Sherwood Brands, Inc. v. Great American Insurance

³⁰³ HARRELL, J. This case demands that we revisit Maryland’s insurance contract claim notice-prejudice jurisprudence, a body of law that has laid dormant largely since T.H.E. Insurance Co. v. P.T.P. Inc., 331 Md. 406 , 628 A.2d 223 (1993). As the trial judge observed, this involves “quite a workout.” Sherwood Brands, Inc. (“Sherwood”) appeals from the judgment of the Circuit Court for Montgomery County — granting summary judgment in favor of Appellee, Great American Insurance Company (“Great American”) — concluding that Great American acted properly in denying coverage under a third-party liability policy it issued Sherwood because Sherwood neglected to notify Great American of claims made against Sherwood within ninety days of the expiration of the policy period, as the policy required. Great American’s entitlement to judgment was not dependent on it demonstrating how it may have been prejudiced by Sherwood’s tardy notice. We hold that, for reasons to be explained more fully infra, pursuant to Maryland Code (1997, 2006 Repl.Vol.), Insurance Article § 19-110 (“Disclaimers of coverage on liability policies”), which provides that “[a]n insurer may disclaim coverage on a liability insurance policy on the ground that the insured ... has breached the policy ... by not giving the insurer required notice only if the insurer establishes ... that the lack of ... notice has resulted in actual prejudice to the insurer,” Great American is required to demonstrate how it was prejudiced by Sherwood’s late-bestowed notice.

This is so notwithstanding that the policy at issue is a “claims-made policy.” Accordingly, we vacate the judgment of the Circuit Court for Montgomery County and remand the case to that court for further proceedings not inconsistent with this opinion. FACTS AND LEGAL PROCEEDINGS Sherwood, 1 a North Carolina corporation with its principal office in Rockville, Maryland, is a manufacturer of confections ³⁰⁴ and specialty gifts. Great American issued Sherwood a series of annual “Directors’, Officers’, Insured Entity and Employment Practices Liability Insurance” policies, the most relevant one of which (Policy DOL5741758) was effective 1 May 2007 to 1 May 2008 (the “Policy”). Section I of the Policy, “Insuring Agreements,” provides: A. The Insurer shall pay on behalf of the Insured Persons all Loss which the Insured Persons shall be legally obligated to pay as a result of a Claim ... first made against the Insured Persons during the Policy Period ... for a Wrongful Act, except for any Loss which the Company actually pays as indemnification B. The Insurer shall pay on behalf of the Company all Loss which the Insured Persons shall be legally obligated to pay as a result of a Claim ... first made against the Insured Persons during the Policy Period or the Discovery Period for a Wrongful Act, but only to the extent the Company is required or permitted by law to indemnify the Insured Persons.

C. The Insurer shall pay on behalf of the Insured Entity all Loss which the Insured Entity shall be legally obligated to pay as a result of a Securities Claim first made against the Insured entity during the Policy Period or the Discovery Period for a Wrongful Act. Section III of the Policy, “Definitions,” provides: A. “Claim” shall mean: (1) a written demand for monetary or non-monetary relief made against any Insured and reported to the Insurer ... (2) a civil, criminal, administrative or arbitration proceeding made against any Insured seeking monetary or non-monetary relief and commenced by the service of a complaint or similar pleading, the return of an indictment, or the receipt or filing of notice of charges or ³⁰⁵ similar document, including any proceeding initiated against any Insured before the [EEOC] or any similar governmental body. Finally, Section VIII, “Notice of Claim,” provides, in pertinent part: A. The Insureds shall, as a condition precedent to their rights under this Policy, give the Insurer notice in writing of any Claim....

