Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Lawsuit Arising Out of Attorney-Client Fee Dispute Did Not Seek “Damages”

Posted in Loss

In a win for Wiley Rein’s client, a federal district court applying Connecticut law has held that an insurer has no duty to defend or indemnify an attorney in a lawsuit that arose out of a fee dispute and did not seek any covered relief.  Continental Cas. Co. v. Parnoff, 2018 WL 4356746 (D. Conn. Sept. 12, 2018).

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SEC’s Formal Order of Investigation Constitutes “Claim” First Made Before Policy Period

Posted in “Claim”

The U.S. District Court for the District of Massachusetts has held that two liability insurers did not owe coverage for the insured’s SEC investigation defense costs because the SEC investigation was a “claim” first made before the policy period.  Jalbert v. The Zurich Servs. Corp., 2018 WL 4232905 (D. Mass. Sept. 5, 2018).  Wiley Rein represented one of the prevailing carriers.

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Montana Supreme Court Holds Insurer Does Not Have Statutory Right to Rescind Lawyers’ Professional Liability Policy

Posted in Rescission

The Supreme Court of Montana has held that a Montana statute allowing insurers to “prevent a recovery” under an insurance policy in certain circumstances, including when the insured made misrepresentations or omissions in its application, does not provide a right to rescind the policy ab initioALPS Prop. & Cas. Ins. Co. v. McLean & McLean, PLLP, 2018 WL 3737950 (Mont. Aug. 7, 2018).  The court also held that an innocent insured attorney had a reasonable expectation of retaining attorney malpractice insurance by purchasing an extended reporting period endorsement.

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Court Denies Reconsideration of Holding that Securities Exclusion Bars Coverage for Claims Involving Misrepresentations Made During Sale of Securities

Posted in Wrongful Act

Applying Texas law, a federal district court has denied a motion for reconsideration of its prior ruling that a securities exclusion barred coverage for claims involving alleged misrepresentations made in connection with the sale of securities.  Gleason v. Markel Am. Ins. Co., 2018 WL 3819928 (E.D. Tex. Aug. 10, 2018).  The court rejected the insured’s argument that an exception to the exclusion restored coverage, concluding that the insured failed to fully brief the argument in the earlier summary judgment motion.

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First Circuit Holds Physician’s Accessing of Ex-Wife’s Medical Records Allegedly to Harass Does Not Constitute “Professional Services”

Posted in Professional Services

Applying Maine law, the United States Court of Appeals for the First Circuit has held that a professional liability insurer had no duty to defend a physician for claims arising out of his alleged improper accessing of his ex-wife’s medical records on the basis that such action did not constitute the rendering of professional services.  Med. Mut. Ins. Co. of Me. v. Burka, 2018 WL 3805909 (1st Cir. Aug. 10, 2018).

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Lawsuits Involving a “Continuing Pattern of Anticompetitive Behavior” Constitute Related Claims

Posted in Related Claims and associated exclusions, Wrongful Act

The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has affirmed a district court’s holding that multiple lawsuits filed against the insured over a fifteen-year period involving a “continuing pattern of anticompetitive behavior” constitute claims “related logically, causally or in any other way.”  Health First, Inc. v. Capitol Specialty Ins. Corp., 2018 WL 4025461 (11th Cir. Aug. 22, 2018).

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Court Finds Insurer Entitled to Recoupment, Declines to Follow ALI Restatement on the Law of Liability Insurance

Posted in Defense Costs, Loss

A Delaware trial court, applying Tennessee law, has ruled that an insurer was entitled to recover defense costs it advanced under a reservation of rights for a non-covered claim.  Catlin Specialty Ins. Co. v. CBL & Assocs. Props., 2018 WL 3805868 (Del. Super. Ct. Aug. 9, 2018).  In so doing, the court cited the American Law Institute Restatement on the Law of Liability Insurance (Restatement), but it ultimately refused to follow the Restatement, concluding that it did not accurately reflect Tennessee law.

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Wells Notices and Subsequent Enforcement Action Deemed First Made at the Time when SEC Original Investigation Began

Posted in Related Claims and associated exclusions

In a win for Wiley Rein’s client, a Texas state court, applying Texas law, has held that no coverage was available for Wells notices issued and an enforcement action brought by the United States Securities and Exchange Commission (SEC) because they were related to the SEC’s original investigation, which commenced prior to the claims-made policy period.  UniPixel, Inc. v. XL Specialty Ins. Co., (Tex. Dist. Ct., Harris Cnty. Aug. 23, 2018).

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Insured’s Payment to Stockholders to Settle Bankruptcy Dispute Relates to Prior Notice of Circumstances

Posted in Related Claims and associated exclusions, Wrongful Act

Applying Rhode Island law, the United States District Court for the District of Rhode Island has held that an insured was entitled to coverage for a settlement because the settlement related back to a prior notice of circumstances.  Twin River Worldwide Holdings, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2018 WL 3640995 (D.R.I. Aug. 1, 2018).

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Law Enforcement Liability Policy Triggered by Suit for Violation of Constitutional Rights

Posted in Wrongful Act

A Missouri federal district court, applying Missouri law, has held that an insurer had an obligation under a law enforcement liability policy to defend a county and law enforcement officials in a suit alleging violation of the plaintiff’s Fourth and Fourteenth Amendment rights based on the initiation of prosecution of criminal charges, even though the investigation by the law enforcement officials commenced prior to the policy period.  Argonaut Great Central Ins. Co. v. Lincoln County, Mo., No. 4:17-CV-00762 JAR (E.D. Mo. Aug. 8, 2018).  In addition, the court held that an exclusion for malicious conduct did not preclude coverage for the claim.

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