Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Failure to Give Timely Notice of Arbitration Bars Coverage, Even Where Insured Gave Timely Notice of Related Claim

Posted in Notice of Claim

The United States District Court for the Southern District of Texas, applying Texas law, has granted an employment practices liability insurer’s motion for summary judgment in a lawsuit alleging that it wrongfully denied coverage for an arbitration award, concluding that the insured failed to provide timely notice of the arbitration to its insurer.  Stadium Motorcars, LLC v. Federal Ins. Co., 2019 WL 212111 (S.D. Tex. May 15, 2019).

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Illinois Court Holds Insured is Entitled to Independent Counsel to Defend Uncovered Punitive Damages Claim

Posted in Cooperation

An Illinois appeals court has held that an insured had the right to select independent counsel under a duty to defend policy where the insured faced a substantial, uncovered punitive damages award.  See Xtreme Prot. Servs., LLC v. Steadfast Ins. Co., 2019 WL 1976482 (Ill. App. Ct. May 3, 2019).

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Regulatory Warning Notices Asserting Damages Based on Same Acquisition Involve “Related Wrongful Acts”

Posted in Notice of Claim, Related Claims and associated exclusions

In a win for Wiley Rein’s client, a New York appellate court has held that a program of asset management liability insurance afforded no coverage for a UK regulatory “Warning Notice” because the notice and a previous notice issued by the same regulator to the same targets arising from the same transaction involved “Related Wrongful Acts” and therefore constituted a single claim first made prior to inception of the relevant policies.  Berkshire Hathaway Specialty Ins. Co. v. H.I.G. Capital, LLC, 2019 WL 2179145 (N.Y. App. Div. May 21, 2019).  In addition, the court held that the policies’ prior notice exclusion applied to bar coverage.

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Insured Entitled to Independent Counsel Where Coverage Action Turns on Facts That Could be Used to Establish Underlying Liability

Posted in Defense Costs, Prior Knowledge/Warranty Exclusion

The United States District Court for the Central District of California, applying California law, has held that an insured is entitled to independent counsel where an insurer’s coverage action turns on facts that overlap with facts that might establish an insured’s liability in the underlying lawsuit.  Aspen Am. Ins. Co. v. Ou, 2019 WL 1950293 (C.D. Cal. Mar. 14, 2019).

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Duty to Defend Triggered Given “Possibility” of Wrongful Act

Posted in Professional Services, Wrongful Act

The United States District Court for the District of South Carolina, applying South Carolina law, has denied a professional liability insurer’s motion to dismiss, holding that the insured’s alleged conduct could fall within the policy’s definition of “Wrongful Act,” thus giving rise to a duty to defend.  Harriman v. Associated Indus. Ins. Co., 2019 WL 1670801 (D.S.C. Apr. 17, 2019).

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Two Lawsuits Based on Real Estate Broker’s Dual Representation of Buyers and Sellers in Same Transaction Arise from Same Wrongful Act

Posted in Related Claims and associated exclusions

The U.S. District Court for the Southern District of California, applying California law, held that two lawsuits against a real estate broker involving his dual representation of buyers and sellers in the same real estate transaction arose from the same wrongful act, such that the second suit was deemed a claim first made at the time the first suit was filed—prior to the inception of the broker’s claims-made errors and omissions policy.  Martin v. QBE Ins. Corp., 2019 WL 2009874 (S.D. Cal. May 7, 2019).

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Maine District Court Holds Insurer Has No Duty to Defend SEC Enforcement Action Because Disgorgement Constitutes a Penalty

Posted in Related Claims and associated exclusions, Securities Litigation

In a case in which Wiley Rein represented the insurer, a federal district court in Maine has held that an insurer had no duty to defend an enforcement action brought by the Securities and Exchange Commission (SEC) under a lawyers’ professional liability policy because none of the relief sought constituted “damages” as defined in the policy.  Marcus v. Allied World Ins. Co., No. 2:18-cv-253-DBH, 2019 WL 1810954, (D. Me. Apr. 23, 2019).  The court held that when sought by the SEC, disgorgement is properly characterized for insurance purposes as a penalty.  The court also held, however, that the policy’s investment advice exclusion did not apply to negate the insurer’s duty to defend a related securities fraud class action, but it rejected the insured’s argument that because the actions were “related claims,” the insurer’s duty to defend the securities lawsuit also obligated it to defend the SEC enforcement action.

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Prior Favorable Coverage Determination is Evidence of Good Faith

Posted in Bad Faith, Breach of Contract

The United States District Court for the District of Nevada, applying Nevada law, has held that the court’s prior favorable coverage determination was evidence that an insurer did not act in bad faith when refusing to defend or provide coverage under a policy.  My Left Foot Children’s Therapy, LLC v. Certain Underwriters at Lloyd’s London, 2019 WL 1810956 (D. Nev. Apr. 23, 2019).

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Dole Insurers Did Not Act in Bad Faith

Posted in Bad faith/duty to settle

Applying Delaware law, a Delaware state trial court has held that insurers did not act in bad faith by denying coverage for underlying settlements when they had reasonable grounds for their position and promptly sought a declaratory judgment as to their indemnification responsibilities.  Arch Ins. Co. v.  Murdock., 2019 WL 1932536 (Del. Super. Ct. May 1, 2019).

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