Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

“Other Insurance” Clause Does Not Create Right to Equitable Contribution Against Excess Policy

Posted in Other Insurance

The United States District Court for the District of Arizona, applying Arizona law, has held that the “other insurance” clauses in two policies are not “mutually repugnant” to enable the primary insurer to receive equitable contribution from an excess insurer where the “other insurance” clause in the primary policy stated that the clause does not apply if the other policy is written to apply as excess insurance.  Admiral Ins. Co. v. Community Ins. Group SPC Ltd., 2016 WL 6873345 (D. Ariz. Nov. 22, 2016).

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Excess Insurer’s Unambiguous Consent-to-Settlement Provision Bars Coverage

Posted in Consent to settle/incur defense costs, Excess insurance/exhaustion

The United States Court of Appeals for the Sixth Circuit, applying Michigan law, has held that a policy provision requiring an excess insurer’s written consent before entering into a settlement was not ambiguous and therefore barred coverage under the excess policy.  Stryker v. National Union Fire Ins., 2016 WL 6818853 (6th Cir. Nov. 18, 2016).

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Insured’s Settlement Without Regard to Reasonableness Rendered Consent Judgment Unenforceable against Insurer that Breached Duty to Defend

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs

The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has held that an insurer’s breach of the duty to defend did not render it liable for a consent judgment where the insured did not consider the reasonableness of the settlement amount.  Sidman v. Travelers Cas. & Sur., 2016 WL 6803034 (11th Cir. Nov. 17, 2016).

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Appellate Court Finds Claims to be Related Even Though They Are Based on Different Legal Theories

Posted in “Claim”, Related Claims and associated exclusions

Applying Tennessee law, a federal appellate court has held that pre-policy demands and later-made claims were related notwithstanding the fact that the demands and claims may have relied on different legal theories.  Direct Gen. Ins. Co. v. Indian Harbor Ins. Co., 2016 WL 5437062 (11th Cir. Sept. 29, 2016).

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Professional Services Exclusion Bars Coverage for False Claims Act Suit Against Online Education Servicer

Posted in Professional Services

The United States District Court for the Northern District of California, applying California law, has held that a professional services exclusion bars coverage under a directors and officers liability policy for an online education program servicer against an action under the False Claims Act, holding that the False Claims Act allegations at issue arose out of the professional services provided by the insured.  HotChalk, Inc. v. Scottsdale Ins. Co., No. 16-3883, 2016 WL 6818760 (N.D. Cal. Nov. 15, 2016).

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Embezzling Payroll Service Providers Were “Employees” of Insured, Triggering Crime Coverage

Posted in Uncategorized

A federal district court in North Carolina has granted an insured’s motion for summary judgment, holding that it was entitled to coverage under its crime policy for embezzlement by its payroll service provider because the payroll service provider constituted an “employee” under the terms of the policy.  Colony Tire Corp. v. Federal Ins. Co., 2016 WL 6683590 (E.D.N.C. Nov. 14, 2016).

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Misappropriation of Funds Exclusion Precludes Coverage For Accounting Firm’s Erroneous Transfer of Client Funds to Third-Party Fraudsters

Posted in Uncategorized

A federal district court in Connecticut has granted an insurer’s motion to dismiss a breach of contract claim by an accounting firm, holding that the firm’s professional liability policy’s exclusion for theft, misappropriation, commingling, or conversion of funds precluded coverage for a claim against the insured for completing fraudulently requested transfers of funds.  Accounting Resources, Inc. v. Hiscox, Inc., 2016 WL 5844465 (D. Conn. Sept. 30, 2016).  The court rejected the insured’s argument that the exclusion applied only to misappropriation or conversion by the insured or its employees.

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Suit for Reimbursement of Beauty School Expenses under California Labor Law Triggers Duty to Defend Despite Wage and Hour Exclusion

Posted in Defense Costs

The United States District Court for the Southern District of California, applying California law, has held that an employment practices liability policy’s wage and hour exclusion does not apply to a claim for reimbursement of reasonable business expenses under the California Labor Code.  Hanover Ins. Co. v. Poway Acad. of Hair Design, Inc., 2016 WL 6698936 (S.D. Cal. Nov. 14, 2016).

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Sixth Circuit Enforces 24-Month Contractual Limitations Period In Bond; Employee’s Knowledge Bars Coverage for Company Under E&O Policy

Posted in Professional Services, Wrongful Act

The United States Court of Appeals for the Sixth Circuit, applying Michigan law, has held that an insured securities broker-dealer’s failure to bring legal proceedings within the 24-month period specified by its financial institution fidelity bond precluded coverage for losses resulting from an employee’s embezzlement scheme.  Hantz Fin. Servs., Inc. v. Am. Int’l Specialty Lines Ins. Co., No. 15-2237, 2016 WL 6609544 (6th Cir. Nov. 9, 2016).  The court also held that the insured’s errors and omissions policy did not respond because the wrongful acts by the employee were “committed with knowledge that [they were wrongful acts].”

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Under Errors and Omissions Policy, No Duty to Defend Suit Alleging Only Intentional Misconduct

Posted in Dishonesty Exclusion, Wrongful Act

The Court of Appeals of Indiana, applying Indiana law, has held that an insurer had no duty to defend its insured against a complaint alleging only intentional misconduct where the policy covered only negligent acts, errors and omissions.  Mt. Vernon Fire Ins. Co. v. Louis Jancetic, 2016 WL 6584268 (Ind. Ct. App. Nov. 4, 2016).  The court further held that the insurer had not engaged in any conduct that would estop it from denying coverage.

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