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Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Professional Services

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Insurer Breached Duty to Defend Where At Least One Allegation “Possibly” Constituted a Wrongful Act

Posted in Professional Services
The United States District Court for the District of Connecticut, applying Connecticut law, has granted summary judgment in favor of an insured, holding that an underlying complaint alleged at least one act that could “possibly” fall within the policy’s definition of “wrongful acts,” triggering a duty to defend.  Fernandez v. Zurich Am. Ins. Co., 2017… Continue Reading

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… Continue Reading

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… Continue Reading

In Absence of Alleged Malpractice, No Professional Liability Coverage Available

Posted in Professional Services
In a win for an insurer represented by Wiley Rein, the United States Court of Appeals for the Fifth Circuit, applying Louisiana law, has held that a lawyers professional liability policy afforded no coverage for a suit alleging no act or omission by the insured in providing legal services.  Edwards v. Continental Cas. Co., 2016… Continue Reading

Professional Services Exclusion Precludes Duty to Indemnify but Not Duty to Advance Defense Costs

Posted in Professional Services
Applying New York law, the United States District Court for the Southern District of New York has held that a D&O insurer was not obligated to indemnify the insured or the insured’s E&O carrier because the D&O policy’s professional services exclusion applied. Beazley Ins. Co., Inc. v. ACE American Ins. Co., No. 15-cv-5119 (S.D.N.Y. Jul.… Continue Reading

Business Enterprise Exclusion Bars Coverage for Trustee Sued in His Capacity as a Director or Officer of Businesses Affiliated with Trusts

Posted in Professional Services
The Supreme Court of Wisconsin has held that a professional liability policy issued to an insured for his conduct as a trustee of two trusts afforded no coverage for a series of claims arising out of the trustee’s alleged conduct as a director or officer of businesses owned by the trusts. Marks v. Houston Cas.… Continue Reading

Appeals Court Vacates Ruling that Breach of Contract Exclusion Barred Coverage, Remands for Consideration of Choice of Law

Posted in Breach of Contract, Professional Services
A New Jersey intermediate court of appeals has vacated and remanded a case in which the trial court held that an insurer had no duty to defend based on a breach of contract exclusion, because the appellate court could not determine whether the exclusion applied without a choice of law analysis. Pharmacy & Healthcare Commc’ns,… Continue Reading

Competitor’s Claims That Broker Engaged in Unfair Business Practices Involve Professional Services and Are Not Precluded by the “Unfair Competition of Any Type” Exclusion

Posted in Professional Services
Applying Massachusetts law, the United States Court of Appeals for the First Circuit has held that unfair business practices claims brought against an insured insurance broker by a competitor involved professional services within the scope of its professional liability policy and that an exclusion for “unfair competition of any type” did not apply because the… Continue Reading

Contract and Willful Acts Exclusions Do Not Preclude Duty to Defend Tortious Interference and Copyright Infringement Claims

Posted in “Claim”, Breach of Contract, Defense Costs, Professional Services
The United States District Court for the Northern District of California, applying California law, has held that neither a breach of contract exclusion nor the implied willful acts exclusion provided for by California Insurance Code § 533 precluded an insurer’s duty to defend a lawsuit brought against its insured by one of its competitors for… Continue Reading

No Coverage Under D&O Policy For Misrepresentations Regarding Mortgage-Backed Securities Because Not “Securities Of” the Insured

Posted in Professional Services
The United States Court of Appeals for the Ninth Circuit, in an unpublished opinion applying California law, has held that there is no coverage under a D&O liability policy for claims alleging misrepresentations in offering documents for mortgage-backed securities because the mortgage-backed securities did not constitute “securities of an Organization.” Impac Mortgage Holdings Inc., v.… Continue Reading

No Coverage for Claims Arising from Failure to Appeal Adverse Decision

Posted in Bad faith/duty to settle, Prior Knowledge/Warranty Exclusion, Professional Services, Related Claims and associated exclusions
Applying Massachusetts law, a Massachusetts federal court has held that no coverage was available under two claims-made policies because the insured knew before policy inception that a client would bring a claim when the insured failed to perfect an appeal of an adverse zoning decision. Gandor v. Torus Nat’l Ins. Co., 2015 WL 6043621 (D.… Continue Reading

Advancement When Bank Customer Had Insufficient Funds Not a “Transaction in the Nature of a Loan”

Posted in Professional Services
The United States Court of Appeals for the Eleventh Circuit, applying Georgia law, has held that an advancement made by a bank similar to that made in connection with overdraft protection was not a “loan” within the meaning of a definition of “Lending Services” in a bankers’ professional liability policy. Greater Community Bancshares, Inc. v.… Continue Reading

