Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Fee Exclusion Bars Coverage for Overdraft Fee Settlement

Posted in Bad Faith, Exclusions

Applying Mississippi law, the United States Court of Appeals for the Seventh Circuit has held that an exclusion in a bankers’ professional liability policy barred coverage for class claims alleging that the insured bank wrongfully maximized overdraft fees charged to its customers.  BancorpSouth, Inc. v. Federal Ins. Co., 2017 WL 4546144 (7th Cir. Oct. 12, 2017).  The court also concluded that the bad faith claim against the insurer failed because of the absence of coverage in the first instance.

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Court Holds that Insured’s Expectations Do Not Override Language of Consumer Protection Exclusion

Posted in Wrongful Act

A New Jersey federal district court, applying New Jersey law, has held that a professional liability insurer was entitled to judgment on the pleadings on the basis that coverage for a complaint against its insured for violations of consumer protection laws was barred by the policy’s exclusion for consumer protection claims.  Hanover Insurance Co. v. Retrofitness, LLC, 2017 WL 4330366 (D.N.J. Sept. 29, 2017).

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Pre-Inception Tolling Agreement and Agency Notice of Potential Statutory Violations Insufficient for Judgment on the Pleadings on Prior Knowledge Provision

Posted in Prior Knowledge/Warranty Exclusion

The United States District Court for the Southern District of Ohio, applying Ohio law, has held that an insurer is not entitled to judgment on the pleadings regarding the application of a prior knowledge provision, notwithstanding the insureds’ entry into a tolling agreement and receipt of a federal agency’s notice of findings of statutory violations prior to policy inception.  Acosta v. Potts, 2017 WL 4418579 (S.D. Ohio Oct. 5, 2017).

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No Indemnification for Insured’s “Restitutionary In Nature” Settlement Payments, Even Without Admission of Guilt or a Final Adjudication

Posted in Loss, Personal Profit/Advantage exclusion, Public Policy prohibition on insurance

The United States District Court for the Southern District of Florida has denied an insured’s request for indemnity from its insurer for the amount owed under a settlement agreement with the state of Florida over grand theft charges against the insured.  The court held that, under Florida law, the settlement does not constitute covered “Loss” because the payments were restitutionary in nature, regardless whether there was an admission of guilt or final adjudication.  Philadelphia Indem. Ins. Co., v. Sabal Ins. Group, Inc., 2017 WL 4310700 (S.D. Fla. Sept. 28, 2017).

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No Coverage Available for Employment-Related Claims Under Policy D&O and EPL Coverage Sections

Posted in Loss

The United States District Court for the District of Massachusetts has held that coverage is unavailable for a complaint alleging violations of the California Labor Code and the California Business and Professions Code because the complaint did not constitute an employment claim as defined by the Policy’s EPL Coverage Section and triggered an exclusion in the Policy’s D&O Coverage Section regarding claims “alleging, arising out of, based upon, or attributable to” the employment practices of the insured.  The Talbots, Inc. v. AIG Specialty Ins. Co., 2017 WL 4364178 (D. Mass. Sept. 29, 2017).

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Insured’s Claims Barred by Res Judicata

Posted in Related Claims and associated exclusions

Applying Maryland law, a federal district court has held that the doctrine of res judicata barred an insured’s claims for coverage under a particular policy, where the insured’s previous efforts to bring those claims in a different proceeding and concerning a different policy failed.  The Humane Society of the United States v. Nat’l Union Fire Ins. Co. of Pittsburgh, 2017 WL 4467490 (D. Md. Oct. 6, 2017).

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No Coverage For Claims Interrelated with Prior Improperly-Noticed Claim

Posted in Notice of Claim, Related Claims and associated exclusions

A federal district court, applying Texas law, has held that an insured is not entitled to coverage for subsequent related claims when the insured gave late notice of the first claim.  ADI Worldlink, LLC v. RSUI Indem. Co., 2017 WL 4112112 (E.D. Tex. Sept. 18, 2017).

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Second Circuit Affirms Judgment That Insured v. Insured Exclusion Bars Coverage After Jury Finds Plaintiff Was Duly Elected or Appointed as a Director

Posted in Insured v. Insured Exclusion

Applying both New York and Nevada law, the United States Court of Appeals for the Second Circuit has held that an insurer correctly denied coverage under its directors and officers liability policy based on the insured v. insured exclusion.  Intelligent Digital Sys. L.L.C. et al. v. Beazley Ins. Co., 2017 WL 4127540 (2d Cir. Sept. 19, 2017).  This conclusion was reached despite arguments that the exclusion was ambiguous, or, in the alternative, that because the company’s bylaws were not followed, the claimant was not “duly elected or appointed” as a director of the company under the meaning of the Policy.

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Fee Arrangement Exclusion Bars Coverage for Claims Arising from Alleged Force-Placed Insurance Scheme

Posted in “Claim”, Personal Profit/Advantage exclusion

A New York state trial court, applying New York law, has held that a fee arrangement exclusion contained in a professional liability insurance policy precludes coverage for claims arising from an insured’s force-placed insurance business.  QBE Americas, Inc. v. Ace Am. Ins. Co., 2017 WL 4122651 (Sup. Ct., N.Y. County Sept. 18, 2017).  The court also held that the policy does not cover costs incurred responding to third-party subpoenas.

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SEC Subpoenas & Formal Investigative Order Are “Claims”

Posted in “Claim”

The United States District Court for the Southern District of New York has held that subpoenas and a formal investigative order issued by the U.S. Securities & Exchange Commission (“SEC”) constituted “Claims” as defined under a D&O policy.  Patriarch Partners LLC v. AXIS Ins. Co., 2017 WL 4233078 (S.D.N.Y. Sept. 22, 2017).

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