Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Wrongful Act

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Insurer Has No Duty to Defend Claim Seeking Restitution and Other Unspecified Relief

Posted in Loss, Personal Profit/Advantage exclusion, Wrongful Act
An Illinois federal district court has held that a lawsuit seeking to recover amounts an insured wrongfully refused to pay to another sought only uninsurable restitutionary-type relief, not “Damages,” and thus did not trigger an insurer’s defense obligations under an E&O policy.  Westport Ins. Corp. v. M.L. Sullivan Ins. Agency, Inc., 2017 WL 56635 (N.D.… Continue Reading

Fifth Circuit Holds that Prior Knowledge Exclusion is Unduly Broad

Posted in Bad faith/duty to settle, Prior Knowledge/Warranty Exclusion, Wrongful Act
The United States Court of Appeals for the Fifth Circuit, applying Texas law, has held that the prior knowledge exclusion contained in a lawyers professional liability policy was unduly broad as written and would be construed to apply to wrongful acts reasonably likely to lead to a malpractice claim.  OneBeacon Ins. Co. v. T. Wade… 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

Under Errors and Omissions Policy, No Duty to Defend Suit Alleging Only Intentional Misconduct

Posted in Dishonesty Exclusion, Wrongful Act
The Court of Appeals of Indiana, applying Indiana law, has held that an insurer had no duty to defend its insured against a complaint alleging only intentional misconduct where the policy covered only negligent acts, errors and omissions.  Mt. Vernon Fire Ins. Co. v. Louis Jancetic, 2016 WL 6584268 (Ind. Ct. App. Nov. 4, 2016). … Continue Reading

SEC Letter and Order Directing Private Investigation Held Not to Allege Wrongful Acts

Posted in “Claim”, Wrongful Act
The United States District Court for the District of Colorado, applying Colorado law, has granted summary judgment in favor of an insurer, holding that a letter from the SEC’s Division of Enforcement advising that the agency was conducting an inquiry into a company’s operations did not allege a Wrongful Act as defined by a D&O… Continue Reading

Negligent Misrepresentation Claim Alleges Wrongful Act Despite Contract-Based Damages

Posted in Personal Profit/Advantage exclusion, Wrongful Act
A Massachusetts intermediate appellate court has held that a claim for negligent misrepresentation alleged a Wrongful Act, even though the alleged damages were based on contractual services. Winbrook Comm. Servs., Inc. v. U.S. Liability Ins. Co., 2016 WL 3245059 (Mass. App. Ct. June 14, 2016). Additionally, the court held that the creation of an opportunity… 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

Coverage Barred For Hedge Fund’s Suit Against Insured Because Related to Prior Securities Class Action

Posted in Related Claims and associated exclusions, Wrongful Act
An Arizona intermediate appellate court, applying Arizona law, has affirmed a trial court’s rulings in favor of an insurer, holding that a lawsuit against the insured’s directors and officers was based in large part on the same or similar “wrongful acts” that were at issue in a previously filed securities fraud class action suit brought… Continue Reading

No “Wrongful Act” Where Claim Did Not Involve Conduct “Solely” in Individual’s Capacity as a Director or Officer of an Insured Entity

Posted in Wrongful Act
A Maryland intermediate appellate court has ruled that a claim did not allege a “wrongful act” because the claim was not made against an individual “solely” in his capacity as a director or officer of an insured entity. Feldman v. Fidelity & Deposit Co. of Md., 2016 WL 885041 (Md. Ct. Spec. App. Mar. 7,… Continue Reading

Dentist’s Alleged Sexual Misconduct Not Covered Under EPL Policy

Posted in Consent to settle/incur defense costs, Notice of Claim, Public Policy prohibition on insurance, Wrongful Act
In a victory for Wiley Rein’s client, a Florida federal court has held that an employment practices liability policy that provided coverage for “harassment” did not cover a licensing action arising out of a dentist’s alleged sexual misconduct. Turbyfill v. Scottsdale Indem. Co., No. 3:14-cv-283 (N.D. Fla. Feb. 24, 2016). The court also noted that… Continue Reading

Ninth Circuit Finds “Related Wrongful Acts” Term is Unambiguous and Encompasses a Broad Range of Acts

Posted in Related Claims and associated exclusions, Wrongful Act
The United States Court of Appeals for the Ninth Circuit, applying California law, has held that a trial court properly interpreted a D&O policy’s “Related Wrongful Acts” provision in concluding that an insured was not entitled to coverage under two policies for twenty-seven lawsuits that followed the first claim noticed to the insurer. Previti v.… Continue Reading

