Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Third Circuit Finds Major Shareholder Exclusion Ambiguous as Applied to Company Acquiring All of Insured’s Stock after Policy Period

Posted in Insured v. Insured Exclusion, Loss

The United States Court of Appeals for the Third Circuit, applying Delaware law, has held that a D&O policy’s Major Shareholder Exclusion, barring claims brought against the insured entity by a company owning five percent or more of the entity, was ambiguous as applied to a company acquiring one hundred percent of the insured’s stock after the policy period.  EMSI Acquisition, Inc. v. RSUI Indem. Co., 2019 WL 4511948 (3d Cir. Sept. 19, 2019).  The court also rejected the insurer’s argument that the insured’s settlement with the acquiring company did not constitute “Loss” under the policy.

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Insured-Versus-Insured Exclusion Does Not Bar Coverage for Derivative Claim Arising from Alleged Employment-Related Misconduct

Posted in Allocation, “Claim”, Insured v. Insured Exclusion, Loss, Related Claims and associated exclusions

A Texas intermediate appellate court, applying Texas law, has held that an insured-versus-insured (IvI) exclusion did not bar coverage for an arbitration award because the underlying dispute arose from alleged wrongful employment practices, bringing the claim within an exception to the exclusion.  Prophet Equity LP v. Twin City Fire Ins. Co., 2019 WL 3886651 (Tex. App. Aug. 19, 2019).  The court also determined that the insurer had not met its burden of proving that any portion of the arbitration award constituted uncovered loss such that an allocation should be imposed.  Id.

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Seventh Circuit: Breach of Contract Exclusion Renders E&O Coverage Illusory

Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Exclusions

Applying Wisconsin law, the United States Court of Appeals for the Seventh Circuit has held that a breach of contract exclusion did not apply to bar coverage for a claim because it had the effect of rendering the insured’s errors and omissions professional liability coverage illusory.  Crum & Forster Specialty Ins. Co. v. DVO, Inc., 2019 WL 4594229 (7th Cir. Sept. 23, 2019).

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Assault and Battery Exclusion Bars Coverage for Negligence Action Arising from Stabbing at Concert

Posted in Assault & Battery Exclusion

In a win for Wiley Rein’s client, the United States District Court for the Eastern District of California applied an assault and battery exclusion to bar coverage for a negligence action arising from a stabbing that occurred at a concert promoted by the insured.  Certain Underwriters at Lloyd’s of London Subscribing to Policy No. EH7713140 v WorldOne Presents, LLC, 2019 WL 4747708 (E.D. Cal. Sept. 30, 2019).

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Insurer Did Not Breach Any Duty to Insured Where Payment of Defense Costs Exhausted Policy Limit

Posted in Defense Costs

The United States District Court for the Western District of New York, applying New York law, held that an insurer did not owe a fiduciary duty to its insured when the insured was represented by independent defense counsel, nor did the insurer breach its contractual duties to its insured in paying defense costs, which ultimately exhausted the policy limit.  Korn v. Federal Ins. Co., 2019 WL 4277187 (W.D.N.Y. Sept 10, 2019).

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No Duty to Defend Claims Brought by California Attorney General Under Unfair Competition or False Advertising Laws

Posted in Duty to Defend, Right to Reimbursement

The United States District Court for the Central District of California has held that California Insurance Code Section 533.5 precludes a duty to defend any claim brought by the California Attorney General under the Unfair Competition Law or False Advertising Law for the recovery of a fine, penalty, or restitution.  Adir Int’l, LLC v. Starr Indem. & Liab. Co., 2019 WL 4462613 (C.D. Cal. Sept. 10, 2019).

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Declaratory Judgment Pleading and Allocation: Don’t Demand “All or Nothing” Unless You Really Mean It

Posted in Allocation

The United States Court of Appeals for the Eighth Circuit, applying Federal procedural and Minnesota substantive law, affirmed a district court’s conclusion that insured corporate directors failed to carry their burden to establish that their insurer was responsible for 100% of the fees and costs incurred in connection with a suit against the directors, the corporation, and other parties.  Brand v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2019 WL 3850592 (8th Cir. Aug. 16, 2019).

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California Court Holds that “Wage and Hour Law” Limitations on Coverage Unambiguously Applied to Labor Code Violations

Posted in Defense Costs, Exclusions, Wage and Hour Coverage

Applying California law, a federal district court has held that a wage and hour endorsement limited the coverage available for two class action lawsuits to $25,000 in defense costs.  Houston Cas. Co v. Great American Chicken Corp., Inc., 2019 WL 3886484 (C.D. Cal. Aug. 12, 2019).

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Failure to Provide Notice of Claim “As Soon As Practicable” Precludes Coverage

Posted in Notice of Claim

The United States District Court for the District of Minnesota, applying Minnesota law, has held that coverage is unavailable where the insured failed to report the claim to its insurer “as soon as practicable” as required by the policy’s notice provision.  Citizens Ins. Co. of Am. v. Assessment Sys. Corp., 2019 WL 4014955 (D. Minn. Aug. 26, 2019).

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No Coverage for Criminal Investigation Where Claim Was Not Reported During Applicable Notice Period

Posted in “Claim”, Notice of Claim

The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has affirmed a ruling that no coverage was available in connection with a criminal investigation where the insured failed to timely report a sealed affidavit that constituted a “claim” under the language of the policy at issue.  Crowley Maritime Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2019 WL 3294003 (11th Cir. July 23, 2019).

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