(1) as defined in Section III.A.(1) which is made during the Policy Period. Such notice shall be given prior to the end of the Policy Period; (2) as defined in Section III.A.(2) [supra ] which is made during the Policy Period. Such notice shall be given as soon as practicable, but in no event later than ninety (90) days after the end of the Policy Period. On 11 December 2007, one Gerald D. Koelsch filed claims against Sherwood and its subsidiaries with the Commonwealth of Massachusetts Commission Against Discrimination, alleging breach of contract, wrongful termination, breach of the duty of good faith and fair dealing, defamation, fraudulent misrepresentation, promissory estoppel, and negligent infliction of emotional distress. 2 He filed a related complaint in the Plymouth County (Massachusetts) Superior Court on 28 March 2008 against Sherwood and its subsidiaries, asserting similar counts and related statutory violations. 3 We treat as undisputed for the purposes of this opinion that both of these actions were filed and served on Sherwood during the time period that the 2007-08 Policy was in effect. 4 Sherwood did not notify Great ³⁰⁶ American of the Koelsch claims until 27 October 2008, a date concededly greater than ninety days after the expiration date of the Policy (1 May 2008).

On 26 November 2008, Barbara Bryan (“Bryan”), a Senior Claims Attorney with Great American, wrote to Sherwood, explaining why the insurer denied coverage for the Koelsch claim. Although the Massachusetts lawsuit “constitutes an action as defined under the policy” and the “Claim made date is ... within the May 1, 2007 — May 1, 2008 Policy Period,” Bryan pointed to Section VIII.A. of the policy — the ninety-day notice requirement — and explained that, because the Policy ended on 1 May 2008 and Great American did not receive notice of the suit until 27 October 2008, “there is no coverage for this Claim under the policy.” Meanwhile, across the globe, on 17 October 2007, Plastic Magen Ltd. and Plasto Kit Ltd. filed suit (unrelated to the Koelsch suit) against Sherwood, its officers, and other entities in the Tel-Aviv Jaffo (Israel) District Court, alleging breach of contract, “deceit and conspiracy,” “lack of good faith,” “illegal enrichment process,” “false presentation,” and other counts. 5 The parties to the present case agree that service of process on Sherwood was made in the Israeli suit sometime in December 2007, and thus it appears undisputed that notice of this action was filed against and served on Sherwood during the effective period of the 2007-08 Policy. Sherwood notified Great American of this suit on 6 November 2008, a date ³⁰⁷ conceded again to be greater than ninety days following the expiration date of the 2007-08 Policy. Bryan wrote again to Sherwood, on 16 December 2008, explaining the insurer’s denial of coverage of the claim represented by the Israeli lawsuit.

As with the Massachusetts suit, Great American conceded that the Israeli lawsuit is a “Claim made within the May 1, 2007 — May 1, 2008 Policy Period,” but denied coverage because notice to Great American of the claim was not given until 6 November 2008, more than ninety days after the end of the 2007-08 Policy. Bryan continued: In acknowledging the tendering of this matter would involve a late notice issue, you mentioned having previously litigated the issue in Maryland, winning a case now cited on the late notice-prejudice issue. I have had the opportunity to view the case you mentioned,[ 6 ] which unfortunately is inapplicable to the Great American policy at issue, as your previous litigation involved your general liability carrier and did not involve a claims made a reported Director and Officers policy. On 10 February 2009, Sherwood, its officers and subsidiaries filed in the Circuit Court for Montgomery County, Maryland, a “Complaint for Breach of Contract and Declaratory Relief’ against Great American, alleging that the Massachusetts and Israeli actions were “claims” under the 2007-08 Policy and Great American breached the Policy when it “refused to pay any losses Plaintiffs may or are obligated to pay as a result of the lawsuit filed by Mr. Koelsch and the law suit filed by Plastic Magen Ltd. and Plasto Kit Ltd.” Sherwood also averred, regarding the Massachusetts and Israeli actions, that Great American “has not been prejudiced by any alleged delay in notification.

