Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Ninth Circuit Upholds Rescission Based on Misrepresentation in Application

Posted in Rescission

Applying California law, the United States Court of Appeals for the Ninth Circuit has upheld the district court’s rescission of a tower of crime policies based on the insured’s material misrepresentation in the application for the policies.  Kurtz v. Liberty Mutual Ins. Co., 2016 WL 4547366 (9th Cir. Sept. 1, 2016). Continue Reading

Insured Stated Claim for Breach of Contract and Bad Faith Against Claims Administrator

Posted in Bad Faith

Applying California law, the United States District Court for the Southern District of California has held that a policyholder stated a claim against the claims administrator for a policy because the plaintiff had pleaded a plausible factual allegation that the claims administrator issued the policy, which was sufficient to survive a motion to dismiss. Reno v. Nat’l Union Fire Ins. Co., 2016 WL 4595955 (S.D. Cal. July 27, 2016). Continue Reading

Insurer That Rejected Added Release Language Liable for Bad Faith Failure to Settle Despite Offering Policy Limits

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

A California intermediate appellate court has held that an insurer is liable for bad faith failure to settle, even though it had made a timely offer to settle for its full policy limits, where the insurer declined to agree to release terms proposed by the claimants to which the insured refused to agree. Barickman v. Mercury Cas. Co., 2016 WL 4274674 (Cal. Ct. App. July 25, 2016). Continue Reading

Notice to Insurance Agent Does Not Constitute Notice to Insurer

Posted in Notice of Potential Claim (Timeliness)

The United States District Court for the Southern District of Texas has held that notice of a potential claim provided to an insurance agent is not considered notice to an insurer for the purposes of determining when a claim is first reported. Evanston Ins. Co. v. Cheetah, Inc., 2016 WL 4494440 (S.D. Tex. Aug. 26, 2016). Continue Reading

One Lawsuit Equals One Claim, Regardless of the Number of Causes of Action

Posted in Related Claims and associated exclusions

The United States District Court for the Eastern District of Pennsylvania has held that a lawyer’s professional liability policy’s per-claim limit of liability, and not the aggregate limit of liability, applied to an underlying lawsuit because the suit’s multiple causes of action were all related, and therefore constituted a single claim under the policy. Westport Ins. Corp. v. Mylonas, 2016 WL 4493192 (E.D. Pa. Aug. 25, 2016). Continue Reading

Montana High Court Rules that Evaluation of Reasonableness of Stipulated Settlement Must Consider the Merits and Value of the Underlying Case

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

The Montana Supreme Court has held that, even where an insurer breaches its duty to defend and is estopped from denying coverage for a later settlement, the insurer is still entitled to challenge the reasonableness of the settlement, and the court must assess the merits and value of the underlying case in assessing the settlement amount. Tidyman’s Mgmt. Servs., Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2016 WL 4440634 (Mont. Aug. 23, 2016). Continue Reading

Contract Exclusion Bars Coverage for Suit Alleging Breach of Special Relationship and Conversion

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Exclusions

The United States Court of Appeals for the Ninth Circuit, applying Washington law, has held that a contract exclusion precluded defense or indemnity coverage for a suit alleging breach of special relationship and conversion torts that were predicated on premature termination of a contract. X2 Biosystems, Inc. v. Federal Ins. Co., 2016 WL 4120694 (9th Cir. Aug. 3, 2016). Continue Reading

Attorney’s Reporting of Alleged Ethics Violations Not “Professional Services”; Eight-Month Delay in Providing Notice Precludes Coverage as a Matter of Law

Posted in Notice of Claim

An Illinois federal district court has granted a commercial general liability insurer’s motion for summary judgment that it had no duty to defend or indemnify an insured law firm or its principals in a defamation action based on the insureds’ failure to comply with the notice provisions in the policy. Sentinel Ins. Co., Ltd. v. Cogan, 2016 WL 4270213 (N.D. Ill. Aug. 15, 2016). The court, however, rejected the insurer’s argument that coverage for the insured’s reporting of alleged ethical violations of a competitor was precluded by the policy’s “professional services” exclusion. Continue Reading

Employee Stock Ownership Plan Participant Cannot Pursue Fiduciary Breach and Bad Faith Claim Against Insurer of Plan’s Fiduciaries

Posted in Bad Faith

Applying Mississippi law, a federal district court has held that a participant in an employee stock ownership plan cannot pursue his claims against the insurer of the plan fiduciaries because those claims were previously released in a settlement agreement between the plan fiduciaries and the insurer. Sealey v. Beazley Ins. Co. Inc., et al., 2016 WL 4392624 (S.D. Miss. Aug. 17, 2016). Continue Reading

Rescission Voids All Policy Provisions, Including Innocent Insured Provision

Posted in Rescission

Applying Georgia law, a federal district court has held that rescission of an insurance policy based on a material misrepresentation in the application voids all provisions of the policy, including the “innocent insured” provision, such that the insureds who had no knowledge of the fraud cannot rely on that provision to preserve coverage for themselves. ProAssurance Cas. Co. v. Smith, 2016 WL 4223666 (S.D. Ga. Aug. 9, 2016). Continue Reading