Less than a month after the purchase of a home, the property flooded and the new owners sued the real estate agency, with which they dealt, and others for rescission of the sale plus damages. The lawsuit was served on the agency approximately one month after it was filed. The agency’s errors and omissions insurer sought summary judgments, reliving it of coverage and defense obligations, because the policy had expired two weeks before the insured had received notice of the claim against it. The insured appealed trial court granting of summary judgment in favor of the insurance company.

The appeal court, on examination of the policy, found that it provided for the defense of any claim against the ins. “Claim” was defined as “a demand received by the Insured for money or services, including service of suit or institution of arbitration proceedings against the Insured.”

By virtue of the insuring clause in the policy, the insurer contracted to “Pay on behalf of the Insured all sums in excess of the deductible amount stated in the Declarations which the Insured shall become legally responsible to pay as damages as a result of claims first made against the insured during the policy period.”

The court concluded that the filing of the lawsuit did not constitute a claim under the policy, quoting the trial judge, in part, as follows: “The filing of sit is not the receipt of a demand, the service of the suit is the receipt of the demand. This suit was served two weeks after the coverage was expired and, therefore, the motion for summary judgment will be granted.”

The appeal court affirmed the granting of summary judgment by the trial judge in favor of the insurance company, dismissing all claims by the real estate agency against the insurer.

McFarland Et Ux. v. Sauvinet Et Al., Louisiana Court of Appeals, First Circuit. No.CA 870500. May 17, 1988. CCH 1988-89 Fire and Casualty Cases, Paragraph 1394.