The Fifth Circuit’s latest insurance opinion stems from the heartbreaking story of Braylon Jordan. Braylon, just a toddler back in 2012, swallowed Maxfield & Oberton Holding’s (M & O) once-popular “Buckyball” magnets. The magnets shredded Braylon’s internal organs and ultimately resulted in life-altering disablement for Braylon. Braylon’s parents brought suit against M & O, along with its insurers, including one of its excess liability carriers, Evanston Insurance Company. The ensuing litigation against M & O, Evanston, and other M & O insurers, is unsurprising. The Fifth Circuit’s ruling on the issue of whether the Jordans had actually made a “claim” against M & O for Braylon’s accident, however, dealt a heavy blow to the world of insureds and claimants alike.
In the immediate aftermath of Braylon’s accident, several news outlets ran articles chronicling Braylon’s journey to some semblance of recovery. M & O first got wind of the occurrence through an April 23, 2012, news article, which was forwarded to the company’s primary insurer. In forwarding this April 2012 article, M & O’s then-CEO told the company’s primary insurer that the only information known to M & O about Braylon’s accident was included in the article. M & O’s CEO also relayed that M & O had not yet been contacted directly concerning the incident. The April 2012 article was subsequently forwarded to Evanston. While M & O’s primary insurer acknowledged the article with a reservation of rights, Evanston opened an internal “Claim/Occurrence” file monitoring the incident. It is this “Claim/Occurrence” file that the Jordans betted on in bringing a declaratory action for relief under the Evanston policy after M & O and its primary insurer reached a settlement agreement. The settlement terms included M & O CEO’s agreement to pay an additional $20 million to the Jordans contingent on funding from Evanston. Evanston refused to fund the settlement, and the Fifth Circuit upheld their decision.
The Fifth Circuit looked to the effective period under M & O’s Evanston policy, which ran from July 25, 2011, to July 25, 2012. The Court also observed that the Evanston policy was a claims-made policy under which potential coverage would only be triggered upon a claim being made against M & O. In the months that followed the initial April 2012 article, multiple news outlets continued chronicling Braylon’s recovery journey. Evanston nevertheless noted on two separate occasions in its internal “Claim/Occurrence” file that as of June 2012 and October 2012, respectively, no claim or lawsuit had been initiated against M & O. In fact, M & O did not receive any claim by the Jordans directly until their retained attorney sent a demand letter to M & O on December 11, 2012, well outside of the effective Evanston policy period. All of this considered, the Fifth Circuit reasoned that despite M & O hearing news of Braylon’s accident through the media grapevine, the Jordans were precluded from any relief under the Evanston policy because they failed to timely make a claim against M & O within the applicable Evanston policy period. The Fifth Circuit likewise found that no indemnity on Evanston’s part was attached to fund the M & O CEO’s partial settlement agreement with the Jordans.
Read the Fifth Circuit’s full opinion here.
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