Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Defense Costs

Subscribe to Defense Costs RSS Feed

Insurer Did Not Breach Any Duty to Insured Where Payment of Defense Costs Exhausted Policy Limit

Posted in Defense Costs
The United States District Court for the Western District of New York, applying New York law, held that an insurer did not owe a fiduciary duty to its insured when the insured was represented by independent defense counsel, nor did the insurer breach its contractual duties to its insured in paying defense costs, which ultimately… Continue Reading

California Court Holds that “Wage and Hour Law” Limitations on Coverage Unambiguously Applied to Labor Code Violations

Posted in Defense Costs, Exclusions, Wage and Hour Coverage
Applying California law, a federal district court has held that a wage and hour endorsement limited the coverage available for two class action lawsuits to $25,000 in defense costs.  Houston Cas. Co v. Great American Chicken Corp., Inc., 2019 WL 3886484 (C.D. Cal. Aug. 12, 2019).… Continue Reading

Former Of Counsel Is Still “Insured Person” After Leaving Law Firm

Posted in Defense Costs
The Ohio Court of Appeals has held that an “of counsel” attorney was an “Insured Person” under his former law firm’s professional liability policy for purposes of a malpractice action involving allegations that occurred both before and after the attorney worked at the firm.  Gallagher Sharp, L.L.P. v. Miller Goler Faeges Lapine, L.L.P., 2019 WL… Continue Reading

Defense Cost Recoupment Provisions Enforceable Under Washington Law

Posted in Defense Costs
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… Continue Reading

Insured Entitled to Independent Counsel Where Coverage Action Turns on Facts That Could be Used to Establish Underlying Liability

Posted in Defense Costs, Prior Knowledge/Warranty Exclusion
The United States District Court for the Central District of California, applying California law, has held that an insured is entitled to independent counsel where an insurer’s coverage action turns on facts that overlap with facts that might establish an insured’s liability in the underlying lawsuit.  Aspen Am. Ins. Co. v. Ou, 2019 WL 1950293… Continue Reading

Contract Exclusion Bars Coverage for Demand for Cost-Overrun Payment

Posted in Breach of Contract, Defense Costs, Wrongful Act
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 . .… Continue Reading

Claims Based on Similar Wrongdoing Deemed “Related” Despite Geographic Differences of Class Composition

Posted in Defense Costs, Related Claims and associated exclusions
A Utah federal district court has held that claims based on similar acts of wrongdoing were barred by a prior notice exclusion despite geographic differences among the putative class definitions.  Starr Indem. & Liab. Co. v. Monavie, Inc., 2019 WL 1227930 (D. Utah Mar. 5, 2019).  The court also ruled that the insurer was entitled… Continue Reading

No Duty to Defend or Indemnify Due to Securities Exclusion, Consumer Protection Law Exclusion, and Investment Performance Exclusion, but Insurer Cannot Recoup Defense Costs

Posted in Defense Costs
Applying Wisconsin law, a federal district court has held that an insurer owed no duty to defend or indemnify its insureds because exclusions for claims arising from violations of securities laws or consumer protection laws, and from the failure of investments to perform as desired, barred coverage.  Hanover Ins. Co. v. BMOC, Inc., 2019 WL… Continue Reading

Fact Disputes Preclude Summary Judgment Over Insurer’s Failure to Provide Immediate Defense

Posted in Defense Costs
The United States District Court for the Central District of California, applying California law, has held that an insurer was not entitled to summary judgment in full, finding that triable issues of fact remained regarding the insurer’s alleged failure to provide an immediate defense to the insured corporation and to assign separate counsel for an… Continue Reading

Court Finds Insurer Entitled to Recoupment, Declines to Follow ALI Restatement on the Law of Liability Insurance

Posted in Defense Costs, Loss
A Delaware trial court, applying Tennessee law, has ruled that an insurer was entitled to recover defense costs it advanced under a reservation of rights for a non-covered claim.  Catlin Specialty Ins. Co. v. CBL & Assocs. Props., 2018 WL 3805868 (Del. Super. Ct. Aug. 9, 2018).  In so doing, the court cited the American… Continue Reading

Insureds Entitled to Advancement of Defense Costs But Not Equitable Reallocation of Policy Proceeds

Posted in Defense Costs
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… Continue Reading

DOJ Investigation Constitutes Seven “Claims,” But Specific Litigation and Pending-Or-Prior Litigation Exclusions Bar Coverage

Posted in “Claim”, Defense Costs
The United States Circuit Court of Appeals for the Ninth Circuit, applying California law, has held that an insurer owed no duty to reimburse the insured’s costs of responding to a governmental investigation.  Millennium Labs., Inc. v. Allied World Assurance Co., Inc., 2018 WL 1179601 (9th Cir. Mar. 7, 2018).  While the court held that… Continue Reading

