The United States District Court for the District of New Jersey, applying Delaware law, has held that an exclusion precluding coverage for misappropriation of trade secrets in a directors and officers liability policy barred coverage for a claim brought against the insured by a competitor alleging the negligent failure to supervise an employee.  Sprout Health, LLC v. RSUI Indem. Co., 2020 WL 2507776 (D.N.J. May 15, 2020).  The court determined that the negligence count was “directly contingent” on a showing that the insured’s employee misappropriated the competitor’s trade secrets.

Continue Reading Negligent Failure to Supervise Claim Barred by Misappropriation of Trade Secrets Exclusion

The United States District Court for the Middle District of Tennessee, applying Tennessee law, has held that a fraud exclusion in a professional liability policy did not bar coverage for a breach of contract claim arising out of a franchise agreement.  For Senior Help, LLC v. Westchester Fire Ins. Co., 2020 WL 1532292 (M.D. Tenn. Mar. 31, 2020).  The court determined that the separately awarded damages for the breach were based on the insured’s failure to meet contractual obligations, regardless of the insured’s otherwise fraudulent conduct.

Continue Reading Breach of Contract Claim Not Barred By Fraud Exclusion

The United States Court of Appeals for the Ninth Circuit, applying Washington law, has held that a district court erred in concluding that a demand letter and suit alleging the same wrongful act constituted a “single claim” where the applicable professional liability policy lacked a related claims provision.  Nat’l Union Fire Ins. Co. v. Zillow, Inc., 2020 WL 774366 (9th Cir. Feb. 18, 2020).  The court of appeals declined, however, to find that the absence of a related claims provision resolved the coverage issue and remanded for consideration of extrinsic evidence to determine the parties’ intent.

Continue Reading Ninth Circuit Holds Demand Letter and Suit Alleging Same Wrongful Acts Are Not Necessarily a Single Claim Where Policy Lacks Related Claims Provision

The United States District Court for the Southern District of New York, applying New Jersey law, has held that an insurer was estopped from denying coverage under a retroactivity provision in an engineering firm’s professional liability policy because the insurer’s reservation of rights, which was issued three years after accepting control of the insured’s defense, was untimely and defective.  RLI Ins. Co. v. AST Eng’g Corp., 2019 WL 7114986 (S.D.N.Y. Dec. 20, 2019).

Continue Reading Untimely Reservation of Rights Estops Insurer from Denying Coverage

The United States District Court for the Eastern District of Arkansas has held that no coverage exists under an errors and omissions policy for claims
Continue Reading CEO’s Abuse of Position is Not “Professional Services” and Negligence Claim for Return of Monies Does Not Seek “Damages”

The United States Court of Appeals for the Third Circuit, applying Delaware law, has held that a D&O policy’s Major Shareholder Exclusion, barring claims brought against the insured entity by a company owning five percent or more of the entity, was ambiguous as applied to a company acquiring one hundred percent of the insured’s stock after the policy period.  EMSI Acquisition, Inc. v. RSUI Indem. Co., 2019 WL 4511948 (3d Cir. Sept. 19, 2019).  The court also rejected the insurer’s argument that the insured’s settlement with the acquiring company did not constitute “Loss” under the policy.

Continue Reading Third Circuit Finds Major Shareholder Exclusion Ambiguous as Applied to Company Acquiring All of Insured’s Stock after Policy Period

The United States District Court for the District of Massachusetts, applying Massachusetts law, has held that a claim asserted against a law firm alleging the failure to transfer client files to former attorneys of the firm constituted a failure to render “Legal Services” as defined by a professional liability policy.  Governo v. Allied World Ins. Co., 2019 WL 4034810 (D. Mass. Aug. 27, 2019).  The court previously denied a motion to dismiss the case, which is described here.

Continue Reading Claim Against Law Firm Alleging Failure to Transfer Client Files Satisfies Policy’s Definition of “Legal Services”

In a win for Wiley Rein’s client, a California state court has held that an insurer correctly denied coverage under a D&O policy on the basis that the operative “claim” was made before the policy period.  CNEX Labs, Inc. v. Allied World Assurance Co. (U.S.), Inc., Case No. 18-CV-334461 (Cal. Super. Ct., Santa Clara Cty. Jul. 17, 2019).  The court found that a letter the insured received before the policy period “clearly suggested a lawsuit” against the insured and, in any event, the insured had also signed a standstill agreement before the policy’s inception, which separately constituted a “claim.”

Continue Reading Letter to Insured Asserting Right to Patent Applications Constitutes a Claim Made Prior to D&O Policy Period

The United States District Court for the Central District of California, applying California law, has held that an insurer lacked adequate information to deny coverage under an insured vs. insured exclusion in a D&O policy.  MJC Supply, LLC v. Scottsdale Ins. Co., 2019 WL 2372279 (C.D. Cal. June 4, 2019).  The court also held that the insureds’ notice under one policy constituted sufficient notice of the claim under two policies issued to a different named insured.  However, the court held that the insureds were not entitled to recover the difference between a judgment entered in their favor and a subsequent settlement of multiple lawsuits because the insureds did not sustain a “Loss.”

Continue Reading Insurer Lacked Conclusive Evidence of Insured’s Involvement to Trigger I v. I Exclusion; Insured’s Compromise of Favorable Judgment to Settle Multiple Suits Not a “Loss”

An Illinois appeals court has held that an insured had the right to select independent counsel under a duty to defend policy where the insured faced a substantial, uncovered punitive damages award.  See Xtreme Prot. Servs., LLC v. Steadfast Ins. Co., 2019 WL 1976482 (Ill. App. Ct. May 3, 2019).

Continue Reading Illinois Court Holds Insured is Entitled to Independent Counsel to Defend Uncovered Punitive Damages Claim