Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Single Lawsuit Alleging Multiple Wrongful Acts Constitutes Single Claim

Posted in “Claim”

The United States Court of Appeals for the Third Circuit, applying Pennsylvania law, has held that a single lawsuit alleging three causes of action and up to eight discrete wrongful acts constituted a single claim under a professional liability insurance policy.  Westport Ins. Corp. v. Mylonas, 2017 WL 3327798 (3d Cir. Aug. 4, 2017).

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Fraudulent Instruction Loss Caused by Social Engineering Scheme Does Not Trigger Computer Fraud Coverage Under Commercial Crime Policy

Posted in Cyber Policies and Issues

A Michigan federal district court has held that a fraudulent instruction loss caused by a social engineering scheme did not constitute a “direct loss” that was “directly caused by computer fraud” and therefore did not trigger computer fraud coverage under a commercial crime policy.  American Tooling Ctr., Inc. v. Travelers Cas. & Sur. Co. of Am., 2017 WL 3263356 (E.D. Mich. Aug. 1, 2017).

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Insurer’s Duty to Defend Ends at Tender of Policy Limits

Posted in Defense Costs

The United States District Court for the Eastern District of Kentucky, applying Kentucky law, has held that an insurer’s duty to defend under a medical professional liability policy ended when the insurer tendered policy limits to the insured, despite the ongoing lawsuit against the insured.  Mt. Hawley Ins. Co. v. MESA Med. Grp., PLLC, 2017 WL 3082662 (E.D. Ky. July 19, 2017).

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Insurer May Not Rescind Renewal Policy Based on Misrepresentations in Prior Policy’s Application

Posted in Loss, Prior Knowledge/Warranty Exclusion, Rescission

An Illinois intermediate appellate court, applying Illinois law, has held that a renewal insurance policy may only be rescinded based on material misrepresentations made in the renewal application, and not based on misrepresentations made in applications for prior policies.  Ill. State Bar Ass’n Mut. Ins. Co. v. Rex Carr Law Firm, 2017 IL App (4th) 160365-U (Ill. App. Ct. June 27, 2017).  The court also held that application of the policy’s prior knowledge provision depended on the insured law firm’s subjective expectation of whether the relevant circumstance might lead to a claim.

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Computer Fraud Coverage Extends to Manipulation of External Email Server

Posted in Cyber Policies and Issues

The United States District Court for the Southern District of New York, applying New York law, has held that a cloud-based service provider’s loss resulting from fraudulent wire instructions is covered under a computer fraud and funds transfer fraud policy because the fraudulent email changed data in the provider’s computer system despite use of a third-party external email service.  Medidata Solutions, Inc. v. Federal Ins. Co., No. 15-CV-907 (S.D.N.Y. July 21, 2017).  The court also held that the fraud precluded any finding that coverage was excluded based on the provider’s knowledge or consent to the wire transfer.

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Inviting a Second Bite at the Apple: Delaware Chancery Court Suggests New Approach to Evaluating Preclusive Effect of Prior Unsuccessful Derivative Litigation

Posted in Corporate Considerations

In response to the Delaware Supreme Court’s question in connection with remand, the Delaware Chancery Court has suggested reevaluation of its prior willingness to dismiss subsequent derivative litigation where an earlier derivative action has been dismissed due to demand futility.  In re Wal-Mart Stores, Inc. Delaware Derivative Litigation, C.A. No. 7455-CB (consol.), supp. op. (Del. Ch. July 25, 2017).  Where the court previously would dismiss subsequent efforts to re-litigate demand failure, the new approach suggested by the Chancery Court provides that an earlier action should not be given preclusive effect if it failed to survive a motion to dismiss pursuant to Delaware Chancery Court Rule 23.1, the Delaware analog to Federal Rule of Civil Procedure 23.1.

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Specific Litigation Exclusion Bars Coverage When Claim Arises “At Least in Part” From Excluded Litigation

Posted in Related Claims and associated exclusions

An Illinois district court, applying Delaware law, has held that a specific litigation exclusion in a company’s directors and officers insurance policy bars coverage for a claim arising “at least in part” from the litigation referenced in the exclusion.  RSUI Indem. Co. v. Worldwide Wagering, Inc, 2017 WL 3023748 (N.D. Ill. Jul. 17, 2017).

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Insurer Need Not Demonstrate Prejudice from Late Notice Under Claims Made and Reported Policy

Posted in Notice of Claim

The United States Court of Appeals for the Sixth Circuit, applying Ohio law, has held that an insurer does not need to show prejudice resulting from late notice under a claims made and reported policy in order to deny coverage.  McCarty v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa, 2017 WL 2781561 (6th Cir. June 27, 2017).  The court also held that an insurer does not have actual or constructive notice of a claim from a public court docket.

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No E&O Coverage Where Insured Failed to Report Claim During Policy Period When It Was First Made

Posted in “Claim”, Notice of Claim

The Appellate Court of Illinois, applying Illinois law, has held that an insurer has no duty to defend or indemnify an insurance agent under an errors and omissions liability policy where the agent failed to provide notice of the claim during the policy period in which the claim was first made.  James River Ins. Co. v. Timcal, Inc., 2017 WL 2852812 (Ill. App. June 30, 2017).

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