Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Insured’s Failure to Obtain Insurer’s Consent Prior to Executing Settlement Term Sheet Precludes Coverage

Posted in Consent to settle/incur defense costs

The United States Court of Appeals for the Ninth Circuit, applying California law, has held that an insured breached the consent-to-settle provision of its professional liability insurance policy by executing a settlement term sheet prior to seeking or obtaining the consent of its insurer and therefore was not entitled to coverage under the policy.  Onewest Bank, FSB v. Houston Cas. Col., 2017 WL 218900 (9th Cir. Jan. 9, 2017).

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“Capacity Exclusion” Bars Coverage for Counterclaim Against Law Firm

Posted in Uncategorized

The New York Supreme Court, Appellate Division, applying New York law, has held that no coverage was available under a lawyer’s professional liability policy for a counterclaim filed against the insured because of an exclusion barring coverage for claims arising out of the insured’s services and/or capacity as an officer, director, partner, or employee of an organization other than that of the named insured.  Law Offices of Zachary R. Greenhill, P.C. v. Liberty Ins. Underwriters, Inc., 2017 WL 439650 (N.Y. App. Div. Feb. 2, 2017).

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Failure to Disclose Untimely Filings on Policy Application Voided the Policy

Posted in Rescission

The United States District Court for the District of New Jersey, applying New Jersey law, has held that an insured attorney’s failure to disclose on an insurance application an appeal filed late and a lawsuit filed outside of the statute of limitations constitutes a material misrepresentation warranting a default judgment voiding the policy.  Liberty Ins. Underwriters, Inc. v. Wolfe, 2017 WL 481468 (D.N.J. Feb. 3, 2017)

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No Actual Prejudice From Late Notice Where Insurer Could Not Have Altered Outcome of Claim

Posted in Notice of Claim

The Maryland Court of Appeals, applying Maryland law, has held that an insurer could not show actual prejudice from late notice because it could not have impacted the outcome of the claim.  National Union Fire Ins. Co. v. The Fund for Animals, Inc., 2017 WL 383453 (Md. Jan. 27, 2017).  Although the insured sustained adverse rulings in a related case which were then given collateral estoppel effect in the underlying case, the insurer would not have had any right to direct the defense of the related proceeding.

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“Employment-Related Wrongful Acts” Exclusion Bars Coverage for Wage Claims under D&O Policy

Posted in Uncategorized

A New York intermediate appellate court has held that an exclusion “for any employment-related Wrongful Act” unambiguously barred coverage under a D&O policy for a claim against a director for failure to pay wages and earned vacation benefits.  Hansard v. Federal Ins. Co., 2017 WL 424688 (N.Y. App. Div. Feb. 1, 2017).

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No Coverage for California False Claims Act Suit

Posted in Public Policy prohibition on insurance

A California federal district court has granted an errors and omissions liability insurer’s motion for summary judgment that it had no duty to defend a suit against its insured alleging violations of the California False Claims Act (“CFCA”), holding that the underlying suit created no potential for coverage and that there was no reasonable expectation of coverage in light of the nature and kind of risks covered by the policy.  Office Depot, Inc. v. AIG Specialty Ins. Co., No. CV 15-02416-SVW-LPRx (C.D. Cal. Jan. 4, 2017).

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Bankers’ Professional Liability Policy Excludes Overdraft Fee Litigation From Coverage

Posted in Bad Faith, Exclusions

The United States District Court for the Southern District of Indiana, applying Mississippi law, has held that a bankers’ professional liability insurance policy did not cover a class action suit against a bank alleging that it wrongfully maximized overdraft fees charged to its customers.  Bancorpsouth, Inc. v. Federal Ins. Co., 2017 WL 373300 (S.D. Ind. Jan. 26, 2017).  The court also dismissed the bad faith claim made against the insurer because of the absence of coverage in the first instance.

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Florida Statute Does Not Estop Insurer from Denying Reimbursement of Pre-Tender Defense Costs

Posted in Consent to settle/incur defense costs, Defense Costs

The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has held that a thirty-day statutory deadline to deny coverage did not apply to an insurer’s refusal to reimburse the insured for its pre-tender defense costs because this refusal did not constitute a “coverage defense” within the meaning of the statute. Embroidme.com, Inc. v. Travelers Property Cas. Co. of Am., 2017 WL 74694 (11th Cir. Jan. 9, 2017).

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Court-Appointed Receiver Acts “On Behalf Of” Court, Barring Application of Insured v. Insured Exclusion

Posted in Insured v. Insured Exclusion, Public Policy prohibition on insurance

The United States District Court for the District of Rhode Island, applying Rhode Island law, has held that an insured v. insured exclusion in a directors and officers liability insurance policy does not apply to a court-appointed receiver because the receiver acts as an agent of the court under Rhode Island law, rather than on behalf of the company in receivership. Philadelphia Indem. Ins. Co. v. Providence Cmty. Action Program, Inc., 2017 WL 354279 (D.R.I. Jan. 24, 2017). The court also held that an endorsement in the policy, which expressly defined the receiver as an insured and as “contracted to perform services” for the company, did not alter the inapplicability of the insured vs. insured exclusion.

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Insurer Entitled to Rescind Lawyers Professional Liability Policy Where Insured Made Material Misrepresentations in Application

Posted in Rescission, Rescission-Materiality, Rescission-Waiver

The U.S. District Court for the Southern District of Illinois, applying Illinois law, has held that an insurer was entitled to rescission of a policy where the insured made material misrepresentations in its application.  Carolina Cas. Ins. Co. v. Robert S. Forbes PC, 2017 WL 86136 (S.D. Ill. Jan. 10, 2017).  The court also held that the insurer did not waive its right to rescind because, even though the insurer took a year to investigate the claim, the insurer consistently reserved its right to rescind the policy.

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