Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

“Capacity” Exclusion Bars Coverage for Two Directors for Claims of Wrongdoing and Fiduciary Breaches Outside Their Insured Capacity

Posted in Uncategorized

Applying Delaware law, a Delaware state court has held that a policy’s “capacity” exclusion precluded coverage for two directors because the claims filed against those directors would not have been established “but for” the directors’ alleged misconduct related to third-party investment entities the directors formed to control the insured company.   Goggin v. National Union Fire Ins. Co. of Pittsburgh, 2018 WL 62661195 (Del. Sup. Ct. Nov. 30, 2018).

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Excess Insurer Not Bound by Primary Insurer’s Payment of Uninsurable Disgorgement Settlement

Posted in Excess insurance/exhaustion, Loss

Applying California law, the United States District Court for the Central District of California has held that a follow-form excess insurer was not bound by the primary insurer’s decision to pay a settlement because the settlement constituted uninsurable disgorgement that did not trigger the excess insurer’s policy.  Axis Reinsurance Co. v. Northrop Grumman Corp., No. 2:17-CV-8660 (C.D. Cal Nov. 16, 2018).

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“Professional Services” Exclusion Bars Coverage for Law Enforcement Investigations

Posted in Professional Services

A Nebraska state court has held that the “professional services” exclusion in the insured municipality’s CGL policy barred coverage for the wrongful conviction and civil rights actions brought against the municipality because its deputy sheriffs and psychologist performed “professional services” when they investigated the underlying crime. Gage County, Neb. v. Employers Mut. Cas. Co., No. CI 17-1822, (Neb. Dist. Ct., Lancaster County, Nov. 1, 2018).

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Attorneys’ Fees Awarded Pursuant to Statute Are Not “Damages”

Posted in Loss

An Ohio federal court has held that attorneys’ fees awarded under a fee-shifting provision contained in the Individuals with Disabilities Education Act (IDEA) do not constitute covered “damages” under an insurance policy.  Wesco Ins. Co. v. Roderick Linton Belfance LLP, 2018 WL 4510093 (N.D. Ohio Sept. 19, 2018).

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Fourth Circuit Affirms that All Claims Arising from Negligent Design of Two, Nearly Identical Bridges Constitute “Related Claims”

Posted in Related Claims and associated exclusions

In a win for an insurer represented by Wiley Rein, the United States Court of Appeals for the Fourth Circuit, applying North Carolina law, affirmed that all claims against an engineering firm for the negligent design of two bridges constituted “related claims,” subject to a single limit of liability.  Stewart Eng’g, Inc. v. Continental Cas. Co., No. 18-1386 (4th Cir. Nov. 7, 2018).  A summary of the district court’s opinion can be found here.

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Two Class Action Lawsuits Are “Related,” Despite Different Plaintiffs and Different Time Periods

Posted in Related Claims and associated exclusions

Applying California and Virginia law, a federal district court has held that two class action lawsuits alleging similar wrongful conduct, but brought by different classes for different class periods, were nonetheless related and constituted a single claim.  Northrop Grumman Corp. v. AXIS Reinsurance Co., 2018 WL 5314918 (D. Del. Oct. 26, 2018).

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Contract Exclusion Precludes Coverage for Breach of Health Management Service Provider Agreement

Posted in Breach of Contract

A Texas federal district court, applying Texas law, has held that a contract exclusion in an errors and omissions policy precluded coverage for a suit alleging that the insured breached a contract and committed related misconduct in connection with a contract for providing health management services to a client.  Conifer Health Solutions, LLC v. QBE Specialty Ins. Co., 2018 WL 4620613 (E.D. Texas Sept. 26, 2018).

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Nebraska Court Rules Injury from Malicious Prosecution Occurs at Time of Charging

Posted in Wrongful Conviction

A Nebraska state trial court, applying Nebraska law, has held that law enforcement liability coverage for malicious prosecution claims is triggered solely when an individual is charged, rejecting several alternate trigger theories put forward by the insured county.  Gage Cty., Neb. v. Neb. Intergovernmental Risk Mgmt. Ass’n, No. CI 17-0339 (Neb. Dist. Ct. Oct. 10, 2018).  In so holding, the court joined a majority of jurisdictions that have considered the issue.

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Monetary Loss from Fraudulent Email Scheme Triggers Coverage Under Business Owners’ Policy

Posted in Cyber Policies and Issues

A Montana federal district court has ruled that a false pretense exclusion did not preclude coverage under a crime policy for monetary losses resulting from a fraudulent email scheme, reasoning that the exclusion was ambiguous.  Ad Advert. Design, Inc. v. Sentinel Ins. Co., 2018 WL 4621744 (D. Mont. Sept. 26, 2018).  The court also held that further briefing was necessary to determine the amount recoverable under the policy.

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