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Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Uncategorized

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Prior Acts Exclusion Bars Coverage for Claims Arising Out of Actions Predating Policy

Posted in Uncategorized
The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has held that a prior acts exclusion barred coverage under a directors and officers liability policy for claims brought against insured persons for alleged fraudulent transfers, even though the transfers occurred within the policy period.  Zucker v. U.S. Specialty Ins. Co., 2017… Continue Reading

“Capacity Exclusion” Bars Coverage for Counterclaim Against Law Firm

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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… Continue Reading

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

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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).… Continue Reading

Embezzling Payroll Service Providers Were “Employees” of Insured, Triggering Crime Coverage

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A federal district court in North Carolina has granted an insured’s motion for summary judgment, holding that it was entitled to coverage under its crime policy for embezzlement by its payroll service provider because the payroll service provider constituted an “employee” under the terms of the policy.  Colony Tire Corp. v. Federal Ins. Co., 2016… Continue Reading

Misappropriation of Funds Exclusion Precludes Coverage for Accounting Firm’s Erroneous Transfer of Client Funds to Third-Party Fraudsters

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A federal district court in Connecticut has granted an insurer’s motion to dismiss a breach of contract claim by an accounting firm, holding that the firm’s professional liability policy’s exclusion for theft, misappropriation, commingling, or conversion of funds precluded coverage for a claim against the insured for completing fraudulently requested transfers of funds.  Accounting Resources,… Continue Reading

Expert Testimony Regarding the Timing of a Claim and Applicability of Exclusions is Inadmissible

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A federal trial court has held that an expert opinion that relates to when a claim was made or the application of certain exclusions is inadmissible in coverage litigation, while expert opinions related to the insurance industry’s customs and practices are allowed. Foundation Health Servs., Inc. v. Zurich Am. Ins.Co., 2016 WL 1449678 (M.D.La. April… Continue Reading

Broad Lead-In Language Precludes Coverage for Lawsuit with Even Minimal or Incidental Relationship to Excluded Claims

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A California federal court has held that a professional liability policy does not afford coverage for a lawsuit against an insured life insurance agent because the suit fell within the policy’s exclusions for claims based upon, directly or indirectly arising out of, or in any way involving premium finance mechanisms or guarantees about future premiums.… Continue Reading

Mutual Mistake Requires Reformation of Retroactive Date for Additional Insured

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Applying Illinois law, the United States District Court for the Northern District of Illinois has held that the retroactive date for an additional insured under claims-made policies should be reformed to the inception date of each policy because of a mutual mistake. Hallmark Spec. Ins. Co. v. Roberg, 2015 WL 5163216 (N.D. Ill. Sept. 2,… Continue Reading

No Duty to Defend Antitrust Suit Alleging Malicious Disparagement

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Applying Texas law, the United States District Court for the Southern District of Texas has held that there is no duty to defend an insured under a CGL policy for allegations of malicious disparagement, where the policy precluded coverage for knowingly false disparagement and knowing attempts to violate others’ rights and inflict personal and advertising… Continue Reading

Delaware Chancery Court Rejects Proposed Merger Settlement Emphasizing Need for Case-Specific Assessment of Settlement Consideration and Attorneys’ Fees

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On July 8, 2015, Vice Chancellor Laster of the Delaware Chancery Court rejected an unopposed motion for a final settlement and attorneys’ fees in a case challenging a merger transaction. Acevedo v. Aeroflex Holding Corp., CA No. 7930-VCL (Del Ch. July 8, 2015). (h/t Delaware Corporate & Commercial Litigation Blog).… Continue Reading

Bond Exclusion Bars Coverage for Claims Against Property Management Company

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The United States Court of Appeals for the Ninth Circuit, applying California law, has issued a unanimous decision holding that a bond exclusion in a professional liability policy barred coverage for claims asserted against an insured property manager arising out of its alleged failure to secure extensions of two surety bonds relating to construction work… Continue Reading

Insurer Not Estopped from Relying on Exclusion in Unilaterally Disclaiming Duty to Defend; Business Enterprise Exclusion Bars Coverage

