A Florida federal court has held that a contractual liability exclusion in a D&O policy barred coverage for an underlying action in its entirety because all of the asserted causes of action “depended on” an indemnity agreement the insured executed with the claimant.  Bond Safeguard Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2014 WL 5325728 (M.D. Fla. Oct. 20, 2014).

A bond issuance company issued bonds on behalf of a land development company in connection with land development projects.  The land development company also executed an agreement with the bond issuance company and one of its officers requiring that the land development company and the officer indemnify the bond issuance company for any costs incurred in relation to the bonds.  The land development company did not comply with its obligations under the bonds, and the bond issuance company purportedly suffered significant losses as a result of settling obligations under the bonds.  In connection with the ensuing underlying action to enforce the indemnification agreement, the development company’s officer sought coverage from the development company’s D&O insurer, which denied coverage.

In the ensuing coverage action, the court granted summary judgment for the insurer and held that the contractual liability exclusion barred coverage.  The contractual liability exclusion barred coverage in connection with “Claim[s] . . . alleging, arising out of, based upon or attributable to any actual or alleged contractual liability of the Company or any other Insured under any express contract or agreement.”  The court noted that the phrase “arising out of” was “unambiguously broad.”  Although the underlying litigation included a negligent misrepresentation count in addition to a breach of contract count, this count “depended on (and was not merely incidental to)” the officer’s indemnity agreement with the bond issuance company.  The court rejected an argument that Florida’s concurrent causation doctrine permitted coverage here because there was no insured risk that was distinct from the excluded contractual risk.