Insurer Failed to Show Claims Were Not Interrelated; Not Entitled to Summary Judgment for Suit Seeking Disgorgement

Posted in Defense Costs, Personal Profit/Advantage exclusion, Public Policy prohibition on insurance, Related Claims and associated exclusions, Wrongful Act
A Texas intermediate court of appeals has held that an insurer was not entitled to summary judgment where the insurer contended that a claim brought by a bankruptcy plan agent (i) did not allege a wrongful act, and (ii) was not made within the policy period because it did not relate back to claims made… Continue Reading

Managed Care E&O Policy Covers Suit Alleging Unfair Competition by Competitors

Posted in “Claim”, Wrongful Act
A California federal court has held that a managed care organization E&O policy provided coverage for a suit alleging unfair competition, and was not limited to coverage for suits brought by the insured’s customers or clients. EYEXAM of Cal., Inc. v. Allied World Surplus Lines Ins. Co., 2015 WL 7015414 (N.D. Cal. Nov. 12, 2015).… 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

Claim based on Unsolicited Text Messages in Violation of TCPA Does Not Allege a “Privacy Wrongful Act” under Policy’s “Cyber Claims Endorsement”

Posted in Cyber Policies and Issues, Wrongful Act
An Illinois intermediate appellate court has held that a cosmetic surgery center was not entitled to coverage because a claim alleging that it violated the Telephone Consumer Protection Act (TCPA) by sending unsolicited text messages advertising its services did not allege a “privacy wrongful act” under a “cyber claims endorsement” in a medical professional liability… Continue Reading

Knowing Conduct Is Not An “Error, Omission or Negligent Act” Under Technology E&O Policy

Posted in Cyber Policies and Issues, Wrongful Act
A Utah federal district court has held there was no coverage under a technology E&O policy because an underlying complaint against two insureds alleged that they knowingly failed to provide certain customer information to the claimant, the insureds’ business customer, which did not qualify as an “error, omission or negligent act.” Travelers Prop. Cas. Co.… Continue Reading

FDIC’s Suit Against Law Firm for Acceptance of Advanced Retainer Not Covered

Posted in Professional Services, Wrongful Act
An Illinois appellate court has held that there was no duty to defend an insured law firm for a claim arising out of the insured’s alleged wrongful acceptance of an advance retainer payment from a failing bank because the claim alleged only intentional acts that did not fall within the policy’s definition of professional services. … Continue Reading

No Coverage for SEC Investigation Where Initial Investigative Order First Issued Before the Policy Period

Posted in “Claim”, Wrongful Act
The United States District Court for the District of Massachusetts has held that, where subpoenas served during a policy period refer to an investigative order first issued before the policy period and investigate the same officers and company for the same pattern of alleged securities law violations, the subpoenas were part of a single “claim”… Continue Reading

Civil Lawsuit Alleging Ethical Violations Is Not a “Disciplinary Proceeding” Under a Lawyers Professional Liability Policy

Posted in “Claim”, Wrongful Act
Applying Missouri law, a federal district court has held that a civil lawsuit alleging ethical violations by a law firm and its attorneys does not constitute a “disciplinary proceeding” under a lawyers professional liability policy.  The Hullverson Law Firm, P.C. v. Liberty Ins. Underwriters, Inc. (E.D. Mo. Oct. 22, 2014). … Continue Reading

Business Pursuits Exclusion Bars Coverage for Activities after Alleged Ponzi Schemer Left Law Firm

Posted in Related Claims and associated exclusions, Wrongful Act
A federal magistrate judge has determined that legal malpractice insurers need not defend an attorney for claims arising from his activities as manager of a fraudulent investment fund after settling allegations covering the time period he worked as a lawyer at the insured firm.  Duckson v. Cont’l Cas. Co., No. 14-cv-1465 (D. Minn. Dec. 8,… Continue Reading

No Coverage for Individual for Claims Based on Role Outside of Insured Organization

Posted in Defense Costs, Wrongful Act
A North Dakota federal district court, applying Idaho law, has ruled that a series of underlying antitrust lawsuits against an individual and several other defendants did not allege a “wrongful act” by the individual under the terms of a company’s D&O policy because the allegations involved the individual’s conduct on his own behalf, and in… 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

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

Inconsistent Policy Provisions Render Policy Ambiguous as to Coverage for Attorney Advertising

Posted in Loss, Wrongful Act
The United States District Court for the Eastern District of Missouri, applying Missouri law, has held that a policy was ambiguous because its definition of personal injury provided coverage for the advertising activities of a law firm, but its definition of wrongful act excluded injury arising out of the law firm’s advertising.  Hullverson Law Firm,… Continue Reading