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).
Collateral Estoppel Bars Relitigation of Issues Bearing on Prior Knowledge of Potential Claim
Posted in Prior Knowledge/Warranty ExclusionAn Alaska federal court has held that a state court’s finding in the underlying litigation that an insured should have known of a potential claim by a date before inception of a policy collaterally estopped the insured from relitigating that issue in a coverage dispute concerning a prior knowledge provision. ALPS Prop. & Cas. Ins. Co. v. Merdes & Merdes, P.C., 2018 WL 1278422 (D. Alaska Mar. 12, 2018).
Multiple Claims Arising from Employee’s Termination Deemed Related
Posted in Related Claims and associated exclusionsAn Illinois federal court has held that multiple claims arising from the termination of a single employee arose from the same “Interrelated Wrongful Acts” and were deemed a single claim made at the time of the first such claim. Twin City Fire Ins. Co. v. Permatron Corp., 2018 WL 1565599 (N.D. Ill. Mar. 30, 2018).
Fraudulent Voucher Redemption Scheme Perpetrated by Phone Involves “Use of Computer” but Does Not “Directly Result” in Covered Loss
Posted in Cyber Policies and IssuesThe United States Court of Appeals for the Eleventh Circuit, applying Georgia law, has affirmed a district court’s ruling that a fraudulent scheme using telephones to exploit a computer coding vulnerability in the insured’s system that ultimately led to a loss was not covered under a computer fraud provision in a commercial crime policy. Interactive Commc’ns Int’l v. Great Am. Ins. Co., 2018 WL 2149769 (11th Cir. May 10, 2018). Unlike the district court, however, the appellate court held that the scheme involved the “use of a[] computer.” A summary of the district court opinion can be found here.
No Coverage Due to Material Misrepresentation on Insurance Application Based on Totality of Circumstances
Posted in Prior Knowledge/Warranty Exclusion, RescissionAn intermediate New Jersey appellate court has affirmed a trial court’s decision concluding that no coverage was available for a legal malpractice claim because the insured law firm made material misrepresentations on its insurance renewal application in failing to disclose the insured’s knowledge of circumstances that could result in a professional liability claim. Ironshore Indem., Inc. v. Pappas & Wolf, LLC, 2018 WL 2012009 (N.J. Super. Ct. App. Div. May 1, 2018).
Four Claims Regarding Same Appraisal Methodology Are Covered but Related and Therefore Confined to One Policy Year
Posted in Bad faith/duty to settle, Prior Knowledge/Warranty Exclusion, Related Claims and associated exclusionsThe United States District Court for the Northern District of Illinois, applying New York law, has held that a real estate service firm’s professional liability insurance policies cover four claims regarding the firm’s allegedly improper use of a certain appraisal methodology because neither the prior knowledge exclusion nor an exclusion regarding investment activity applied. Cushman & Wakefield, Inc. v. Illinois Nat’l Ins. Co., 2018 WL 1898339 (Apr. 20, 2018). In doing so, the court determined that the four claims were related and thus all properly treated under the same policy period and, therefore, the primary insurer for that policy period is entitled to recoup all amounts paid in excess of its limit for that policy. The court also granted summary judgment for the first excess insurer on the insured’s bad faith claim.
Computer Fraud Claim Triggers Insurer’s Duty to Pay Defense Costs Despite “Gravamen” of Litigation Involving Excluded Misappropriation Claims
Posted in AllocationThe Superior Court of the State of Delaware, applying Delaware and Kansas law, has held that an insurer owed a duty to pay defense costs under a directors and officers liability policy for a lawsuit primarily alleging the misappropriation of trade secrets, despite a misappropriation exclusion, on the basis that the underlying complaint asserted a claim alleging computer fraud not excluded by the policy. WoodSpring Hotels LLC v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, Case No. N17C-09-274 (Del. Super. Ct., May 2, 2018).
Two Exclusions Bar Coverage under Cyber Policy for TCPA Claim
Posted in Cyber Policies and IssuesA New York federal district court has ruled that two exclusions in a cyber risk policy barred coverage for a claim alleging violations of the Telephone Consumer Protection Act (TCPA). Flores v. ACE American Ins. Co., No. 17-cv-8674 (S.D.N.Y. Apr. 30, 2018). Among other rulings, the court held that the TCPA was not a “Privacy Regulation” as defined in the operative policy because the TCPA does not regulate the control or use of personally identifiable information.
Insured Fails to State a Claim for Bad Faith and Cannot Pursue Extra-Contractual Damages Without Independent Tort
Posted in Bad faith/duty to settleApplying Minnesota law, the United States District Court for the District of Minnesota has held that, while an insured’s breach of contract claim was adequately pled, the insured could not pursue a cause of action for bad faith or seek relief in the form of extra-contractual damages. Lunde v. Cincinnati Ins. Co., 2018 WL 1972475 (D. Minn. Apr. 26, 2018).
Insurer Cannot Invoke Arbitration Clause Following Breach of Duty to Defend
Posted in ADR ClauseA Montana federal district court has held that an insurer was estopped from invoking a policy’s arbitration clause where the insurer had breached its duty to defend by improperly relying on a creditor exclusion in the policy. Am. Trucking & Transp. Ins. Co. v. Nelson, 2018 WL 1902700 (D. Mont. Apr. 20, 2018).