In this judgment the Court of Appeals of Iowa upheld the lower court’s finding that the insured client’s oral assurance that they would not bring a claim against them (they later changed their minds) and did not affect the insured’s duty to report to the insurer an act, error, omission, fact or situation that otherwise could result in a claim being filed against them. 

The relevant disclosure certification referenced “no knowledge of any…existing fact or situation which could result in an act, error or omission by any INSURED which could support or lead to a demand for damages”. The court said that the phrase “could reasonably result in a claim” meant the known act, error or omission is a legally reasonable basis for a claim, not whether the insureds subjectively believe that there will be a claim. The claim originates from the insured’s knowledge of an error sufficient to sustain a suit, not their knowledge that it will result in a filed lawsuit.

The court said that the insured had a duty under the insurance contract to disclose the relevant error which could result in the lawsuit, when it was discovered. The clients purported assurance that a suit would not be filed did not change the existence of the error or the insured’s contractual duty to inform the insurers of the error when seeking continuing coverage.  

The lower court observed: “Any experienced lawyer knows that an initial statement from someone aggrieved that they will not pursue remedies cannot be fully relied upon, there is a potential for liability in an unresolved matter so long as there are facts that could support a future claim.”