Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Insured’s Lack of Notice of Claims and Settlement Demand Bars Coverage

Posted in Notice of Claim

In a win for Wiley Rein’s client, the United States District Court for the District of New Jersey has held that, even though the insured provided notice of circumstances that might lead to a claim, an excess insurer properly denied coverage because the insured failed to notify the excess insurer of the actual claim and a subsequent settlement offer.  Kennedy Univ. Hosp. v. Darwin Nat’l Assurance Co., 2017 WL 1352208 (D.N.J. Apr. 7, 2017).  The court also held that the excess insurer was not barred by estoppel or waiver from denying coverage.

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Underlying Insurer’s Agreement to Pay Limits Does Not Trigger Exhaustion for Excess Policy Requiring “Actual Payment”

Posted in Excess insurance/exhaustion

An Illinois intermediate appellate court has held that excess insurance policies requiring “actual payment” by an underlying insurer for exhaustion purposes were not triggered where the insurer “pledged” its policy as collateral and agreed to advance defense costs until its policy was exhausted but did not make “actual payment” in legal currency. Ritchie v. Arch Specialty Ins. Co., 2017 IL App (1st) 160413-U (Ill. App. Ct. Mar. 31, 2017).

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Lack of Prior Knowledge of Claim a Condition Precedent to Coverage

Posted in Prior Knowledge/Warranty Exclusion, Public Policy prohibition on insurance

The United States District Court for the District of West Virginia, applying West Virginia law, has held that lack of prior knowledge of a claim constitutes a condition precedent to coverage under an accountant’s professional liability policy.  Camico Mutual Ins. Co. v. Hess, Stewart & Campbell P.L.L.C., 2017 WL 926770 (S.D. W. Va. Mar. 8, 2017).  In so holding, the court found that the insurer was not estopped from declining coverage based on an insured’s prior knowledge of a claim despite issuance of a prior reservation of rights letter that only reserved the insurer’s right to raise “all policy provisions and defenses.”

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No Coverage Under E&O Policy for Real Estate Transaction Involving Payment of Undisclosed Fee

Posted in Professional Services

The Supreme Court of Utah has affirmed summary judgment in favor of an insurer, holding that language regarding the scope of coverage under a real estate brokerage company’s insurance policy encompassed only services performed for compensation through a traditional real estate commission.  Compton v. Houston Cas. Co., 2017 WL 1101816 (Utah Mar. 23, 2017).

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Court Finds Insurer Not Bound by $1 Million Consent Judgment

Posted in Consent to settle/incur defense costs

The Supreme Court of Appeals of West Virginia has held that a consent judgment did not bind a general liability insurer because the insurer was not a party to the lawsuit and did not expressly agree to the judgment.  Penn-America Ins. Co. v. Osborne, 2017 WL 878716 (W. Va. March 1, 2017).

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Court Upholds Eroding Defense Expense Provision; ERISA Exclusion Bars Coverage for Constitutional and Statutory Civil Rights Claims

Posted in Defense Costs

The United States Court of Appeals for the Fifth Circuit, applying Mississippi law, has held that policies providing that defense costs erode policy limits are enforceable as written and do not offend public policy.  Federal Ins. Co. v. Singing River Health Sys., 2017 WL 816235 (5th Cir. Mar. 1, 2017).  The court further held that the policy’s Employee Benefits Law Exclusion barred coverage for a broad set of claims including those based on the federal and state constitutions and statutes.

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Loss Caused by Fraudulent Exploitation of Coding Error Does Not Implicate Computer Fraud Coverage

Posted in Cyber Policies and Issues

A Georgia federal district court has held that a fraudulent scheme using telephones to exploit a computer coding vulnerability in the insured’s system that ultimately led to a loss was not covered under a computer fraud provision in a commercial crime policy.  Incomm Holdings, Inc. v. Great Am. Ins. Co., 2017 WL 1021749 (N.D. Ga. Mar. 16, 2017).

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Judgment Creditor Not Entitled to Policy Proceeds Where Insured Defaulted Without Insurer’s Consent

Posted in Consent to settle/incur defense costs

The United States District Court for the Southern District of New York, applying New York law, has held that two judgment creditors of an insured were not entitled to insurance policy proceeds where the insured had breached the terms of the policy by allowing a default judgment to be entered against it.  XL Specialty Ins. Co., v. Lakian, 2017 WL 1063451 (S.D.N.Y. March 20, 2017).  The court further held that the insurer had not waived its policy defenses by writing a letter to the broker informing it of the insured’s duty to defend the action or by filing an interpleader action without naming the judgment creditors.  The court also concluded that a third judgment creditor for an insured person had no rights to the policy because it had no claim under the policy at the time the interpleader action was filed, and because the policy was not property of the insured person.  Wiley Rein represents the insurer.

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Federal Liability Risk Retention Act Preempts Maryland’s Notice-Prejudice Statute for Non-Chartered Risk Retention Group

Posted in Notice of Claim

A Maryland federal court has held that the federal Liability Risk Retention Act (LRRA) preempts Md. Ins. Code § 19-110, Maryland’s notice prejudice statute, in circumstances where Maryland law otherwise would govern a contract issued by a non-chartered insurer.  Mora v. Lancet Indem. Risk Retention Grp., Inc., 2017 WL 818718 (D. Md. Mar. 1, 2017).

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Insurer Had 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 WL 923910 (D. Conn. March 8, 2017).

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