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Federal Court Justifies Malpractice Insurance Claim Notification As Adequate

A computer-generated loss run submitted to an insurer is a sufficient notice of a claim under an excess liability policy, sold by Lexington Insurance

A Federal appeals court has declared that a computer-generated loss run submitted to an insurer is a sufficient notice of a claim under an excess liability policy, sold by Lexington Insurance – reported in Business Insurance.

The case of East Texas Medical Center Regional Healthcare System versus Lexington Insurance involved a claims-made medical malpractice policy (from June 2002 to June 2003) with $5 million in limits above a $2 million retention. During that time, a medical malpractice claim was filed and a dispute arose between East Texas Medical Center and Lexington, about whether the policyholder properly notified Lexington of the claim and a subsequent lawsuit.

The medical center had provided Lexington information only through three computer-generated spreadsheets known as a loss runs, that contained data on many claimants. Lexington deprived coverage and the medical center sued.

A jury hearing the case awarded $1.7 million in damages to the medical center, but a trial court judge agreed with Lexington that there was insufficient evidence to support the jury findings.

However, the 5th US Circuit Court of Appeals vacated that finding and remanded the case for additional proceedings. Lexington had argued that loss runs lack relevant data are insufficient to satisfy its policy requirements that written notice be made of a claim. But the New Orleans-based appeals court disagreed.