No relevant documents have been lost ³⁰⁸ or destroyed. No known witnesses are missing. No evidence has been lost or destroyed. No adverse rulings have [been] obtained in the underlying suit for wrongful termination.” Accordingly, Sherwood requested the Circuit Court enter a judgment declaring that Great American “is obligated to pay all losses the Plaintiffs become legally obligated to pay in the underlying suit[s]” and that Sherwood “is obligated to pay all costs incurred in bringing this Complaint for Breach of Contract and Declaratory Relief____” Joined with its complaint, Sherwood filed a motion for summary judgment, urging arguments similar to those it makes to this Court. 7 In its answer, Great American denied that it breached the policies with Sherwood, and denied that the respective notices of the Massachusetts and Israeli actions were timely.

Further, Great American tendered twenty affirmative defenses, only one of which is relevant to the present appeal: “Coverage for the Underlying Actions under the 2007[-08] Policy is barred due to [Sherwood’s] failure to give written notice to Great American as soon as practicable and no later than within ninety (90) days after the end of the Policy Period.” Shortly after filing its answer, on 22 May 2009, Great American filed an opposition to Sherwood’s motion for summary judgment, and a cross-motion for summary judgment, advancing arguments similar to those it offers to this Court. On 14 July 2009, the Circuit Court heard oral argument on the motions. Denying Sherwood’s motion for summary judgment and granting Great American’s cross-motion for summary judgment, the trial court explained: [I]t all turns on what type of policy this is going to be construed to be, whether it’s a straight'-up claims made, or is it a claims made with a reporting period. If it is the latter, then the insurance company would have to show ³⁰⁹ actual prejudice for the late notice before it would not have to pay benefits under the policy.

But here, in section 8 of the actual policy, it says “The insureds shall, as a condition precedent to their rights under the policy, give the insurer notice in writing of any claim.” In this case we drop down to 2, as defined in, it’s actually a civil proceeding, “which is made during the policy period.” “Such notice shall be given as soon as practicable, but in no event later than 90 days after the end of the policy period.” So I base my decision based on that section. And I find that this particular policy is analogous to the policy that was construed in the [T.H.E. Ins. Co. v. P.T.P. Inc., 331 Md. 406 , 628 A.2d 223 (1993) ] case. And so I find that the policy, the Great American policy in question here is a claims made with reporting period, and therefore that the defendant is not required to show actual prejudice to deny coverage for claims.

So bottom line is I am granting the defendant, Great American Insurance Company’s, cross-motion for summary judgment.... Sherwood noted a timely appeal to the Court of Special Appeals. On our initiative, we issued a writ of certiorari, Sherwood Brands v. Great American Ins., 415 Md. 114 , 999 A.2d 179 (2010), before the intermediate appellate court decided the appeal, to consider “whether the lower court erred by ruling that [Great American] was not required by Section 19-110 of the [Maryland] Insurance Code to show actual prejudice in order to deny coverage based on the [Sherwood]’s failure to comply with the notice condition of the 2007[-08] insurance policy at issue____” 8 ³¹⁰ STANDARD OF REVIEW “The standard of review of a trial court’s grant of a motion for summary judgment on the law is de novo, that is, whether the trial court’s legal conclusions were legally correct. Under this standard, we review the trial court’s ruling on the law, considering the same material from the record and deciding the same legal issues as the circuit court.” Messing v. Bank of America, N.A., 373 Md. 672, 684 , 821 A.2d 22, 28 (2003) (internal citations omitted); see Tyler v. City of College Park, 415 Md. 475, 498 , 3 A.3d 421, 434 (2010) (“Whether a circuit court’s grant of summary judgment is proper in a particular case is a question of law, subject to a non-deferential review on appeal.”).

