In a win for Wiley’s client, a Texas appellate court held that a D&O policy did not cover Wells notices issued by the United States Securities and Exchange Commission (SEC) or its enforcement action because they involved the same series of related facts as the SEC’s original investigation and shareholder litigation initiated before the claims-made policy period. UniPixel, Inc. v. XL Specialty Ins. Co., 2020 WL 1528098 (Tex. App. Mar. 31, 2020).
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A federal district court, applying South Dakota law, has held that a contractual liability exclusion barred coverage for breach of contract damages, including an award of consequential damages in the form of lost profits. Employers Mut. Cas. Co. v. Brant Lake Sanitary Dist., 2020 WL 1275294 (D.S.D. Mar. 17, 2020).
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Applying Illinois law, the United States District Court for the Central District of Illinois has held that an insurer had no duty to cover defense costs for affirmative claims that involved, but were not brought by, its insured. Marquis Energy LLC v. Federal Ins. Co., 2020 WL 853503 (C.D. Ill. Feb. 20, 2020).
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On remand from the Tenth Circuit, the United States District Court for the District of Colorado, applying Colorado law, has held that an insurer failed to satisfy its burden of proof on allocation where it neglected to ensure that an arbitration award was sufficiently detailed. Rockhill Ins. Co. v. CFI-Global Fisheries Mgmt., 2020 WL 996882 (D. Colo. Mar. 2, 2020). As a result, the District Court entered judgment against the insurer for the full amount of the arbitration award.
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The United States District Court for the Northern District of Illinois, applying Illinois law, has held that there is no coverage under a D&O policy where the insured did not timely report a declaratory judgment lawsuit and instead sought coverage only after an amended complaint was filed in the successive policy period. Hanover Ins. Co. v. R.W. Dunteman Co., 2020 WL 1275002 (N.D. Ill. Mar. 17, 2020). The court held that the complaints were part of a single “claim” and not separate “claims” even though the amended complaint added insured defendants and theories of liability.
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The United States District Court for the Northern District of Mississippi, applying Mississippi law, held that only a “Social Engineering Fraud” provision responded to a loss resulting when an unknown third-party, posing as the insured’s vendor, sent fraudulent banking information and the insured issued payments based on that information. Miss. Silicon Holdings, LLC v. AXIS Ins. Co., 2020 WL 868874 (N.D. Miss. Feb. 21, 2020). The court, holding that the policy provisions were unambiguous, rejected the insured’s argument that the policy’s “Computer Transfer Fraud” and “Funds Transfer Fraud” provisions should apply.
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The United States Court of Appeals for the First Circuit, applying Massachusetts law, has held that an SEC investigation of the insured company constituted a claim “first made” when the SEC’s formal order of investigation issued. Jalbert v. Zurich Servs. Corp., No. 18-2244, 2020 WL 1322787 (1st Cir. March 20, 2020). As a result, two excess insurers whose policies incepted after the formal order entered did not owe coverage. Wiley represented one of the prevailing carriers.
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An Illinois intermediate appellate court, applying Illinois law, has held that an insurer must defend an attorney against a malpractice claim seeking damages for alleged negligence in the amount of fees paid to the attorney, concluding that the “legal fees” exclusion in the policy did not apply because the injury suffered by the claimant was not a consequence of the lawyer’s fees. Illinois State Bar Ass’n Mut. Ins. Co. v. Canulli, No. 1-19-0142 (Ill. App. Ct. March 13, 2020).
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The Fifth Circuit, applying Louisiana law, has held that coverage was unavailable for an $11.7 million settlement with the government because the settlement did not relate to “professional services” provided by the insured to its “client.” IberiaBank Corp. v. Illinois Union Ins. Co., 2020 WL 1284958 (5th Cir. Mar. 18, 2020).
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The Delaware Supreme Court today handed securities defendants a major victory, concluding that forum selection provisions in Delaware companies’ registration statements that required that certain securities litigation be brought solely in federal district court were facially valid. Salzberg, et al. v. Sciabacucchi, Case No. 314 2019 (Del. Mar. 18, 2020). In doing so, it overturned the Delaware Chancery Court’s previous conclusion that such provisions were unenforceable to the extent that they required any claim under the Securities Act of 1933 (the 1933 Act) to be filed exclusively in federal court.
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