No Duty to Defend Lawsuit Alleging Remuneration to which Insured was Not Legally Entitled

The United States District Court for the Middle District of Florida, applying Florida law, has held that a professional liability insurer had no duty to defend a lawsuit alleging that the insured, a closing agent, wrongfully collected closing costs to which it was not entitled.  RLI Ins. Co. v. Coastline Title of Pinellas, LLC, 2022 WL 686274 (M.D. Fla. Mar. 8, 2022).  Notably, the pertinent exclusion did not have an “in fact” or final adjudication requirement.

The buyer of a property sued the closing agent for allegedly charging closing costs to the buyer instead of the seller in violation of the purchase agreement.  In a putative class action, the buyer alleged that he and putative class members were damaged by paying fees “they should not have paid” under the purchase agreement.  The lawsuit was dismissed with prejudice.

In a declaratory judgment action brought by the insured’s liability carrier, the court considered whether the insurer owed a duty to defend the insured against the buyer’s lawsuit under an E&O policy.  Among other grounds, the insurer argued that no coverage existed under the policy’s personal profit/advantage exclusion, which bars coverage for claims arising “out of, directly or indirectly resulting from or in consequence of or in any way involving . . . the gaining by [the insured] of any personal profit, remuneration or advantage to which [the insured] was not legally entitled.”

The court held that the exclusion applied because the lawsuit concerned the collection of fees by the insured in the absence of a contractual right to do so, regardless whether the claimant alleged illegal or criminal conduct.  The court rejected the insured’s argument that the court was required to determine whether the insured actually lacked a legal entitlement to the fees; it held that “Florida law is clear that an insurer’s duty to defend depends on the complaint” and “not its merits.”  Finally, the court held that the exclusion was broad enough to encompass and bar coverage for the entire action, noting that the underlying case was about the wrongful collection of fees, and the clause, “or in any way involving” in the exclusion is a “mop-up clause” “intended to exclude anything not already excluded by the other clauses.”

Categories

Practice Areas

Wiley Executive Summary

Sign up for updates

Wiley Rein LLP Cookie Preference Center

Your Privacy

When you visit our website, we use cookies on your browser to collect information. The information collected might relate to you, your preferences, or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. For more information about how we use Cookies, please see our Privacy Policy.

Strictly Necessary Cookies

Always Active

Necessary cookies enable core functionality such as security, network management, and accessibility. These cookies may only be disabled by changing your browser settings, but this may affect how the website functions.

Functional Cookies

Always Active

Some functions of the site require remembering user choices, for example your cookie preference, or keyword search highlighting. These do not store any personal information.

Form Submissions

Always Active

When submitting your data, for example on a contact form or event registration, a cookie might be used to monitor the state of your submission across pages.

Performance Cookies

Performance cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.

Powered by Firmseek