ANALYSIS I. Md.Code (1997, 2006 Repl.Vol.), Insurance Article § 19-110: Its Origin and Application The first seed, leading ultimately to the development of Md.Code (1997, 2006 RepLVol.), Insurance Art., § 19-110, was sown in Watson v. United States Fidelity and Guaranty Co., 231 Md. 266 , 189 A.2d 625 (1963). In Watson , the carrier issued an insurance policy to an individual, Watson, that “required the insured, as a condition precedent, to give written notice of an accident to the insurer ‘as soon as practicable’ following an accident.” Watson, 231 Md. at 269 , 189 A.2d at 626 . Watson was involved in an automobile accident on 5 March 1961, but did not notify the insurer until 8 April 1961. A few days later, the insurance company informed Watson that, “in view of the fact that prompt notice of the accident had not been given to it,” it denied the claim.

Watson, 231 Md. at 270 , 189 A.2d at 626 . On appeal, the insured argued “that the modern view which holds that the insurer must show ³¹¹ actual prejudice in order to be relieved of its obligations under a policy is clearly the better view, and the one now being followed by a majority of jurisdictions.” Watson, 231 Md. at 272 , 189 A.2d at 627 . The Court, rejecting Watson’s argument that “even though the notice condition ... involved is a condition precedent, it is unavailable to the Company as a denial of liability ... unless the Company was prejudiced by the failure to give prompt notice,” held that “[t]his contention is not in accord with the Maryland decisions, nor with the weight of authority elsewhere in the country,” holding ultimately that, because the insured did not contest that he had not given notice “as soon as practicable,” the insurer was within its rights to deny coverage. Id.; see Prince George’s County v. Local Gov’t Ins.

Trust, 388 Md. 162, 181 , 879 A.2d 81, 93 (2005) (“In Watson, we held that an insurer need not show prejudice in order to deny coverage to an insured who breached the notice provision of an insurance policy.”). The Legislature’s response to Watson was prompt and decisive. At the legislative session immediately following Watson , the General Assembly enacted former Maryland Code (1957, 1972 RepLVol.), Article 48A, § 482. See Chapter 185 of the Acts of 1964; Local Gov’t Ins.

Trust, 388 Md. at 181 , 879 A.2d at 92-93 (“In passing the statute, the Legislature apparently aimed to abrogate the common law rule as articulated in Watson____”); St. Paul Fire & Marine Ins., Co. v. House, 315 Md. 328, 352 , 554 A.2d 404, 416 (1989) (“Section 482 ... appears to have been enacted to remedy the harsh result of the Watson case.”). 9 Following a 1966 amendment, 10 § 482 provided: ³¹² Disclaimer of coverage because of lack of notice or cooperation from insured. Where any insurer seeks to disclaim coverage on any policy of liability insurance issued by it, on the ground that the insured or anyone claiming the benefits of the policy through the insured has breached the policy by failing to cooperate with the insurer or by not giving requisite notice to the insurer, such disclaimer shall be effective only if the insurer establishes, by a preponderance of affirmative evidence that such lack of cooperation or notice has resulted in actual prejudice to the insurer. One commentator offered three potential reasons the General Assembly moved so quickly responding to Watson : First, an aura of unfairness emanates from a situation in which an insurance company is permitted to disclaim liability when it is not prejudiced by the insured’s breach of a condition precedent. In such a situation, the insurer receives an unjustifiable windfall.

Second, the Watson rule allows an unreasonable forfeiture by permitting the insurer’s assertion of a technical irregularity to deny protection for which the insured has paid. Finally, allowing an insurer to disclaim liability has the undesirable effect of leaving victims of automobile accidents uncompensated by their paid-for insurance coverage. A Legal Process Analysis for a Statutory and Contractual Construction of Notice and Proof of Loss Insurance Disclaimers, 38 Md. L.Rev. 299, 309-10 (1978). 11 Chronologically, the next case shaping Maryland’s modern notice-prejudice jurisprudence is House, supra. In House , an ³¹³ insurer issued a “physicians and surgeons professional liability policy” providing that “[a] claim is made on the date you first report an incident or injury to us or our agent.” House, 315 Md. at 331 , 554 A.2d at 405 .

