Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Insureds Entitled to Advancement of Defense Costs But Not Equitable Reallocation of Policy Proceeds

Posted in Defense Costs

The United States District Court for the Northern District of Texas, applying Texas law, has held that the directors and officers of a corporation in receivership were entitled to advancement of defense costs despite the receiver’s objections.  SEC v. Faulkner, 2018 WL 2761850 (N.D. Tex. June 6, 2018).  The court declined, however, to reallocate the insurer’s prior payments based on the objections of one insured who contended he had not received a sufficient share of the policy proceeds.

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Failure of Insured to Provide Timely Notice Under Claims-Made Policy Bars Suit Against Insurer of Bankrupt Insured

Posted in Bankruptcy, Notice of Claim

The United States Court of Appeals for the Third Circuit, applying Pennsylvania law, has held that an insured’s failure to provide timely notice of a claim under a claims-made policy barred coverage for that suit.  Frazier v. Exide Techs., No. 17-2399, 2018 WL 2727396 (3d Cir. June 6, 2018).

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Professional Services Exclusion Precludes Coverage for False Claims Act Lawsuit

Posted in Professional Services

Applying California law, the United States Court of Appeals for the Ninth Circuit has held that a professional services exclusion in a D&O policy barred coverage for an underlying lawsuit alleging violations of the federal False Claims Act.  Hotchalk, Inc. v. Scottsdale Ins. Co., 2018 WL 2473474 (9th Cir. June 4, 2018).

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Court Holds Prior Acts Exclusion Bars Coverage for Securities Lawsuit

Posted in Prior Knowledge/Warranty Exclusion

In a win for Wiley Rein’s client, the United States District Court for the Central District of California has held that a prior acts exclusion in a management liability policy bars coverage for a securities lawsuit brought by shareholders alleging misrepresentations before the prior acts date and continuing after the prior acts date.  Jayhawk Private Equity Fund II LP v. Liberty Ins. Underwriters, Inc., No. 17-cv-5523 (C.D. Cal. June 7, 2018).

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Claim Arising from Sale of Dental Practice Does Not Involve Professional Services

Posted in Professional Services

An Illinois federal district court has held that a claim alleging that a dentist overstated the value of his dental practice to increase the practice’s sale price is not a claim for “professional services” under the dentist’s professional liability policy.  Medical Protective Co. v. Fabricius, 2018 WL 2561009 (N.D. Ill. June 4, 2018).

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Court Holds that Government-Issued Subpoena Constitutes a Claim

Posted in “Claim”, Excess insurance/exhaustion

The United States District Court for the Northern District of Illinois, applying Illinois law, has held that a government-issued subpoena constituted a Claim under the directors and officers liability policies at issue, thus allowing a company’s coverage action to proceed against its primary and excess insurers.  Astellas US Holding, Inc. v. Starr Indem. & Liab. Co., 2018 WL 2431969 (N.D. Ill. May 30, 2018).  The court also held that the company’s excess insurers were appropriate parties to the action even though the underlying limits had not been exhausted.

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Faulty Workmanship Exclusion in Professional Liability Policy Bars Coverage for Faulty Design and Construction

Posted in Professional Services

The United States District Court for the District of Colorado, applying Colorado law, has held that an arbitration award for faulty design and construction was potentially recoverable as “damages” under a professional liability policy, but coverage was ultimately precluded by an unambiguous and broad “Faulty Workmanship” exclusion.  Rockhill Ins. Co. v. CFI-Global Fisheries Mgmt., 2018 WL 1886805 (D. Colo. 2018).

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Insurer Has No Duty to Defend Law Firm Against Allegations of Overbilling

Posted in Professional Services

The United States Court of Appeals for the Tenth Circuit, applying Colorado law, has affirmed that an insurer has no duty to defend a law firm against allegations of overbilling.  Evanston Ins. Co. v. Law Office of Michael P. Medved, P.C., 2018 WL 2306871 (10th Cir. May 22, 2018).  In so doing, the court recognized that billing activities are not “professional services” as defined in professional liability policies and that claims of overbilling do not arise from the provision of professional services.

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Ninth Circuit Holds Section 533 ‘Willful Acts’ Exclusion Does Not Bar Coverage for Alleged Violations of California False Claims Act

Posted in Public Policy prohibition on insurance

The United States Court of Appeals for the Ninth Circuit has held that Section 533 of the California Insurance Code does not bar coverage for claims brought under the California False Claims Act (the “CFCA”).  Office Depot, Inc. v. AIG Specialty Ins. Co., 2018 WL 2296036 (9th Cir. May 21, 2018).

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Tax Advice Was Not “Professional Services” Under Life Insurance Agents E&O Policy

Posted in Professional Services

A California intermediate court of appeals, applying California law, has held that a life insurance agents E&O policy did not cover a suit by a financial advisor’s clients regarding advice provided to the clients to limit their tax liability.  Lindsey Fin., Inc. v. Am. Auto. Ins. Co., 2018 WL 2111979 (Cal. Ct. App. May 8, 2018).

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