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The Illinois Court of Appeals, applying Illinois law, affirmed a trial court’s ruling that an insurer did not act in bad faith by denying coverage where there was a “bona fide” coverage dispute concerning an underlying lawsuit against the insured.  Nine Grp. II, LLC v. Liberty Int’l Underwriters, Inc., 2020 Ill. App. WL 190320 (Ill. Ct. App. Jun. 18, 2020).  The court held that the trial court had correctly refused to award certain costs to the insured under an Illinois statute applicable where an insurers’ conduct is “vexatious and unreasonable.”

Continue Reading Illinois Court of Appeals Rules Insurer Did Not Act in Bad Faith in Denying Coverage Where Claim Was Made Before Policy Period

The U.S. Court of Appeals for the Ninth Circuit, applying California law, affirmed a district court’s ruling that an insurer did not act in bad faith by failing to defend its insureds and settle a claim where there was a “genuine issue” as to the insurer’s liability.  Sharp v. Evanston Ins. Co., 2020 WL 2569694 (9th Cir. May 21, 2020).  However, the court concluded that the insurer’s denial of coverage was incorrect because various policy exclusions requiring malice and California Insurance Code Section 533 did not apply to bar coverage for the insureds’ alleged negligent mishandling of fiduciary funds.

Continue Reading Ninth Circuit Holds That Alleged Misappropriation of Client Funds Triggers E&O Coverage, But No Bad Faith Where Insurer’s Denial Was Reasonable

The Eastern District of New York, applying New York law, has held that alleged violations of the New York Labor Law (NYLL) and the Fair Labor Standards Act (FLSA) did not constitute covered “Wrongful Acts” as defined by the applicable employment practices liability insurance policy.  Sirob Imports Inc. v. Mount Vernon Fire Ins. Co., 2020 WL 1550587 (E.D.N.Y. Mar. 31, 2020).  However, the court concluded that such allegations were ultimately covered under the policy’s Fair Labor Standards Act Sub-Limit Endorsement because the two statutes were “similar.”

Continue Reading Alleged Violations of Fair Labor Standards Act and New York Labor Law Not “Wrongful Acts” Under Employment Practices Liability Policy

Applying Pennsylvania law, the United States District Court for the Eastern District of Pennsylvania has held that a shareholder demand letter, a derivative action and a shareholder lawsuit against the insured were not “related” because the alleged conduct took place at different times and involved different individuals.  Vito v. RSUI Indem. Co., 2020 WL 424592 (E.D. Pa. Jan. 27, 2020).

Continue Reading Claims Alleging Same Conduct Against Same Insured But Based on Different Specific Facts Not Related Under D&O Policy

In a win for Wiley Rein’s client, the United States District Court for the Eastern District of California applied an assault and battery exclusion to bar coverage for a negligence action arising from a stabbing that occurred at a concert promoted by the insured.  Certain Underwriters at Lloyd’s of London Subscribing to Policy No. EH7713140 v WorldOne Presents, LLC, 2019 WL 4747708 (E.D. Cal. Sept. 30, 2019).

Continue Reading Assault and Battery Exclusion Bars Coverage for Negligence Action Arising from Stabbing at Concert

A federal district court in Massachusetts has held that an insurer properly denied coverage for a claim against an insured church brought by another church that had broken away from the original entity because the breakaway church was not an “insured” under the original church’s policy.  Newton Covenant Church, et al. v. Great Am. Ins. Co., 2019 WL 3464705 (D. Mass. Jul. 31, 2019).

Continue Reading Breakaway Church Not an “Insured” Under Original Church’s D&O Policy

Applying California law, the United States Court of Appeals for the Sixth Circuit has held that an insurer properly denied coverage under consecutive claims-made-and-reported policies based on the insured’s failure to provide timely notice of a claim and the insured’s failure to disclose the pending claim in its application for coverage.  US HF Cellular Commc’ns., LLC v. Scottsdale Ins. Co., 2019 WL 2323802 (6th Cir. May 31, 2019).

Continue Reading No Coverage Because of Late Notice and Undisclosed Prior Knowledge of Claim

In a case in which Wiley Rein represented the insurer, a federal district court in Maine has held that an insurer had no duty to defend an enforcement action brought by the Securities and Exchange Commission (SEC) under a lawyers’ professional liability policy because none of the relief sought constituted “damages” as defined in the policy.  Marcus v. Allied World Ins. Co., No. 2:18-cv-253-DBH, 2019 WL 1810954, (D. Me. Apr. 23, 2019).  The court held that when sought by the SEC, disgorgement is properly characterized for insurance purposes as a penalty.  The court also held, however, that the policy’s investment advice exclusion did not apply to negate the insurer’s duty to defend a related securities fraud class action, but it rejected the insured’s argument that because the actions were “related claims,” the insurer’s duty to defend the securities lawsuit also obligated it to defend the SEC enforcement action.

Continue Reading Maine District Court Holds Insurer Has No Duty to Defend SEC Enforcement Action Because Disgorgement Constitutes a Penalty

The Ninth Circuit, applying California law, has held that an insurer improperly failed to defend its insured in connection with a lawsuit alleging that the insured engaged in an ongoing mortgage modification fraud scheme, because one count in the lawsuit did not require willful conduct and therefore was not necessarily uninsurable under California Insurance Code § 533. First One Lending Corp. v. Hartford Casualty Ins. Co., 2017 WL 1018305 (9th Cir. Mar. 5, 2019). The court further held that a financial services exclusion did not completely bar coverage because at least some allegations bore an “insufficient causal nexus with financial services,” thus triggering the insurer’s duty to defend.

Continue Reading Ninth Circuit Holds Section 533 and Financial Services Exclusion Do Not Bar Coverage for Alleged Mortgage Modification Scam