House had a series of annual policies the last of which ended on 1 January 1986. See House, 315 Md. at 330 , 554 A.2d at 405 . Allegedly, House performed surgery on a patient and left part of a needle in her knee; St. Paul, however, declined to defend House, claiming that it did not receive notice of the claim until February 1986, after the policy had expired. See House, 315 Md. at 331 , 554 A.2d at 405-06 . “We granted certiorari ... to determine whether § 482 applies when an insurer asserts that there is no coverage under a ‘claims made’ policy because the claim was not made while the policy was in effect.” House, 315 Md. at 330 , 554 A.2d at 405 .

Ultimately, we declined to reach that question, holding instead that the “issue arises only if the policy here involved is construed as the insurer contends .... [but], we do not accept the policy construction on which the insurer’s argument is premised.” Id. 12 Although the Court could not have known it at the time, in advancing Maryland’s notice-prejudice jurisprudence, of greater significance in House was Chief Judge Robert C. Murphy’s dissent, which was joined by Judges McAuliffe and Blackwell. The dissent began by disagreeing with the Majority opinion’s conclusion that the policy was ambiguous as to when a claim was made; in his view, “[i]t is ... clear that reporting is a ³¹⁴ prerequisite to coverage____” House, 315 Md. at 342 , 554 A.2d at 411 (Murphy, C.J., dissenting). 13 The dissent proffered potential policy rationales for the adoption of approaches, like Maryland’s, requiring insurers denying coverage of claims for reasons related to notice deficiencies to make a showing of prejudice. See House, 315 Md. at 345-47 , 554 A.2d at 412-13 . First, the dissent noted that many “courts have found that the strict contractual condition precedent approach creates a forfeiture,” explaining that: [Although the policy may speak of the notice provision in terms of “condition precedent,” ... nonetheless what is involved is a forfeiture, for the carrier seeks, on account of a breach of that provision, to deny the insured the very thing paid for....

Thus viewed, it becomes unreasonable to read the provision unrealistically or to find that the carrier may forfeit the coverage, even though there is no likelihood that it was prejudiced by the breach. House, 315 Md. at 345 , 554 A.2d at 413 (quoting Cooper v. Gov’t Employees Ins. Co., 51 N.J. 86 , 237 A.2d 870, 873-74 (1968)). Second, the dissent explained that another rationale “is based upon the purpose and function of the notice provision”: The purpose of a policy provision requiring notice of an accident or loss to be given within a certain time is to give the insurer an opportunity to acquire, through an adequate ³¹⁵ investigation, full information about the circumstances of the case, on the basis of which, it can proceed to disposition, either through settlement or defense of the claim____ [A] reasonable notice clause is designed to protect the insurance company from being placed in a substantially less favorable position than it would have been in had timely notice been provided, e.g., being forced to pay a claim against which it has not had an opportunity to defend effectively.

In short, the function of a notice requirement is to protect the insurance company’s interests from being prejudiced. Where the insurance company’s interests have not been harmed by a late notice, even in the absence of extenuating circumstances to excuse the tardiness, the reason behind the notice condition in the policy is lacking, and it follows neither logic nor fairness to relieve the insurance company of its obligations under the policy in such a situation. House, 315 Md. at 346-47 , 554 A.2d at 413 (quoting Brakeman v. Potomac Ins. Co., 472 Pa. 66 , 371 A.2d 193, 197 (1977)).

In addition to offering potential policy reasons undergirding the Legislature’s passage of former § 482, Chief Judge Murphy explained the distinction between “occurrence” policies and “claims-made” policies. Coverage in an “occurrence” policy is provided no matter when the claim is made, subject, of course, to contractual and statutory notice and limitations of actions provisions, providing the act complained of occurred during the policy period. Because the insurer’s liability in such policies ordinarily relates to a definite, easily identifiable and notorious event such as an automobile accident, a fire, a slip and fall injury, or a ship collision, the insurer is ordinarily able to conduct a prompt investigation of the incident and make an early assessment of related injuries and damages with the result that actuarial considerations permit relative certainty in estimating loss ratios, establishing reserves, and fixing premium rates. ³¹⁶ House, 315 Md. at 349 , 554 A.2d at 414 (quoting Stine v. Continental Casualty Co., 419 Mich. 89 , 349 N.W.2d 127, 131 (1984)). Occurrence policies differ from claims-made policies, the latter of which are “of relatively recent origin and were developed primarily to deal with situations in which the negligent act is difficult to pinpoint and may have occurred over an extended period of time.” House, 315 Md. at 349 , 554 A.2d at 414 .

