A Louisiana intermediate court of appeals has affirmed a district court’s holding that the insurance policies at issue covered only those wrongful acts that occurred after the dates the policies were issued and that a letter from the U.S. Department of Labor stating that it was conducting an investigation and attaching a subpoena constituted a “claim” that was required to be reported during the policy period in which it was made. Bilyeu v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2015 WL 5714557 (La. Ct. App. Sept. 30, 2015).
The plaintiffs were trustees and shareholders in their company’s employee stock ownership plans. They approved, as trustees on behalf of the plan, the sale of their shares to the plan in three transactions, the last of which was in July 2004. After an acquisition, the company’s new owners purchased claims-made-and-reported fiduciary liability and D&O liability policies beginning in July 2005. The company also purchased excess coverage on the fiduciary policy beginning in October 2006 and on the D&O policy beginning in December 2007.
The plaintiffs received a letter from the Department of Labor in September 2007 stating that it was conducting an investigation and attaching a subpoena seeking documents related to the company and the plans. The Department asked the plaintiffs to sign tolling agreements in April 2008, four months after the end of the 2006-07 policy period. After the plaintiffs tendered the claim, the primary and excess insurers denied coverage. The plaintiffs then filed a declaratory judgment action against both insurers, and the district court granted summary judgment for the insurers.
The court of appeals affirmed. The court held that a provision in the fiduciary policy barring coverage for wrongful acts committed or allegedly committed by an insured before the time that insured became an insured and before a sponsor organization became a sponsor organization applied because the claim arose from wrongful acts allegedly committed before the plaintiffs’ company was acquired. The court also held that an ERISA exclusion in the D&O policy barred coverage, as did an exclusion for administrative proceedings or regulatory investigations pending before the continuity date where the insured had notice of the investigation or proceeding. The continuity date of the 2007-08 policy was in December 2007, after the Department of Labor letters and subpoenas.
The court further held that the subpoena constituted a claim under the fiduciary policy, which defined claim to include “any fact-finding investigation by the U.S. Department of Labor.” Because the claim was made in September 2007, during the 2006-07 policy period, but not reported until four months after that policy expired, it was also not a claim made and reported during a single policy period.