ProAssurance’s motion and denied plaintiffs’ motion. We affirm.
In this case, the insuring agreement in the policy triggered coverage only if the occurrence was “first reported during the policy period.” Southwest reported the incident at issue in March 2014, nine months after the cancellation of the policy. In other words, the incident was not “first reported during the policy period” as required by the insuring agreement. ProAssurance’s duty to defend was never properly triggered and, therefore, the estoppel doctrine does not apply here. See id. (application of the estoppel doctrine is not appropriate “where there was no insurance policy in existence”).
Plaintiffs improperly attempt to conflate a “late-notice defense” normally associated with occurrence policies with the coverage triggering requirements for a claims-made policy. Unlike Ehlco, ProAssurance did not rely on a breach of notice condition. Instead, ProAssurance relied upon Southwest to fulfill its reporting duties to trigger coverage.
“Claims-made and occurrence-based policies insure different risks.” Uhlich Children’s Advantage Network v. National Union Fire Company of Pittsburgh, PA, 398 Ill. App. 3d 710, 715 (2010). In an occurrence policy, the risk is the occurrence itself. Id. In a claims-made policy, the risk insured is the claim brought by a third party against an insured. Id. “The purpose of a claims-made policy is to allow the insurance company to easily identify risks, allowing it to know in advance the extent of its claims exposure and compute its premiums with greater certainty.” Id. “A ‘claims made and reported’ policy requires not only that the claim be first made during the policy period, but also that it be reported to the insurer during the policy period.” Id. In contrast, “ ‘[c]onventional liability insurance policies are “occurrence” policies; they insure against a negligent or other liability-causing act or omission that occurs during the policy period regardless of when a legal claim arising out of the act or omission is made against the insured.’ ” Id. (quoting National Union Fire Insurance Co. v. Baker & McKenzie, 997 F.2d 305, 306 (7th Cir. 1993)). Due to the indefinite future liability to which an occurrence policy can expose the insurance company, insurers instead offer “claims made” policies which cost less, but also provide less coverage. Id. Here, Southwest neither made the claim nor reported it to ProAssurance during the policy period as required by the insuring agreement.