An insured under a fidelity insurance policy discovered and reported (to the insurer) losses resulting from employee dishonesty three years after the termination of the policy. The insurer denied coverage because of discovery and notice provisions in the policy. Federal court judgment in favor of the insurer was rendered in the course of an ensuing lawsuit.

The court noted that the insuring clause of the policy provided for the payment of losses ". . . .any Insured shall sustain or discover it has sustained during the policy period. . . ." The provision was subject to a notice requirement, under policy exclusions, to the effect that coverage did not apply unless loss was discovered and written notice was given to the insurer within 60 days after the policy's termination. The insured had not availed itself of an option to extend the discovery period, for an additional premium, from 60 days to one year.

Discovery took place when the plan to defraud the insured was revealed during the indictment of the dishonest employees by a federal grand jury. This was a full three years after the termination of the pertinent policy.

The court found it immaterial that the perpetrators "got away with" their deeds for such a long period. The policy provisions were clear. The insurer's motion for summary judgment in its favor was granted.

(J. I. CORPORATION, Plaintiff v. FEDERAL INSURANCE COMPANY, Defendant. United States District Court, District of Massachusetts. Civ. A No. 89-0613-H. February 21, 1990. 730 F. Supp. 1187. CCH 1990 Fire and Casualty Cases, Paragraph 2571.)