Breach of Contract

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The Supreme Court of Vermont has held there is no coverage for breach of contract and intentional torts under an errors and omissions (E&O) liability policy, where all counts of the complaint rested on allegations that the insured used misrepresentations and falsehoods to undermine a competitor, which did not fall within the definition of “professional services” under the policy.  Integrated Tech., Inc. v. Crum & Forster Specialty, 2019 WL 3759175 (Vt. Aug. 9, 2019).
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Applying Texas law, the Fifth Circuit has held that a D&O policy’s securities exclusion barred coverage for a suit for misrepresentation and misconduct that arose out of a sale of equity interests.  Gleason v. Markel Am. Ins. Co., 2019 WL 3437642 at *1 (5th Cir. July 30, 2019).
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The United States District Court for the Central District of California, applying California law, has held that there is no coverage for a False Claims Act settlement where the insured company’s alleged wrongful acts took place outside the policy period and were independently barred from coverage by a contract exclusion, prior acts exclusion and regulatory exclusion. Office Depot Inc. v. AIG Specialty Insurance Co. No. 2:15-cv-02416 (C.D. Cal. June 21, 2019).
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The United States District Court for the District of Nevada, applying Nevada law, has held that the court’s prior favorable coverage determination was evidence that an insurer did not act in bad faith when refusing to defend or provide coverage under a policy.  My Left Foot Children’s Therapy, LLC v. Certain Underwriters at Lloyd’s London, 2019 WL 1810956 (D. Nev. Apr. 23, 2019).
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The United States District Court for the Eastern District of California, applying California law, has held that no coverage is available for a demand for payment in excess of agreed purchase orders based on an exclusion barring coverage for loss “as a result of” a claim “for any actual or alleged obligation under . . . any oral or written contract or agreement.”  Cross Check Servs., LLC v. Old Republic Ins. Co., 2019 WL 1429336 (E.D. Cal. Mar. 29, 2019).
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The U.S. District Court for the Southern District of California, applying California law, has held that neither fiduciary nor employment benefits liability coverage applied to claims seeking benefits under an insured company’s employee benefits plan because the company’s liability arose, not from negligent acts or breaches of fiduciary duty, but from its contractual obligation to provide employees with benefit plans.  Erickson-Hall Constr. Co. v. Scottsdale Ins. Co., 2019 WL 719204 (S.D. Cal. Feb. 20, 2019).
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Applying North Dakota law, the United States Court of Appeals for the Eighth Circuit has held that an insurance policy issued to a parent company and several of its commonly owned affiliates did not provide coverage for a lawsuit against the owner of the companies and one of the insured subsidiaries for breach of a noncompetition covenant in an asset purchase agreement.  Mau v. Twin City Fire Ins. Co., — F.3d –, 2018 WL 6379281 (8th Cir. Dec. 6, 2018).
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A Texas federal district court, applying Texas law, has held that a contract exclusion in an errors and omissions policy precluded coverage for a suit alleging that the insured breached a contract and committed related misconduct in connection with a contract for providing health management services to a client.  Conifer Health Solutions, LLC v. QBE Specialty Ins. Co., 2018 WL 4620613 (E.D. Texas Sept. 26, 2018).
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Applying Wisconsin law, the United States District Court for the Eastern District of Wisconsin has held that a contract exclusion in a multi-line liability policy barred coverage for an action solely alleging breach of contract.  Crum & Forster Specialty Ins. Co. v. GHD Inc., 2018 WL 3304631 (E.D. Wisc. Jul. 5, 2018).  The court also held that the broad language in the exclusion did not render coverage “illusory” such that the reformation of the policy would be warranted.
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Applying North Dakota law, a federal district court has held that a contract exclusion contained in a directors and officers liability policy precludes coverage for claims arising from a non-compete clause in an asset purchase agreement.  Mau v. Twin City Fire Ins. Co., 2017 WL 4479731 (D.N.D. Oct. 3, 2017).  The court also held that the insurer had no duty to defend an officer against claims arising from the alleged violation of the non-compete agreement because the officer did not commit the acts underlying the violation in his capacity as officer of a defined subsidiary of the insured entity.
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