While millions have been captivated by Wayfarer Studio’s production of “It Ends With Us,” a lesser-known but real-life insurance drama is unfolding off-screen. Last week, Harco National Insurance Company found itself in the spotlight when it filed a declaratory judgment action against its insureds, including, among others, Wayfarer Studios LLC, It Ends With Us Movie LLC and Justin Baldoni (jointly “Defendants”) asserting it has no obligation to defend the claims brought against Defendants by Blake Lively in Lively v. Wayfarer Studios, et al., U.S.D.C., S.D.N.Y. Case No. 1:24-cv-10049-LJL (the “Underlying Action”).

Background

In December 2024, Blake Lively filed a lawsuit against Defendants alleging serious misconduct while she was worked as the lead actor for “It Ends With Us.” According to the lawsuit, Lively was subjected to sexual harassment and a hostile work environment by the Defendants beginning in May 2023. Further, the lawsuit alleges that Defendants later retaliated against her for complaining about the mistreatment.

The Coverage Action

Harco issued two relevant management liability policies to Defendants: One policy effective from July 15, 2023, to July 15, 2024 (the “2023 Policy”), and a second policy effective from July 15, 2024, to July 15, 2025 (the “2024 Policy”).

On April 25, 2025, Defendants notified Harco National Insurance Company of the Underlying Action and requested defense and indemnity under the 2023 Policy and 2024 Policy. In response, Harco denied coverage and filed a declaratory judgment action seeking a court ruling that it has no duty to defend or indemnify Defendants under either policy.

In its complaint, Harco outlines several reasons for denying coverage. First, it argues that Defendants failed to provide timely notice of the claim when it was first made under the 2023 Policy. Second, it argues that the prior knowledge exclusion bars coverage under both policies because prior to the inception of both policies, Defendants were aware of Lively’s allegations and nonetheless warranted on their application that they knew of no facts or circumstances that could give rise to a claim. Lastly, Harco argues that the 2024 Policy does not provide coverage because Lively’s initial demand in November 2023, constituted a “claim” that was first made before the 2024 Policy took effect.

Takeaways

While this coverage action is still in its early stages, and the Defendants will certainly present their own arguments supporting coverage under the policies, Harco’s reasons for denying coverage are extremely common defenses that insurers use to deny, limit or reserve rights on coverage. Remember, securing insurance is just the start—the real win is ensuring that the coverage is there when you need it. Therefore, policyholders should keep the following in mind:

• Do Not Overlook the Application. While the application process may seem mundane, it is critical for policyholders to answer all questions truthfully and thoroughly. Inaccurate or incomplete responses can lead to coverage denials or even rescission of the policy, depending on jurisdiction.
• Provide Prompt Notice. Delayed notice can jeopardize coverage and may give the insurer grounds to deny a claim depending on the length of the delay and whether the insurer was prejudiced by the late notice. In any event, policyholders are best served by avoiding an often preventable coverage dispute over late notice. When in doubt, notify your insurer of a claim. Further, analyze policies to determine if they contain a “notice of circumstances” provision, which allows notice when the policyholder reasonably suspects a claim may be imminent, and thus preserves coverage during the noticed policy period for later filed claims.
• Understand Your Exclusions. Pay close attention to your policy exclusions including the prior knowledge exclusions, which can limit the availability of coverage. These exclusions can sometimes be negotiated at the policy procurement stage for more favorable wording.
• Engage Assistance as Needed. Experienced coverage attorneys, brokers and risk management professionals can help policyholders in navigating the application process, improving and understanding key policy provisions at the time of purchase, providing timely notice of a claim and, if needed, defending against wrongful denials and securing entitled coverage.