Regarding claims-made policies, we observed: [T]he error or omission may be a discrete act or failure to act, or it may consist of a lengthy process and remain latent and undiscoverable for a number of years. Examples include a physician’s misdiagnosis, an attorney’s fraudulent concealment, or an architect’s defective design. From an underwriting perspective, occurrence policies are unrealistic for such risks because of the long or open ‘tail’ exposure which results. When the ‘event’ intended to be covered cannot easily be fixed and the liability for the consequent injury extends long into the future, often well after expiration of the policy, considerations of inflation, upward spiraling jury awards, and legislative and judicial adoption of newly developing concepts of tort law mean that actuarial factors, including fixing premium rates and establishing adequate reserves, are highly speculative.

The result, logically, is the establishment of a premium rate schedule sufficiently high to accommodate ‘worst scenario’ jury verdicts returned years after the error, omission, or negligent act. House, 315 Md. at 349-50 , 554 A.2d at 414 -15 (quoting Stine, 349 N.W.2d at 131 ). 14 The dissent de-constructed claims-made ³¹⁷ policies even further, distinguishing between “pure” claims-made policy, and “reporting-type” claims-made policies: So-called “pure” claims made policies generally define “claims' made” as all claims brought against the insured within the policy period. The claim made against the insured party is the event which invokes coverage. The policy may also be of a “reporting” type, defining “claims made” as all claims made against the insurer by the insured during the policy period.

Thus, the claim made against the insurer is the event invoking coverage in a “reporting” type of claims made policy. House, 315 Md. at 350-51 , 554 A.2d at 415 . Chief Judge Murphy applied the aforementioned principles to former § 482 and the insurance policy in House . First, the dissent disagreed with the majority’s determination that the policy was ambiguous as to when a claim is made, concluding that “[i]t is ... clear that reporting is a prerequisite to coverage----” Regarding whether § 482 applied to the policy, Chief Judge Murphy explained that, although § 482 states that it applies to “any policy of liability insurance,” the statute only “potentially applies to ‘any’ liability insurer or policy,” considering that “the statute [also] requires that the basis for the disclaimer or denial of coverage be that ‘the insured has breached the policy ... by not giving the requisite notice to the insurer.’ ” House, 315 Md. at 355 , 554 A.2d at 417 (emphasis in original).

The dissent framed next the possibly penultimate or even dispositive question as whether § 482 applied to the policy in House : “The fundamental question now is whether, at the time [House] reported the ... claim, there existed a contract between the parties, for one cannot breach a contract ³¹⁸ which is not in existence .... ” House, 315 Md. at 355-56 , 554 A.2d at 418 (emphasis added). As the dissent explained: To answer this question, I look again to the nature of claims made and occurrence policies. Both types of policies include provisions which define (1) the events for which coverage is provided and (2) when and how coverage can be initiated. For example, an occurrence policy has a fixed time period defining what specific events or occurrences will be covered.

When this time period ends, however, the insurer’s responsibilities under the policy do not end, for it may be held liable for the covered events, barring statutes of limitations, at any time thereafter. Claims made policies are almost the mirror image of occurrence policies in that they often cover claims based on events which occurred many years before the policy came into effect, but limit the scope of coverage to claims based on these events which are made within the limited time period of the policy. Unlike the occurrence policy, the insurer’s potential liability ends when the policy expires. Therefore, when the claims made policy at issue here expired there was nothing left.