Lawsuit Filed by Company Against Former Officer Does Not Trigger Employment Practices Liability Coverage

Posted in Defense Costs, Notice of Claim, Wrongful Act
The United States District Court for the District of Oklahoma has held that a lawsuit filed by a company against its former president did not implicate its policy’s Employment Practices Liability coverage because the lawsuit was not filed by or on behalf of an employee, as required by the policy.  Statton v. Allied World Specialty… Continue Reading

Insured’s Non-Covered Counterclaim Does Not Create Conflict Entitling It to Select Independent Counsel

Posted in Defense Costs
The United States Court of Appeals for the First Circuit, applying Massachusetts law, has held that an employment practices liability insurer was not obligated to pay for independent counsel based on the insured’s prosecution of a counterclaim that was not covered under the policy.  Mount Vernon Fire Ins. Co. v. VisionAid, Inc., 2017 WL 5476323… Continue Reading

Contract Exclusion Bars Coverage for Claims Arising from Asset Purchase Agreement’s Non-Compete Clause

Posted in Breach of Contract, Defense Costs, Wrongful Act
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… Continue Reading

Insurer Has No Duty to Defend or Indemnify Insured for Action Alleging Solely Intentional Wrongdoing

Posted in Defense Costs
A Delaware superior court, applying Tennessee law, has held that a professional liability insurer is entitled to judgment that it has no duty to defend or indemnify its insured because the underlying action against the insured alleged only intentional wrongdoing. Catlin Spec. Ins. Co. v. CBL & Assocs. Properties, Inc., 2017 WL 4173511 (Del. Super.… Continue Reading

No Coverage for $3.5 Million in Pre-Notice Defense Expenses Where Notice Was a Year Late

Posted in Consent to settle/incur defense costs, Defense Costs, Notice of Claim
Applying Delaware law, a federal court in New York has held that where an insured waited more than a year to report a lawsuit to its insurer and during that period incurred more $3.5 million in legal fees, the insurer had no obligation to pay pre-tender defense costs, without regard to whether the insurer could… Continue Reading

Failure to Defend and Bring Timely Coverage Action Precludes Insurer from Raising Policy Defenses Under Illinois Law

Posted in Defense Costs, Dishonesty Exclusion, Prior Knowledge/Warranty Exclusion
Applying Illinois law, the United States Court of Appeals for the Seventh Circuit has held that an insurer who initially refused to defend its insured and waited five years to bring an action for declaratory relief was precluded from raising policy defenses to indemnity.  Title Indus. Assurance Co. v. First American Title Ins. Co., 2017… Continue Reading

Court Upholds Eroding Defense Expense Provision; ERISA Exclusion Bars Coverage for Constitutional and Statutory Civil Rights Claims

Posted in Defense Costs
The United States Court of Appeals for the Fifth Circuit, applying Mississippi law, has held that policies providing that defense costs erode policy limits are enforceable as written and do not offend public policy.  Federal Ins. Co. v. Singing River Health Sys., 2017 WL 816235 (5th Cir. Mar. 1, 2017).  The court further held that… Continue Reading

Florida Statute Does Not Estop Insurer from Denying Reimbursement of Pre-Tender Defense Costs

Posted in Consent to settle/incur defense costs, Defense Costs
The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has held that a thirty-day statutory deadline to deny coverage did not apply to an insurer’s refusal to reimburse the insured for its pre-tender defense costs because this refusal did not constitute a “coverage defense” within the meaning of the statute. Embroidme.com,… Continue Reading

Personal Profit Exclusion Does Not Relieve Insurer of Duty to Advance Defense Costs for Other Pending Causes of Action

Posted in Allocation, “Claim”, Defense Costs, Personal Profit/Advantage exclusion
Applying Montana law, the United States District Court for the District of Montana has held that a D&O policy’s personal profit exclusion, which was implicated by a finding of conversion against an insured director, did not relieve the insurer of the duty to advance defense costs for the other remaining causes of action against the… Continue Reading

Settlement of Class Actions for Allegedly Withheld Profits Not Disgorgement

Posted in Defense Costs, Loss, Public Policy prohibition on insurance
Applying New York and Delaware law, the Superior Court of Delaware has held that a retirement benefits provider’s settlement of three class actions seeking payment of alleged profits did not constitute disgorgement and was insurable under the provider’s professional liability policies.  TIAA-CREF Individual & Institutional Servs. LLC v. Illinois Nat’l Ins. Co., 2016 WL 6534271… Continue Reading