California Court Finds Attorney Letter Constitutes a “Claim” Despite Lack of Express Monetary Demand
The United States District Court for the Northern District of California, applying California law, has held that an attorney’s letter constituted a “claim” under a claims-made and reported EPL policy because it implicitly demanded monetary compensation. Diversified Rest. Grp., LLC v. Houston Cas. Co., 2026 WL 3017425 (N.D. Cal. Oct. 7, 2026). The court found that notice of the claim was untimely, and therefore coverage was not available.
A company owned and operated several restaurants. In December 2022, after an underage employee reported alleged sexual misconduct, the company received a letter from the employee’s counsel requesting insurance information and threatening further action to protect the employee’s “legal interests” if the company or its insurer did not respond within ten days. The attorney letter also provided instructions for addressing payments, though no specific amount was sought. The company maintained EPL coverage under successive policies for 2022 and 2023, each requiring claims to be reported within 30 days after the expiration of the applicable policy period. The company did not report the letter to the insurer within the 2022 policy’s 30-day reporting deadline, prompting the insurer to deny coverage on the ground that the attorney letter constituted a “claim” that had not been timely reported.
The court held that the letter constituted a “claim” under the 2022 policy, which defined the term in relevant part as “a written demand made by or on behalf of a Claimant alleging damages.” The court explained that a demand need not expressly request monetary compensation to qualify as a “claim.” Rather, the letter’s request for insurance policy limits, warning that counsel would take steps to protect the employee’s legal interests, and instructions regarding payment demonstrated an implicit demand for compensation. Accordingly, the attorney letter triggered the 2022 policy’s reporting requirement, and the insureds’ failure to report it within the required period barred coverage.