Professional Services Exclusions Bar Coverage for Failure to Give Prescribed Drugs to Prisoner

Posted in Professional Services
Applying Texas law, the United States Court of Appeals for the Fifth Circuit has held that “medical services” and “professional services” exclusions in general liability and umbrella policies issued to a private prison operator barred coverage for a civil rights claim of an inmate who died while in custody due to the failure of the… Continue Reading

Lawyer Rendered “Professional Services” in Failure to Advise Investment Transaction Counterparty Regarding Title Insurance

Posted in Professional Services
A federal district court has held that an insurer breached a lawyers professional liability policy when it denied coverage in connection with a real estate investment transaction between a claimant and the insured lawyer, holding that the claimant believed the lawyer was representing him and that the lawyer rendered “professional services” when he failed to advise… Continue Reading

Professional Services Exclusion in D&O Policy Bars Coverage for Claim Arising from Provision of Payroll Services

Posted in Professional Services
Applying California law, the United States Court of Appeals for the Ninth Circuit has held that a professional services exclusion bars coverage for a suit against the directors and officers of a payroll services company because the suit arose from their failure to provide payroll services. Begun v. Scottsdale Ins. Co., 2015 WL 4910137 (9th Cir.… Continue Reading

Dishonesty Exclusion Bars Coverage for Attorney’s Charging Exorbitant Fee

Posted in Dishonesty Exclusion, Professional Services
The U.S. Bankruptcy Court for the Middle District of Florida, applying Florida law, has held that a dishonesty exclusion precludes coverage for a claim under a professional liability policy issued to a trusts and estates attorney who made fraudulent representations and abused his fiduciary position to obtain an exorbitant fee from an estate. Fla. Lawyers… Continue Reading

Financial Institution Bond Bars Coverage for Loss Not Resulting Solely from Duties of Outside Investment Advisor

Posted in Professional Services
The New York Supreme Court Appellate Division has held that a financial institution bond barred coverage for loss that did not result solely from the dishonest acts of an outside investment advisor. Jacobson Family Inv., Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 2015 WL 3767850 (N.Y. App. Div. June 18, 2015).… Continue Reading

Professional Services Exclusion Bars Coverage for Claims against Bank Accused of Facilitating Ponzi Scheme

Posted in Professional Services
Applying Florida law, the United States District Court for the Southern District of Florida has held that a professional services exclusion precludes coverage for claims made against a Ponzi schemer’s bank and four of its executives. Goldberg v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., No. 1:13-cv-21653 (S.D. Fla. May 18, 2015).… Continue Reading

Fraudulent Overbilling Likely Is “Professional Services” But Coverage Barred by Fraudulent Acts Exclusion

Posted in Bankruptcy, Dishonesty Exclusion, Professional Services
The United States Bankruptcy Court for the Middle District of Florida has held that an attorney’s overbilling stemming from fraudulent misrepresentations likely involved “professional services” under a lawyers’ professional liability policy but coverage was barred, in any event, under the policy’s exclusion for “criminal, dishonest, intentional, malicious or fraudulent act(s).” Fla. Lawyers Mut. Ins. Co.… Continue Reading

Ninth Circuit Holds Professional Services Exclusion Bars Coverage for Ponzi Scheme Lawsuit

Posted in Professional Services
The United States Court of Appeals for the Ninth Circuit, applying California law, has held that a professional services exclusion bars coverage for a lawsuit alleging a Ponzi scheme by an insured parent company and its subsidiaries, even though only the subsidiaries directly performed the investment services at issue.  Jamison v. Certain Underwriters at Lloyd’s… Continue Reading

Professional Services Exclusion Does Not Bar Coverage Because Alleged Wrongful Conduct Tenuously Connected to Provision of Professional Services

Posted in Professional Services
Applying California law, the United States Court of Appeals for the Ninth Circuit has held that a professional services exclusion did not preclude a duty to defend because some of the allegations in the underlying proceedings were tenuously connected to the performance of professional services. Ambrosio v. Brit UW Limited, 2015 WL 1566793 (9th Cir.… Continue Reading

Indiana High Court Holds Settlement of Managed Care Organization Multi-District Litigation Is Covered under E&O Policies

Posted in Bad faith/duty to settle, Dishonesty Exclusion, Loss, Professional Services, Public Policy prohibition on insurance
The Indiana Supreme Court, applying Indiana law, has held that the settlement of a multi-district litigation, which alleged that the insured managed care organization had engaged in a scheme of systematically failing to pay claims by medical providers in full and in a timely manner, fell within the insuring agreement of the organization’s E&O policy… 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