The United States District Court for the District of Rhode Island has concluded that a stockholder demand letter for legal expenses in connection with a dispute regarding the rights of different classes of stockholders constitutes a covered claim for a wrongful act. Twin River Worldwide Holdings, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 2018 WL 3640995 (D.R.I. Aug. 1, 2018).
Prior Knowledge Exclusion Does Not Require Absolute Certainty of Future Claim
Posted in Prior Knowledge/Warranty ExclusionApplying Michigan law, the United States Court of Appeals for the Sixth Circuit has held that an insured had prior knowledge of a potential claim following a letter from an investor demanding compensation for losses and threatening legal action. Alterra Excess & Surplus Co. v. Excel Title Agency, 2018 WL 3599597 (6th Cir. July 26, 2018).
No Duty to Defend Under Claims-Made-and-Reported Policy Where Notice of Claim Given Nine Months After Cancellation
Posted in “Claim”, Notice of ClaimAn Illinois appellate court has held that a trial court properly awarded judgment to an insurer because it had no duty to defend or indemnify its insured under its claims-made-and-reported policy where notice of the underlying negligence lawsuit came in more than nine months after the policy was cancelled. Southwest Disabilities Services and Support v. ProAssurance Specialty Ins. Co., Inc., 2018 WL 3635473 (Ill. App. Ct. July 27, 2018).
Court Rules that “Direct Means Direct” in Crime Policy, Rejecting Proximate Cause Analysis
Posted in Cyber Policies and IssuesA Nevada federal district court has applied the “direct means direct” rule to conclude that losses an insured suffered from payment card chargebacks when certain employees made fraudulent charges on customers’ payment cards were only the “indirect” result of employee theft, and therefore not covered under the insured’s commercial crime policy. CP Food & Beverage, Inc. v. U.S. Fire Ins. Co., No. 1:16-cv-02421-APG-GWF (D. Nev. Aug. 6, 2018).
Specific Litigation Exclusion Bars Coverage for Separate Proceeding Involving Same Conduct in Allegedly Oversupplying “Pill Mills”
Posted in Prior Knowledge/Warranty Exclusion, Related Claims and associated exclusionsAn Ohio federal district court has held that a specific litigation exclusion concerning a lawsuit brought by a state attorney general alleging that the insured oversupplied “pill mills” barred coverage for a show cause order the insured later received from a federal law enforcement agency concerning some of the same alleged misconduct. Miami-Luken, Inc. v. Navigators Ins. Co., 2018 WL 3424448 (S.D. Ohio July 11, 2018).
Settlement Payments Not Uninsurable Disgorgement Where Not Conclusively Linked To Improperly Acquired Funds
Posted in Loss, Public Policy prohibition on insuranceApplying New York law, the Delaware Supreme Court has held that settlement payments that were not conclusively linked to disgorgement damages were insurable under New York public policy. In re TIAA-CREF Ins. Appeals, 2018 WL 3620873 (Del. July 30, 2018).
Investigation Seeking Sanctions and Return of Fees Sought No Covered “Damages”
Posted in LossIn a win for Wiley Rein’s client, a Louisiana federal district court has held that an insurer has no duty to defend an attorney in an investigation that sought only sanctions, the return of legal fees, and other non-covered relief. Andry Law Group, LLC v. CNA Fin. Corp., 2018 WL 3642003 (E.D. La. Aug. 1, 2018).
Sixth Circuit Finds Insurer Obligated to Cover Loss from Fraudulent Email Scheme
Posted in Cyber Policies and IssuesThe U.S. Court of Appeals for the Sixth Circuit, applying Michigan law, has held that the computer fraud provision of a commercial crime policy covers losses from wire transfers sent by the insured pursuant to fraudulent emails. American Tooling Ctr., Inc. v. Travelers Cas. & Sur. Co., 2018 WL 3404708 (6th Cir. Jul. 13, 2018).
Mailroom Mix-Up Cannot Excuse Notice Requirement Noncompliance
Posted in Notice of ClaimThe United States Court of Appeals for the Eleventh Circuit, applying Georgia law, has held that mishandling of mail by an insured’s employee which led to noncompliance with a notice requirement in an insurance policy cannot, as a matter of law, excuse the noncompliance. Johnson & Bryan, Inc. v. Utica Mut. Ins. Co., 2018 WL 3387525 (11th Cir. July 11, 2018). In affirming the grant of the insurer’s motion to dismiss, the appeals court agreed that whether a delay was justified was not a question for a jury where the insured’s failure to meet the requirement resulted from its own negligence.
Broad Contract Exclusion Did Not Render Errors & Omissions Coverage “Illusory”
Posted in Breach of ContractApplying Wisconsin law, the United States District Court for the Eastern District of Wisconsin has held that a contract exclusion in a multi-line liability policy barred coverage for an action solely alleging breach of contract. Crum & Forster Specialty Ins. Co. v. GHD Inc., 2018 WL 3304631 (E.D. Wisc. Jul. 5, 2018). The court also held that the broad language in the exclusion did not render coverage “illusory” such that the reformation of the policy would be warranted.