Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Breakaway Church Not an “Insured” Under Original Church’s D&O Policy

Posted in Insured v. Insured Exclusion, Insured-identity

A federal district court in Massachusetts has held that an insurer properly denied coverage for a claim against an insured church brought by another church that had broken away from the original entity because the breakaway church was not an “insured” under the original church’s policy.  Newton Covenant Church, et al. v. Great Am. Ins. Co., 2019 WL 3464705 (D. Mass. Jul. 31, 2019).

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Failure to Report EEOC Charge Precludes Coverage for Interrelated Lawsuit

Posted in “Claim”, Notice of Claim, Related Claims and associated exclusions

The United States District Court for the Eastern District of Arkansas, applying Arkansas law, has held that coverage is unavailable for a lawsuit arising out of Interrelated Wrongful Acts at issue in an EEOC charge where the insured failed to report the EEOC charge to its insurer within the claims-made policy’s reporting period.  Pine Bluff Sch. Dist. v. ACE Am. Ins. Co., 2019 WL 3074011 (E.D. Ark. July 12, 2019).  The court also held that the insurer was not barred from denying coverage based on waiver or estoppel after it first provided a defense under a reservation of rights.

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No E&O Coverage for Breach of Contract and Intentional Torts

Posted in Breach of Contract, Professional Services, Wrongful Act

The Supreme Court of Vermont has held there is no coverage for breach of contract and intentional torts under an errors and omissions (E&O) liability policy, where all counts of the complaint rested on allegations that the insured used misrepresentations and falsehoods to undermine a competitor, which did not fall within the definition of “professional services” under the policy.  Integrated Tech., Inc. v. Crum & Forster Specialty, 2019 WL 3759175 (Vt. Aug. 9, 2019).

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Availability of Information Regarding Ongoing Lawsuit Does Not Preclude Exclusions for Prior Acts or Pending Litigation

Posted in Professional Services, Related Claims and associated exclusions

The United States District Court for the Northern District of Illinois, applying Illinois law, has held that there is no coverage under a professional liability policy where the claim arose out of the same set of facts upon which a separate lawsuit against the insured was filed before the policy incepted.  Arch Ins. Co. v. PCH Healthcare Holdings, 2019 WL 3554062 (N.D. Ill. Aug. 5, 2019).  The court further held that the plain language of an exclusion for “healthcare services” precluded coverage for the claim.

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No Coverage for Receiver’s Claw Back Claim Against D&O Because Profit Exclusion Applied and Claim Did Not Arise Out of a “Wrongful Act”

Posted in Personal Profit/Advantage exclusion, Wrongful Act

The U.S. District Court for the Middle District of Florida, applying Florida law, held that a directors and officers liability insurance policy did not provide coverage for a claim asserted by a receiver seeking the return of bonus and other compensation amounts paid to a former director and officer of the company because (1) the policy’s profit exclusion applied; and (2) the claw back claim did not arise out of a “Wrongful Act.”  Desai v. Navigators Ins. Co., 2019 WL 3068398 (M.D. Fla. July 12, 2019).

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Letter to Insured Asserting Right to Patent Applications Constitutes a Claim Made Prior to D&O Policy Period

Posted in “Claim”, Notice of Claim, Related Claims and associated exclusions

In a win for Wiley Rein’s client, a California state court has held that an insurer correctly denied coverage under a D&O policy on the basis that the operative “claim” was made before the policy period.  CNEX Labs, Inc. v. Allied World Assurance Co. (U.S.), Inc., Case No. 18-CV-334461 (Cal. Super. Ct., Santa Clara Cty. Jul. 17, 2019).  The court found that a letter the insured received before the policy period “clearly suggested a lawsuit” against the insured and, in any event, the insured had also signed a standstill agreement before the policy’s inception, which separately constituted a “claim.”

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Fifth Circuit Holds Securities Exclusion Bars Coverage for Suit Arising out of Sale of Equity Interests

Posted in Breach of Contract, Duty to Defend, Exclusions

Applying Texas law, the Fifth Circuit has held that a D&O policy’s securities exclusion barred coverage for a suit for misrepresentation and misconduct that arose out of a sale of equity interests.  Gleason v. Markel Am. Ins. Co., 2019 WL 3437642 at *1 (5th Cir. July 30, 2019).

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Interrelated Claims Provision Precludes Coverage for Putative Class Action

Posted in Related Claims and associated exclusions

The United States District Court for the Western District of Washington has held that a liability insurer has no duty to defend its insured against a putative class action because the lawsuit involved “Related Wrongful Acts” and therefore constituted a single claim first made prior to the inception of the policy.  Navigators Specialty Ins. Co. v. Double Down Interactive, LLC, 2019 WL 3387458 (W.D. Wash, July 26, 2019).

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Court Lets Insured’s Third-Party Beneficiary Claim Proceed Against Adjuster With Which It Had No Contract

Posted in Discovery Issues

The United States District Court for the Eastern District of Louisiana, applying Louisiana law, has allowed an insured’s claim against a third party adjuster (TPA) to survive a motion to dismiss, where the insured’s principal support for the claim was its alleged “belief” that the contract between the insurer and the TPA (which defendants declined to provide to the insured) contained a provision stipulating that the contract was for the benefit of insureds.  Hammerman & Gainer, LLC v. Lexington Ins. Co., 2019 WL 2603637 (E.D. La. June 25, 2019).

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No Coverage Because of Late Notice and Undisclosed Prior Knowledge of Claim

Posted in Notice of Claim, Prior Knowledge/Warranty Exclusion

Applying California law, the United States Court of Appeals for the Sixth Circuit has held that an insurer properly denied coverage under consecutive claims-made-and-reported policies based on the insured’s failure to provide timely notice of a claim and the insured’s failure to disclose the pending claim in its application for coverage.  US HF Cellular Commc’ns., LLC v. Scottsdale Ins. Co., 2019 WL 2323802 (6th Cir. May 31, 2019).

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