Mind the Wording: No Coverage Without a Clear Demand — Lessons for Claims Teams

A recent decision from the United States District Court for the Southern District of California, in the matter between Del Mar Woods v. Philadelphia Indemnity Insurance Co., 2025 WL 1798300 (S.D. Cal. June 27, 2025), provides guidance on the interpretation of “Claim” under claims-made insurance policies and highlights the limits of what may constitute a “demand”.

Background

Del Mar Woods Homeowners Association (the “HOA”) purchased a claims-made insurance policy from Philadelphia Indemnity Insurance Company, effective from 25 March 2022 to 25 March 2023. The policy defined a “Claim” as “a written demand for monetary or non-monetary relief against an Insured”, but did not further define “demand” or “non-monetary relief”.

The coverage dispute arose from a series of communications between homeowners and the HOA regarding the installation of unauthorised hardwood flooring in a condominium unit. On 20 February 2022, prior to the inception of the policy, the affected homeowners emailed the HOA Board, expressing their expectation that the Board would enforce their rights under the association’s Covenants & Restrictions and Rules & Regulations and “promptly resolve” the flooring issue. The email did not specify any particular regulation, nor did it threaten litigation or demand a particular remedy.

Several months later, on 8 June 2022, after further correspondence, the homeowners’ attorney sent a letter to the HOA, explicitly demanding enforcement of the association’s rules and immediate action against the residents responsible for the unauthorised flooring. The HOA tendered this June letter to its insurer, which denied coverage, arguing that the February email constituted the first “Claim”—and thus pre-dated the policy period.

Court’s Analysis

The central issue before the court was whether the February 2022 email amounted to a “Claim” under the policy, thereby precluding coverage for the June 2022 letter.

The court examined the ordinary meaning of “demand,” noting that it generally refers to a request made under an assertion of right or an insistence on a particular course of action. The court observed that the February email, while expressing an expectation that the HOA would act, did not:

a.) Identify a specific process or regulation entitling the homeowners to relief;

b.) Insist on a particular remedy, whether monetary or non-monetary;

c.) Threaten litigation or indicate an intent to sue if the issue was not resolved.

The court further noted that the email was not sent by an attorney and did not contain the hallmarks of a formal demand. Importantly, no case law supported the proposition that a “demand” exists in the absence of a threat of legal action or a clear notice of intent to pursue litigation.

Turning to the concept of “non-monetary relief”, the court explained that this typically refers to a benefit ordered by a court. The February email did not request any such relief, nor did it identify any specific duty the HOA owed to the homeowners.

Court’s Decision

Based on its analysis, the court concluded that the February 2022 email did not constitute a “Claim” as defined by the policy. It was not a written demand for monetary or non-monetary relief, as it lacked the necessary specificity and insistence. The first true “Claim” arose with the June 2022 letter from the homeowners’ attorney, which was both explicit in its demands and made during the policy period.

As a result, the court rejected the insurer’s attempt to deny coverage on the basis that the “Claim” was first made before the policy incepted.

Takeaway

Not every complaint or request for action will trigger coverage under a claims-made policy. Only communications that clearly and specifically demand relief—monetary or otherwise—will be treated as “Claims” for the purposes of coverage. Both policyholders and insurers should be mindful of the language used in correspondence.