The U.S. District Court for the Eastern District of Pennsylvania, applying Pennsylvania law, has held that an insurer is estopped from denying coverage for a legal malpractice action after defending the action for over a year without a reservation of rights, despite knowledge of the facts upon which it ultimately relied to deny coverage.  However, the court also held that the insurer was not estopped from denying coverage for a subsequent action seeking disgorgement of the insured attorney’s fees because the insurer timely reserved rights with respect to the disgorgement action. Westport Ins. Corp. v. McClellan , 2020 WL5961047 (E.D. Pa. Oct. 8, 2020).

Continue Reading Insurer Estopped from Denying Coverage for Legal Malpractice Action But Not Subsequent Disgorgement Action

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 federal statute pursuant to which the risk retention group was formed.  Attorneys Liability Protection Society, Inc. v. Ingaldson Fitzgerald, P.C., 2016 WL 5335036 (9th Cir. 2016).  The court also rejected the policyholder’s argument that the insurer should be estopped from asserting defenses to coverage because it acted in bad faith by failing to attend settlement meetings.

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

Applying Connecticut law, a federal district court has held that an insurer properly rescinded multiple crime policies issued to an insured based on the insured’s failure to disclose known losses in its applications for coverage. Known Litigation Holdings, LLC v. Navigators Ins. Co., 2016 WL 3566653 (D. Conn June 24, 2016).
Continue Reading Rescission Proper Due to Failure to Disclose Known Losses in Application

Applying Massachusetts law, the United States District Court for the District of Massachusetts has held that an insurer is not estopped from denying coverage for a subsequent claim when it already issued a coverage letter for litigation based on the same facts and involving the same coverage issues. American Guar. & Liab. Ins. Co. v. Lamond, 2016 WL 1312008 (D. Mass. Apr. 4, 2016). In addition, the court held that the insurer did not act in bad faith by failing to settle the litigation.
Continue Reading Insurer Not Estopped from Denying Coverage for Failing to Send Second Coverage Letter

Applying Michigan law, the United States District Court for the Eastern District of Michigan has held that a fidelity bond did not provide coverage for an employee’s theft of client funds because the insured’s losses were suffered indirectly through reimbursing client losses. Hantz Fin. Servs., Inc. v. Nat’l Union Fire Ins. Co., 2015 WL 5460632 (E.D. Mich. Sept. 17, 2015). In addition, the court held that an E&O policy did not provide coverage for claims arising out of the employee’s theft because the employee intended to steal client funds.
Continue Reading Neither Bond Nor E&O Policy Covers Entity Losses from Employee Theft of Client Funds