Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Breach of Contract – coverage for amounts due pursuant to contract, exclusions

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Claim Brought by Lenders Against Officers Based on Company’s Misstated Financials Barred by Bankruptcy and Creditors Exclusion

Posted in Bankruptcy, Breach of Contract – coverage for amounts due pursuant to contract, exclusions
Applying Texas law, the United States Court of Appeals for the Fifth Circuit has held that an exclusion barring coverage for any claim brought or maintained by or on behalf of any creditor of the company precluded coverage for claims by lenders against company officers alleging that they misrepresented the financial condition of a company. … 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… Continue Reading

Federal Appellate Court Declares “Language of the Policy is King” in Affirming Application of Contract Exclusion

Posted in Breach of Contract, Breach of Contract – coverage for amounts due pursuant to contract, exclusions
The United States Court of Appeals for the Seventh Circuit has affirmed a trial court’s ruling that, under Illinois law, a contract exclusion applied to preclude coverage for a claim stemming from an insured’s failure to pay its contractor because all of the claimant’s causes of action arose from its contract with the insured. Altom… Continue Reading

Cyber Policy Does Not Cover Indemnification Payments to Credit Card Processor After Data Breach

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Cyber Policies and Issues
In one of the first cases directly addressing the scope of coverage under a cyber insurance policy, an Arizona federal district court has dismissed an insured’s complaint seeking coverage for amounts paid to its credit card processor for assessments resulting from a data breach. P.F. Chang’s China Bistro, Inc. v. Fed. Ins. Co., No. 2:15-CV-01322-SMM… Continue Reading

Seventh Circuit: A Breach of Contract is Not a “Negligent Act”

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Wrongful Act
The United States Court of Appeals for the Seventh Circuit has affirmed a ruling holding that an underlying action alleging only breach of contract did not allege a negligent act, error, or omission required to trigger coverage under the policy at issue. Hartford Cas. Ins. Co. v. Karlin, Fleisher & Falkenberg, LLC, 2016 WL 2849449… Continue Reading

Court Holds Insurer Can Allocate Settlements

Posted in Allocation, Bad faith/duty to settle, Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Loss
A federal district court in Pennsylvania has upheld an insurer’s right to allocate settlements between covered and non-covered amounts and affirmed the insurer’s substantive allocation of two settlements. United Nat’l Ins. Co. v. Indian Harbor Ins. Co., No. 14-6425 (E.D. Pa.). Wiley Rein represented the insurer.… Continue Reading

Contractual Liability Exclusion Bars Coverage for Negligence Claim

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Exclusion lead-in language (Arising out of)
The United States Court of Appeals for the Eleventh Circuit has held that coverage was precluded for a negligence claim because the claim arose out of the insured’s contractual liability and was thus barred by the contractual liability exclusion contained in the D&O policy. Bond Safeguard Ins. Co. v. Nat’l Union Fire Ins. Co. of… Continue Reading

A Breach of Contract is not a “Negligent Act”

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Wrongful Act
An Illinois federal court has held that an underlying complaint alleging breach of contract did not allege injury arising out of “any negligent act, error or omission” necessary to trigger employee benefits liability coverage, citing the “well-recognized line of demarcation between negligent acts and breaches of contract.” Hartford Cas. Ins. Co. v. Karlin, Fleisher &… Continue Reading

Contract Exclusion Bars Coverage for City but Not Individual Officials

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Dishonesty Exclusion, Personal Profit/Advantage exclusion
The United States District Court for the Northern District of Illinois, applying Illinois law, has held that a contract exclusion barred coverage for a claim against an insured city by the operator of a minor league baseball team which asserted it was a third-party beneficiary to the contract for the construction of a stadium in the… Continue Reading

Contractual Liability Exclusion Bars Coverage for Insureds’ Alleged Liability under Contract, Regardless Whether Contracts Are Actually Valid

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions
Applying New Jersey law, the United States Court of Appeals for the Third Circuit has held that a contractual liability exclusion precludes coverage for a claim seeking to recover under contracts for foreign exchange transactions regardless whether the contracts in fact are valid.  PNY Techs. Inc., v. Twin City Fire Ins. Co., 2015 WL 3622933… Continue Reading

Contract Exclusion Bars Coverage for Fraud Claims Arising Out of Advertising Services Contract

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions
The United States District Court for the Central District of California, applying California law, has held that a breach of contract exclusion bars coverage for fraud claims against an insured advertising agency. Axis Ins. Co. v. Inter/Media Time Buying Corp., 2015 WL 3609300 (C.D. Cal. June 8, 2015).… Continue Reading

Unpaid Compensation and Breach of Contract Exclusions Bar Coverage for Independent Contractor’s Suit

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions
Applying Illinois law, an Illinois federal district court has granted an insurer’s motion to dismiss a coverage action where unambiguous unpaid compensation and breach of contract exclusions precluded coverage for allegations that the policyholder wrongfully withheld compensation owed to an independent contractor. Altom Transp., Inc. v. Westchester Fire Ins. Co., 2015 WL 2399126 (N.D. Ill.… Continue Reading

Court Stays Litigation of Certain Coverage Defenses, Allows Others To Proceed Pending Resolution of Underlying Litigation

