An Alabama federal district court has ruled that a third-party claim seeking indemnification for a medical malpractice suit, allegedly resulting from the insured’s allegedly faulty performance of technology services, was barred from coverage by “medical services” and bodily injury exclusions. Jackson, Key & Assocs., LLC v. Beazley Ins. Co., Inc., 2018 WL 6710041 (S.D. Ala. Nov. 30, 2018) (report and recommendation adopted on December 20, 2018).
Seventh Circuit Holds that Actual Wrongful Act Must be Established to Trigger Prior Knowledge Exclusion
Posted in Prior Knowledge/Warranty Exclusion, Wrongful ActThe United States Court of Appeals for the Seventh Circuit, applying Indiana law, has revived a coverage dispute over whether a medical malpractice insurer’s professional liability insurer must cover the malpractice insurer’s post-verdict excess settlement of an underlying wrongful death claim, finding that factual questions remain as to whether the malpractice insurer’s refusal to settle the wrongful death claim on behalf of its insured physician was an actual “Wrongful Act” triggering a prior knowledge exclusion. Med. Protective Co. v. Am. Int’l Specialty Lines Ins. Co., 2018 WL 6613336 (7th Cir. Dec. 18, 2018).
Specific Circumstances and Prior Notice Exclusions Bar Coverage for Trustee’s Lawsuit Against Former Directors and Officers
Posted in Exclusion lead-in language (Arising out of), Related Claims and associated exclusions, Wrongful ActApplying California law, the United States District Court for the Northern District of California has held that coverage is precluded under a claims-made D&O policy based on two exclusions: a specific circumstances exclusion and a prior notice exclusion. Landmark Am. Ins. Co. v. Navigators Ins. Co., 2018 WL 6591620 (N.D. Cal. Dec. 14, 2018).
Corporate Coverage Considerations: California Appellate Court Confirms Enforceability of Delaware Forum Selection Bylaws
Posted in Corporate ConsiderationsIn an issue of first impression in California, a California appellate court has rejected a shareholder plaintiff’s effort to avoid enforcement of a Delaware company’s forum selection bylaw, despite the shareholder’s arguments that the bylaw was inconsistent with California law and was otherwise unreasonable given the manner and timing of its adoption. Drulias v. 1st Century Bancshares, Inc., __ Cal.Rptr.3d __, 2018 WL 6735137 (Cal. Ct. App. Dec. 21 2018). While Delaware law plainly authorizes such forum selection bylaws, this ruling by a non-Delaware court is a welcomed confirmation that these provisions can be enforced in proceedings brought outside of the state.
Delaware Chancery Court Rules Federal Forum Selection Clause in Corporate Charter Unenforceable
Posted in Corporate ConsiderationsRuling on summary judgment, the Delaware Chancery Court has held that forum selection clauses in three separate companies’ corporate charters requiring that any claims under the Securities Act of 1933 be brought in federal court are “ineffective and invalid.” Sciabacucchi, et al. v. Salzberg, et al., C.A. No. 2017-0931-JTL (Del. Ch. Dec. 19, 2018). In doing so, the court noted that the source of the 1933 Act claims was federal law, distinct from any right created under Delaware law, and thus beyond the power of the companies to control through their bylaws in this manner.
Statute of Limitations Period Begins When Insured Can Plead Prima Facie Elements of Bad Faith Case
Posted in Bad faith/duty to settle, Notice of ClaimThe Supreme Court of Delaware has held that under Delaware law, the three-year statute of limitations period applicable to a statutory bad faith action governed by Louisiana law commences when the insured could plead a prima facie case and was therefore barred. Homeland Ins. Co. of New York v. Corvel Corp., 2018 WL 6061261 (Del. Nov. 20, 2018).
Eighth Circuit Affirms No Coverage for Lawsuit for Breach of Noncompetition Covenant
Posted in Breach of ContractApplying North Dakota law, the United States Court of Appeals for the Eighth Circuit has held that an insurance policy issued to a parent company and several of its commonly owned affiliates did not provide coverage for a lawsuit against the owner of the companies and one of the insured subsidiaries for breach of a noncompetition covenant in an asset purchase agreement. Mau v. Twin City Fire Ins. Co., — F.3d –, 2018 WL 6379281 (8th Cir. Dec. 6, 2018).
Insurer Must Defend Utility in Suit Based on Outage, Despite Exclusion for Property Damage and Resulting Loss of Use
Posted in Bad FaithA Washington federal district court, applying Washington law, has held that an insurer who issued a public officials and employment practices liability policy to a utility had a duty to defend the insured in an action stemming from damages to a refinery after a power outage, despite the policy’s property damage exclusion. Indian Harbor Ins. Co. v. City of Tacoma, Wash. Dep’t of Pub. Util., 2018 WL 6304767 (W.D. Wash. Dec. 3, 2018). The court found that the underlying complaint was ambiguous as to whether the refinery sought any damages other than those for property damage.
Warranty Precludes Coverage for SEC Action Under Excess Policy
Posted in Prior Knowledge/Warranty ExclusionThe United States Court of Appeals for the Second Circuit, applying New York law, has held that a warranty executed before the inception of an excess directors and officers liability policy precluded coverage for a Securities and Exchange Commission (SEC) action because the insured knew of the SEC’s “escalating” investigation before the warranty was signed. Patriarch Partners, LLC v. AXIS Ins. Co., 2018 WL 6431024 (2d Cir. Dec. 6, 2018).
“Capacity” Exclusion Bars Coverage for Two Directors for Claims of Wrongdoing and Fiduciary Breaches Outside Their Insured Capacity
Posted in UncategorizedApplying Delaware law, a Delaware state court has held that a policy’s “capacity” exclusion precluded coverage for two directors because the claims filed against those directors would not have been established “but for” the directors’ alleged misconduct related to third-party investment entities the directors formed to control the insured company. Goggin v. National Union Fire Ins. Co. of Pittsburgh, 2018 WL 62661195 (Del. Sup. Ct. Nov. 30, 2018).