Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Defense Costs

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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

Suit for Reimbursement of Beauty School Expenses Under California Labor Law Triggers Duty to Defend Despite Wage and Hour Exclusion

Posted in Defense Costs
The United States District Court for the Southern District of California, applying California law, has held that an employment practices liability policy’s wage and hour exclusion does not apply to a claim for reimbursement of reasonable business expenses under the California Labor Code.  Hanover Ins. Co. v. Poway Acad. of Hair Design, Inc., 2016 WL… Continue Reading

Insurer Has a Duty to Defend Lawsuits Potentially Seeking Damages Not Flowing From a Contractual Obligation

Posted in Defense Costs, Dishonesty Exclusion, Excess insurance/exhaustion, Loss
The California Court of Appeal has held that an errors and omissions insurer had a duty to defend lawsuits seeking amounts owed under contract because the lawsuits potentially sought non-contractual damages for breach of fiduciary duty and non-disclosure.  Health Net, Inc. v. Am. Int’l Spec. Ins. Co., 2016 Cal. App. Lexis 7296 (Cal. Ct. App.… Continue Reading

Insured Not Prejudiced by Insurer’s Failure to Attend Settlement Meetings; Alaska Law Precluding Recoupment of Defense Costs Preempted by Federal Risk Retention Group Statute

Posted in Bad faith/duty to settle, Defense Costs, Estoppel
The Ninth Circuit Court of Appeals has reversed a district court’s denial of an insurer’s motion for summary judgment and held that the insurer, which was organized as a risk retention group, was entitled to reimbursement of defense costs incurred in defense of a non-covered claim because Alaska’s statutory bar against recoupment conflicts with the… Continue Reading

Certain Extrinsic Evidence Permissible for Purposes of Establishing No Duty to Defend Under Illinois Law

Posted in Defense Costs
The United States Court of Appeals for the Seventh Circuit, applying Illinois law, has held that extrinsic evidence that does not decide an “ultimate issue” in the underlying claim may be admitted in a declaratory judgment action for purposes of establishing that an insurer has no duty to defend.  Landmark Am. Ins. Co. v. Hilger,… Continue Reading

Insured Required to Reimburse Defense Costs Paid by Insurer for Non-Covered Claim

Posted in Defense Costs, Discovery Issues
In a win for a Wiley Rein client, the United States District Court for the Southern District of California, applying California law, has held that an insured is required to reimburse his insurer for defense costs incurred for a non-covered claim where the insurer properly reserved its right to recoupment. Columbia Cas. Co. v. Abdou,… Continue Reading

Seven-Month Delay Constitutes Late Notice as a Matter of Law

Posted in Bad Faith, Defense Costs, Notice of Claim
A Minnesota federal district court has held that an insurer was entitled to summary judgment in a breach of contract suit brought by its policyholder after the insurer denied coverage because the policyholder failed to provide notice of the suit “as soon as practicable” in accordance with the terms of the policy. Food Market Merch.,… Continue Reading

Insurer Did Not Breach Duty to Defend Where it Refused to Defend Insured’s Husband and Marital Community

Posted in Bad Faith, Defense Costs
The United States District Court for the Western District of Washington, applying Washington law, has held that insurers did not breach their duty to defend where they refused to provide a defense for an insured’s husband and marital community.  Staheli v. Chicago Ins. Co., 2016 WL 2930444 (W.D. Wash. May 19, 2016).  The court also… Continue Reading

Contract and Willful Acts Exclusions Do Not Preclude Duty to Defend Tortious Interference and Copyright Infringement Claims

Posted in “Claim”, Breach of Contract, Defense Costs, Professional Services
The United States District Court for the Northern District of California, applying California law, has held that neither a breach of contract exclusion nor the implied willful acts exclusion provided for by California Insurance Code § 533 precluded an insurer’s duty to defend a lawsuit brought against its insured by one of its competitors for… Continue Reading

Pre-Tender Defense Costs are Uncovered Voluntary Payments

Posted in Bad faith/duty to settle, Consent to settle/incur defense costs, Defense Costs
A federal district court, applying California law, has held that a “no voluntary payment” provision precluded coverage for defense expenses voluntarily incurred by an insured pursuant to its agreement to indemnify its directors and officers prior to providing notice to the insurer of its indemnity obligation. Corthera, Inc. v. Scottsdale Ins. Co., 2016 WL 270951… Continue Reading

Insurer Could Face Bad Faith Liability Even Though It Has No Duty To Defend

Posted in Bad faith/duty to settle, Defense Costs
Applying Utah law, the United States District Court for the District of Utah held that an insurer could potentially face bad faith liability even though the insurer had no duty to defend the insured against an underlying lawsuit. Travelers Prop. Cas. Co. of Am. v. Fed. Recovery Serv., Inc., 2016 WL 156453 (D. Utah Jan.… Continue Reading

No Coverage, No Estoppel, No Duty to Settle; Prior Knowledge Exclusion Bars Coverage for Insured’s Malpractice Claim

Posted in Bad faith/duty to settle, Defense Costs, Prior Knowledge/Warranty Exclusion
The Kansas Court of Appeals has held that an insurer owed no duty to defend or settle a malpractice lawsuit against its insured because the attorney had knowledge of acts reasonably giving rise to the claim before the policy period began. Becker v. Bar Plan Mutual Ins. Co., 2015 WL 9459771 (Kan. Ct. App. Dec.… Continue Reading