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions
Applying California law, the United States District Court for the Northern District of California has granted an insured’s motion to stay in part, holding that certain of an insurer’s coverage defenses should be stayed pending resolution of underlying litigation where those coverage defenses turn on facts to be litigated in the underlying litigation. Ironshore Spec.… Continue Reading

Contract-Related Breach and Negligence Damages Constitute “Loss;” Coverage Precluded by Warranty Exclusion

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Loss, Professional Services
A federal district court in Oregon has held that damages awarded against an insured for breach of contract and negligence in connection with its performance under a software development contract constituted “loss” under an E&O policy but were excluded from coverage by the policy’s warranty exclusion.  Travelers Prop. Cas. Co. of Am. v. ServerLogic Corp.,… Continue Reading

Civil Theft Award Not Covered by D&O Policy or CGL Policy

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Loss, Personal Profit/Advantage exclusion, Public Policy prohibition on insurance
A federal court in Florida has held that neither a D&O insurer nor a CGL insurer has a duty to indemnify the policyholder for a final judgment award that includes treble damages for civil theft.  Twin City Fire Ins. Co. v. CR Technologies, Inc., 2015 WL 1055382, (S.D. Fla. Mar. 11, 2015).  In so holding,… Continue Reading

Contract Exclusion Does Not Bar Coverage for Intentional Misrepresentations During Pre-Contract Negotiations

Posted in Allocation, Bad faith/duty to settle, Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Dishonesty Exclusion
The United States District Court for the District of Rhode Island, applying Rhode Island law, has held that a contract exclusion did not bar coverage for a jury verdict holding in part that the insured’s intentional misrepresentations had induced the claimant to enter into a disputed contract.  TranSched Sys. Ltd. v. Fed. Ins. Co., 2014… Continue Reading

D&O Insurers Liable for $30 Million Judgment Arising from Dissolution of Hospital Affiliation

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Personal Profit/Advantage exclusion, Professional Services
A Rhode Island federal district court has ruled that two D&O policies respond to a nearly $30 million judgment against an insured health system organization that was sued in connection with its disaffiliation from a non-profit hospital.  Lifespan Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA., No. 1:12-cv-00300-M–LDA (D.R.I. Nov. 17, 2014).… Continue Reading

Fourth Circuit Holds That Nonprofit Management Liability Policy Does Not Afford Coverage for Reimbursement of Stolen Social Security Benefits

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Loss
Applying South Carolina law, a federal appellate court has affirmed a district court’s finding that amounts required to be repaid to the Social Security Administration (SSA) pursuant to an insured entity’s contract to serve as a representative payee did not constitute covered loss under a nonprofit management liability policy.  Family Assistance Mgmt. Svcs. v. Beazley… Continue Reading

Contract Exclusion Bars Coverage for Entire Claim, Including Count for Negligent Misrepresentation

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions
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,… Continue Reading

Demands for Payment on Foreign Exchange Transaction Agreements Were Not Claims for Wrongful Acts

Posted in “Claim”, Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Wrongful Act
The United States District Court for the District of New Jersey, applying New Jersey law, has held that there is no coverage for demands for payment from an insured corporation under foreign exchange transaction agreements because the demands were not a claim for a wrongful act.  PNY Techs., Inc. v. Twin City Fire Ins. Co.,… Continue Reading

Qui Tam Settlement Is Disgorgement Not Covered Under a D&O Policy

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Defense Costs, Loss
A Pennsylvania trial court has held that amounts paid in settlement of qui tam actions are uninsurable as a matter of law and thus not covered under D&O policies.  Mountainside Holdings, LLC, v. Am. Dynasty Surplus Lines Ins. Co., No. 2003-127 (Penn. Ct. Common Pleas June 30, 2014).  The court also held that an excess… Continue Reading

District Court Holds Damages for Negligence and Breach of Contract Are “Indivisible”

Posted in Allocation, Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Wrongful Act
The United States District Court for the District of Rhode Island, applying Rhode Island law, has held that a jury’s finding of negligence and breach of duty against an insured constituted a “Wrongful Act” under a D&O policy’s entity E&O endorsement.  Bank of Rhode Island v. Progressive Cas. Ins. Co., 2014 WL 1931906 (D.R.I. May… Continue Reading

Washington Mutual Liquidating Trust Coverage Case Is Not Ripe

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions
The Delaware Supreme Court has held that a liquidating trust’s coverage action against insurers of directors and officers of Washington Mutual, Inc. was not ripe.  XL Spec. Ins. Co. v. WMI Liquidating Trust, No. 449, 2013 (Del. May 28, 2014).  The Court therefore reversed the lower court’s denial of the insurers’ motion to dismiss the… Continue Reading

Contract Exclusion Does Not Apply to Breach of Settlement Agreement

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions
An Idaho federal court has held that a contract exclusion does not bar coverage for purported wrongful acts that resulted in the breach of a settlement agreement under Idaho law.  Idaho Trust Bank v. Bancinsure, Inc., 2014 WL 1117027 (D. Idaho Mar. 20, 2014).  The court also determined that an original and amended complaint were related… Continue Reading