Industrial Indemnity v. Superior Court

Insurer Industrial Indemnity (Industrial) seeks extraordinary relief after the court denied its motion for summary judgment in this action brought by insured Gary Kaku (Kaku). Relying on Northwestern Title Security Co. v. Flack (1970) 6 Cal.App.3d 134 [ 85 Cal.Rptr. 693 ], the court ruled Industrial must show substantial prejudice from Kaku’s late notice of a claim made against him. We distinguish this case from the circumstances reviewed in Northwestern Title Security Co. v. Flack, supra, and grant the petition because under the unambiguous terms of the policy, coverage existed for claims made after Kaku permitted the policy to lapse only if reported to the insurer within one year after lapse.

Factual and Procedural Background

Kaku, a life insurance salesman, purchased a claims-made professional errors and omissions policy from Industrial Indemnity which he permitted to lapse on March 4, 1987. The policy provided for a one-year extended period after lapse within which the company would cover claims made against Kaku during the extension and reported by him within that period. On November 9, 1987, although Kaku was named as a defendant in an action entitled McNamara v.…