No Coverage for Claim First Made and Reported After Policy Expired
A Louisiana federal district court has held that a claims-made-and-reported professional liability policy did not provide coverage for a claim first made and reported years after the policy expired. Sistrunk v. Haddox, 2021 WL 1723545 (W.D. La. Apr. 30, 2021).
A former investment advisor’s clients filed suit in April 2018 against him and his investment firm for allegedly churning their accounts and other fraudulent activity. The investment advisor and his firm were insured under a claims-made professional liability policy that expired on July 1, 2015.
The clients amended their complaint to add the professional liability insurer as a defendant solely in its capacity as the insurer of the investment advisor and his firm. The court granted the insurer’s motion for summary judgment, holding that the insurer had no duty to defend or indemnify the investment advisor or his firm because the underlying claim was neither made nor reported during the applicable policy period.
In so holding, the court rejected the claimants’ argument that the insurer had notice of the underlying claims because the Louisiana Department of Insurance had initiated administrative proceedings against the investment advisor for similar misconduct related to other clients because the claimants did not provide competent summary judgment evidence to support this conclusory allegation.
The court also rejected the claimants’ argument that the investment advisor’s knowledge of the claim may be imputed to its insurer, finding no legal support for such an assertion.
Finally, the court held that the insurer’s failure to address the policy’s extended reporting period did not preclude summary judgment in its favor because the claimants had not presented any evidence that the extended reporting period would apply and therefore failed to meet their burden of establishing a dispute of material fact.