The policy could not be breached because there was no longer a policy to be breached. Any claim made after its expiration is of the same effect as an accident or event which occurs after the “expiration” of an occurrence policy. There was no breach; there was simply no coverage. I therefore think that § 482 is inapplicable to a “reporting” type of claims made policy when the claim is made after the expiration of the policy.

House, 315 Md. at 356 , 554 A.2d at 418 (emphasis added). For clarity purposes, we think it important to restate Chief Judge Murphy’s “holdings,” had he been writing for a majority of the Court at the time. First: In a “pure” claims-made policy, a claim is “made” when a claim (typically a lawsuit) is brought against the insured during the policy period. Second: In a “reporting-type” claims-made policy, a claim is “made” when, in addition to a claim being brought against the insured during the policy period, the insured reports or notifies the ³¹⁹ insurer of the claim made against the insured.

Third: In a claims-made policy, there can be no breach of the policy where a claim is “made” after the policy’s expiration (whether by (1) the insured having a claim filed against it during the policy period, as in a “pure” claims-made policy, or, (2) the insured having reported or notified the claim lodged against the insured to the insurer, as in a “reporting-type” claims-made policy) as one cannot “breach” a policy that is no longer in existence. Fourth: In a claims-made policy, then, where a claim is “made” after the policy expiration, § 482 does not apply to require the insurer to show prejudice, as the statute, on its face, applies only when an “insured has breached the policy.” The importance of the dissent in House became manifest four years later in T.H.E. Insurance Co. v. P.T.P. Inc., 331 Md. 406, 407 , 628 A.2d 223, 223 (1993), in which “we applied], in substance, the analysis presented in Chief Judge Murphy’s dissent in House.” In T.H.E., P.T.P., the owner of a go-kart track, was insured by T.H.E. under a claims-made comprehensive general liability policy running from 2 April 1987 to 2 April 1988, and which required P.T.P. to “see to it that [T.H.E.] receive •written notice of the claim as soon as practicable,” and that included a “Basic Extended Reporting Period” of sixty days. T.H.E., 331 Md. at 412 , 628 A.2d at 225-26 . Importantly, the policy provided that “[a] claim ... seeking damages will be considered to have been made when written notice of such claim is received and recorded by [T.H.E.]....” T.H.E., 331 Md. at 411-12 , 628 A.2d at 225 (emphasis added).

A patron was injured at P.T.P.’s track on 27 August 1987. On 6 June 1988 — after the policy and the sixty-day extended reporting period expired — counsel for the injured patron made a claim against P.T.P. for damages. See T.H.E., 331 Md. at 408-09 , 628 A.2d at 223-24 . T.H.E., upon learning of the claim against P.T.P., denied coverage of the claim.

See T.H.E., 331 Md. at 409 , 628 A.2d at 224 . P.T.P. filed a complaint for declaratory judgment, arguing that T.H.E. had a duty to defend and indemnify against the patron’s claim. The Circuit Court declared that the T.H.E. policy obligated T.H.E. ³²⁰ to defend the claim, considering that § 482 required T.H.E. to show it had been prejudiced by the late-delivered claim, which it failed to do. See id.

On appeal, T.H.E. argued that, because its policy with P.T.P. applied only to claims “first made against any insured during the policy period,” or during the sixty-day extension, where the injured patron did not file a claim against P.T.P. until after the policy and extension period, there was simply no coverage for that claim. T.H.E., 331 Md. at 413 , 628 A.2d at 226 . In response, P.T.P., relying on § 482, argued that the statute required T.H.E. to show actual prejudice resulting from the delay. See id.

