Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

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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Seventh Circuit Holds Prior Event Exclusion Bars Coverage For Claim Simultaneously Tendered to Current and Former Carriers

Posted in Exclusions, Notice of Claim

The U.S. Court of Appeals for the Seventh Circuit, applying Indiana law, has held that a prior litigation and event exclusion bars coverage for a claim that was simultaneously reported to both the current insurer and a prior insurer.  Emmis Commc’ns. Corp. v. Illinois Nat’l Ins. Co., 2019 WL 2754188, *1 (7th Cir. July 2, 2019).  The court agreed with the insurer’s argument that the exclusion, which barred coverage for all notices of claims or circumstances “as reported” under the earlier policy, had no temporal limitation and thus applied if the claim had been reported to the other insurer at any time.

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Insured Bears Burden of Establishing that Exception to Insured Versus Insured Exclusion Applies

Posted in Insured v. Insured Exclusion

The United States District Court for the Northern District of Illinois, applying Oklahoma law, has held that the insured bears the burden of demonstrating that an exception to an otherwise applicable exclusion applies to restore coverage.  World Water Works Holdings, Inc. v. Continental Cas. Co., 2019 WL 2576560 (N.D. Ill. June 24, 2019).

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Third Party’s Breach of Contract Claim Against Broker Survives Motion to Dismiss

Posted in Broker Duty to Claimant

The United States Bankruptcy Court for the District of Massachusetts has held that a third party claimant’s breach of contract claim could proceed against an insurance broker where the third party’s claims against the insured were known to the broker before the broker procured additional insurance that effectively reduced the amount of coverage available.  In re GlassHouse Techs., 2019 WL 2477430 (Bankr. D. Mass. May 31, 2019).

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Three Separate Policy Exclusions and Wrongful Acts Outside the Policy Period Bar Coverage for California False Claims Act Lawsuit

Posted in Breach of Contract, Related Claims and associated exclusions, Wrongful Act

The United States District Court for the Central District of California, applying California law, has held that there is no coverage for a False Claims Act settlement where the insured company’s alleged wrongful acts took place outside the policy period and were independently barred from coverage by a contract exclusion, prior acts exclusion and regulatory exclusion. Office Depot Inc. v. AIG Specialty Insurance Co. No. 2:15-cv-02416 (C.D. Cal. June 21, 2019).

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Insurer Must Defend Insured in Claim Alleging Use of Counterfeit Materials Because “Professional Services” Definition Was Ambiguous and No Exclusion Barred Coverage

Posted in Dishonesty Exclusion, Professional Services

Applying New York law, a Delaware state court has held that an insurer owed its insured a duty to defend because the factual allegations in two underlying lawsuits arguably involved the insured’s performance of “Professional Services” and no exclusion applied to otherwise bar coverage.  Steadfast Ins. Co. v. DBI Servs., LLC, 2019 WL 2613195 (Del. Super. Ct. June 24, 2019).

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First Circuit Holds UBS Puerto Rico Bond Claims Barred by Specific Litigation Exclusion

Posted in Related Claims and associated exclusions

Ruling in favor of Wiley Rein’s client—a primary D&O insurer—and two excess insurers, the U.S. Court of Appeals for the First Circuit today held that a broadly worded specific litigation exclusion bars coverage for a series of lawsuits, regulatory investigations, and arbitrations filed against the insured, a Puerto Rico subsidiary of UBS, because the matters all involve facts, situations, or circumstances alleged in the prior claims listed in the exclusion. UBS Financial Servs. Inc. v. XL Specialty Ins. Co., No. 18-1148 (1st Cir. July 3, 2019).

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Insurer Lacked Conclusive Evidence of Insured’s Involvement to Trigger I v. I Exclusion; Insured’s Compromise of Favorable Judgment to Settle Multiple Suits Not a “Loss”

Posted in Allocation, Insured v. Insured Exclusion, Loss, Notice of Claim

The United States District Court for the Central District of California, applying California law, has held that an insurer lacked adequate information to deny coverage under an insured vs. insured exclusion in a D&O policy.  MJC Supply, LLC v. Scottsdale Ins. Co., 2019 WL 2372279 (C.D. Cal. June 4, 2019).  The court also held that the insureds’ notice under one policy constituted sufficient notice of the claim under two policies issued to a different named insured.  However, the court held that the insureds were not entitled to recover the difference between a judgment entered in their favor and a subsequent settlement of multiple lawsuits because the insureds did not sustain a “Loss.”

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Claim Supplement in Renewal Application Did Not Constitute Proper Notice under Claims-Made-and-Reported Policy

Posted in Notice of Claim

Applying Texas law, a federal district court has held that an insurer owed no duty to defend or indemnify its insured because the insured’s claim supplement to a renewal application did not constitute proper notice of a claim pursuant to the terms of the claims-made-and-reported policy.  Landmark Ins. Co. v. Lonergan Law Firm, PLLC, 2019 WL 2295358 (N.D. Tex. Mar. 8, 2019).

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Former Of Counsel Is Still “Insured Person” After Leaving Law Firm

Posted in Defense Costs

The Ohio Court of Appeals has held that an “of counsel” attorney was an “Insured Person” under his former law firm’s professional liability policy for purposes of a malpractice action involving allegations that occurred both before and after the attorney worked at the firm.  Gallagher Sharp, L.L.P. v. Miller Goler Faeges Lapine, L.L.P., 2019 WL 2319296 (Ohio Ct. App. May 30, 2019).

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