Posted in Uncategorized
Applying Wisconsin law, the Court of Appeals of Wisconsin has held that an insurer is not estopped from relying on a policy exclusion to justify its refusal to defend in subsequent coverage litigation. Marks v. Bedford Underwriters, Ltd., No. 2013AP2756, 2015 WL 2114317 (Wis. Ct. App. May 7, 2015). The court held that prior appellate… Continue Reading

Invasion of Privacy Exclusion Blocks Basketball Team’s Shot at D&O Coverage for TCPA Claims

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The United States District Court for the Central District of California has held that an invasion of privacy exclusion in a D&O policy barred coverage for a claim alleging violations of the Telephone Consumer Protection Act (TCPA). Los Angeles Lakers, Inc. v. Federal Ins. Co., No. 2:14-cv-07743-DMG-SH (C.D. Cal. Apr. 17, 2015).… Continue Reading

Pollution Exclusion in E&O Policy Bars Coverage

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Applying Pennsylvania law, a federal court in Pennsylvania has held that a pollution exclusion in an insurance company’s E&O policy precludes coverage for a dispute between the company and its own policyholder over pollution coverage.  United Nat’l Ins. Co. v. Indian Harbor Ins. Co., 2015 WL 437630 (E.D. Pa. Feb. 2, 2015).  Wiley Rein represented… Continue Reading

“No Direct Action” Rule Bars Claimant’s Declaratory Judgment Claim Against Insurer

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The Texas Supreme Court has ruled that the state’s “no direct action” rule barred a personal injury claimant from suing an insurer until the insurer’s legal obligation to pay damages has been established.  In re Essex Ins. Co., No. 13-1006 (Tex. Sup. Ct. Nov. 21, 2014).  In so doing, the court reversed the trial court’s… Continue Reading

Tax Shelter Exclusion Bars Coverage for Suits Against Accounting Firm

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Applying Tennessee law, a federal district court has held that a tax shelter exclusion precludes coverage for two underlying complaints alleging that the insured implemented investment strategies constituting illegal tax avoidance schemes.  Financial Strategy Group, PLC v. Continental Casualty Co., No. 2:14-cv-2154 (W.D. Tenn. Sept. 23, 2014).  Wiley Rein represented the insurer in this case.… Continue Reading

New Jersey Appellate Court Concludes Third Parties Have Standing to Bring Action Against E&O Insurer

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In an unpublished opinion, a New Jersey appellate court has held that third-party claimants have standing to bring an action against an insolvent insured’s E&O carriers, even in the absence of policy language providing that right.  Ferguson v. Travelers Indemnity Co., 2014 WL 3798524 (N.J. App. Div. Aug. 4, 2014). … Continue Reading

Professional Services Exclusion Unambiguously Excludes Coverage for Negligent Building Design

Posted in Professional Services, Uncategorized
The United States Court of Appeals for the Fifth Circuit has held that, under Louisiana law, an insurer had no duty to defend by operation of a professional services exclusion because the underlying complaint arose out of the rendering of or failure to render professional services.  Wisznia Co., Inc. v. General Star Indem. Co., No.… Continue Reading

No Coverage for Claims Arising out of Madoff’s Ponzi Scheme

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A New York state intermediate appellate court, applying Connecticut law, has held that a liability insurance policy’s loss-of-money, personal-profit, sale-of-securities, and insolvency exclusions preclude coverage for claims by investors against an insured bank for amounts lost in connection with Bernard Madoff’s Ponzi scheme.  Associated Cmty. Bancorp, Inc. v. St. Paul Mercury Ins. Co., 2014 WL… Continue Reading

Absence of Parallel State Court Proceedings Does Not Require Federal Court to Exercise Jurisdiction Under Declaratory Judgment Act

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A federal appellate court has held that a lower court did not abuse its discretion in declining to exercise jurisdiction under the Declaratory Judgment Act even though there was not a parallel state court proceeding because the litigation addressed issues of state law that were better suited to be resolved in the state court system. … Continue Reading