The Massachusetts Supreme Judicial Court has held that consent-to-settle clauses in professional liability policies that give the insured absolute discretion regarding settlement do not inherently conflict with the state’s unfair insurance settlement practices statute, Mass. G.L. ch. 176D § 3(9)(f).  Rawan v. Continental Casualty Company, 136 N.E.3d 327 (Mass. Dec. 16, 2019).  The case had attracted considerable attention from amici concerned about potential disruption of the professional liability insurance market in Massachusetts if such consent-to-settle clauses were deemed impermissible.

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The United States Court of Appeals for the Eighth Circuit, applying Federal procedural and Minnesota substantive law, affirmed a district court’s conclusion that insured corporate directors failed to carry their burden to establish that their insurer was responsible for 100% of the fees and costs incurred in connection with a suit against the directors, the corporation, and other parties.  Brand v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2019 WL 3850592 (8th Cir. Aug. 16, 2019).

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The United States District Court for the Eastern District of Louisiana, applying Louisiana law, has allowed an insured’s claim against a third party adjuster (TPA) to survive a motion to dismiss, where the insured’s principal support for the claim was its alleged “belief” that the contract between the insurer and the TPA (which defendants declined to provide to the insured) contained a provision stipulating that the contract was for the benefit of insureds.  Hammerman & Gainer, LLC v. Lexington Ins. Co., 2019 WL 2603637 (E.D. La. June 25, 2019).

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The United States District Court for the Western District of Washington, applying Washington law, has held that no Washington state public policy prevents an insurer from enforcing a defense cost recoupment provision.  Massachusetts Bay Ins. Co. v. Walflor Indus., 2019 WL 1651659 (W.D. Wash. Apr. 17, 2019).  The court resolved the issue based on precedent and saw no need to certify the question of the enforceability of such provisions to the Washington Supreme Court as the insured urged.

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The First Circuit, applying Massachusetts law, has held that an SEC investigation was a single claim first made when an insured received the formal order of investigation.  The court rejected the insureds’ attempt to split the investigation into various different claims based on the SEC’s subsequent subpoenas and enforcement action.  Biochemics, Inc. v. Axis Reinsurance Co., 2019 WL 2223125 (1st Cir. May 23, 2019).

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The United States District Court for the Eastern District of Pennsylvania, applying Pennsylvania law, found that an attorney “knew or should have known” he might get sued for (allegedly) botching a settlement term sheet where a worker’s compensation review board publicly criticized his handling of the settlement, even though his client did not appear angry at the time.  Zavodnick, Zavodnick & Lasky, LLC v. Nat’l Liab. & Fire Ins. Co., 2019 WL 1003157 (E.D. Pa. Mar. 1, 2019).  Because the insured attorney knew the relevant facts before his professional liability policy incepted, the district court granted the insurer’s motion for summary judgment that there was no coverage.

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A Nebraska state trial court, applying Nebraska law, has held that law enforcement liability coverage for malicious prosecution claims is triggered solely when an individual is charged, rejecting several alternate trigger theories put forward by the insured county.  Gage Cty., Neb. v. Neb. Intergovernmental Risk Mgmt. Ass’n, No. CI 17-0339 (Neb. Dist. Ct. Oct. 10, 2018).  In so holding, the court joined a majority of jurisdictions that have considered the issue.

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The United States Court of Appeals for the Eleventh Circuit, applying Georgia law, has held that mishandling of mail by an insured’s employee which led to noncompliance with a notice requirement in an insurance policy cannot, as a matter of law, excuse the noncompliance.  Johnson & Bryan, Inc. v. Utica Mut. Ins. Co., 2018 WL 3387525 (11th Cir. July 11, 2018).  In affirming the grant of the insurer’s motion to dismiss, the appeals court agreed that whether a delay was justified was not a question for a jury where the insured’s failure to meet the requirement resulted from its own negligence.

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The United States District Court for the Northern District of Texas, applying Texas law, has held that the directors and officers of a corporation in receivership were entitled to advancement of defense costs despite the receiver’s objections.  SEC v. Faulkner, 2018 WL 2761850 (N.D. Tex. June 6, 2018).  The court declined, however, to reallocate the insurer’s prior payments based on the objections of one insured who contended he had not received a sufficient share of the policy proceeds.

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