The Court, through Judge Rodowsky, relying on the dissent in House and the “overwhelming weight of authority, measured both numerically and by persuasiveness,” held: Here, T.H.E. does not deny coverage because of an alleged material failure by P.T.P. to perform a covenant to give notice, or to satisfy a policy provision that might be phrased as a condition that must be satisfied to prevent the loss of coverage that otherwise would apply. In this case the extended reporting period under the original policy had expired before P.T.P. reported the Buckley claim to T.H.E. The original policy had come to an end with respect to newly reported claims. Section 482 could no more revive the original policy to cover the Buckley claim than § 482 could reopen an occurrence policy to embrace a claim based on an accident that happened after the end of the policy period.[ 15 ] T.H.E., 331 Md. at 415 , 416 628 A.2d at 227, 228 . Judge Rodowsky explained further that: ³²¹ In the case before us the original policy had expired before a claim was asserted against P.T.P. That expiration resulted from the terms of coverage and is not attributed to a “breach by P.T.P.” The problem at which § 482 is directed is not presented.

T.H.E., 331 Md. at 421 , 628 A.2d at 230 . 16 Judges Eldridge and (now Chief Judge) Bell dissented in T.H.E. Their first quarrel with the Majority opinion was that it did “not distinguish between the provisions of a claims made policy which establish coverage and the provisions which require notice.” The dissent explained: Section 482 deals with a liability policy’s notice provision, i.e., notice by the insured to the insurer of the happening of an event triggering coverage. It does not apply to the portion of the policy which establishes the essential terms for coverage, i.e., an accident/occurrence or the making of a claim by the injured third party. In a claims made policy the requirement that a claim against the insured be made during the policy period essentially defines the coverage available. The notice of which § 482 speaks, in a claims made policy, is the notice by the insured to the insurer that a claim against the insured has been made during the policy period.

Both the language and purpose of § 482 require that it be applied to the clause in a claims made policy providing for notice to the insurer. ³²² The majority, however, contends that, because T.H.E. Insurance Co. defined the time at which a claim is made as “when written notice of such claim is received and recorded by us,” this claims made policy makes the reporting of the claim by the insured to the insurer the insurable event. By allowing the insurer to define claims made in terms of notice to the insurer, and by holding that § 482 does not apply to this provision in a claims made policies, the majority opens the door for insurers to circumvent the statute. T.H.E., 331 Md. at 425 , 628 A.2d at 232 .

II

Development of Notice-Prejudice Law After T.H.E. In 1996, in codifying the Insurance Article of the Maryland Code, the Legislature recodified former § 482 to Maryland Code (1997, 2006 Repl.Vol.), Insurance Article § 19-110. See Chapter 11 of the Acts of 1996. After a minor 1997 revision, 17 § 19-110 now provides: An insurer may disclaim coverage on a liability insurance policy on the ground that the insured or a person claiming the benefits of the policy through the insured has breached the policy by failing to cooperate with the insurer or by not giving the insurer required notice only if the insurer establishes by a preponderance of the evidence that the lack of cooperation or notice has resulted in actual prejudice to the insurer. The revisor’s note to the 1996 codification notes that “[t]his section is new language derived without substantive change from former Art. 48A, § 482.” Aside from moving the statute from former Article 48A to the Insurance Article, Maryland’s notice-prejudice jurisprudence went dark largely after T.H.E. 18 The growth of notice-prejudice jurisprudence nation ³²³ wide, however, was not stunted similarly. 19 It now may be said fairly that, although some courts have held that their respective notice-prejudice rules apply to claims-made policies, “a majority of courts that have addressed the issue have found that the prejudice requirement does not apply equally to claims-made policies.” 1 Jeffrey E. Thomas, New Appleman on Insurance Law Library Edition § 4.04[4][d][i] (2010).

One further aspect of the jurisprudence developed in the nearly-two decades since T.H.E. is the distinction first mentioned in Maryland in Chief Judge Murphy’s dissent in House, supra — namely, that of “pure” claims-made policies and “claims-made-and-reported” policies. The major distinction between a claims-made and a claims-made and reported policy is just as the names suggest. Under a claims-made policy, a claim must be made against the insured during the policy period, but need only be reported to the insurer “promptly,” or “as soon as practicable,” but not necessarily during the policy period. By contrast,