Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Prior Knowledge/Warranty Exclusion

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No Coverage Available Where Insured Fails to Provide Notice of Potential Claim During First Policy Period and Knew About, But Failed to Disclose, Potential Claim Prior to Second Policy Period

Posted in “Claim”, Notice of Claim, Prior Knowledge/Warranty Exclusion
The United States District Court for the District of Maryland has held that where notice of a potential claim is not reported during the first policy period and the insured knew about, but failed to disclose, the potential claim prior to the second policy period, coverage is precluded under both policies.  James River Ins. Co.… Continue Reading

Federal Court Limits Information Discoverable by Insurer Concerning Insured’s Prior Knowledge

Posted in Discovery Issues, Prior Knowledge/Warranty Exclusion
The United States District Court for the Middle District of Florida has ruled regarding the discoverability of a broad array of documents sought by an insurer in a declaratory judgment action concerning application of a prior knowledge condition.  Berkley Assurance Co. v. Expert Grp. Int’l Inc., 2017 WL 4574599 (M.D. Fla. Oct. 13, 2017).  The… Continue Reading

Pre-Inception Tolling Agreement and Agency Notice of Potential Statutory Violations Insufficient for Judgment on the Pleadings on Prior Knowledge Provision

Posted in Prior Knowledge/Warranty Exclusion
The United States District Court for the Southern District of Ohio, applying Ohio law, has held that an insurer is not entitled to judgment on the pleadings regarding the application of a prior knowledge provision, notwithstanding the insureds’ entry into a tolling agreement and receipt of a federal agency’s notice of findings of statutory violations… Continue Reading

Prior Knowledge Exclusion Bars Coverage for Claim Against Insured Attorney

Posted in Prior Knowledge/Warranty Exclusion
Applying Florida law, a federal district court has held that a prior knowledge exclusion bars coverage for a claim against an insured attorney where the attorney knew, prior to applying for the policy, that he had failed to meet his client’s expectations for the representation.  David R. Farbstein, P.A. v. Westport Ins. Co., 2017 WL… Continue Reading

Court Grants Summary Judgment to Insurer Based on Failure to Disclose Prior Claims in Application

Posted in Prior Knowledge/Warranty Exclusion, Rescission
A California federal district court, applying California law,  has held that an insurer was entitled to summary judgment that it had no duty to defend a suit against its insured because the insured failed to disclose a related claim in its application, and the claim therefore predated the policy period.  Kelly v. Starr Indem. &… Continue Reading

Insurer May Not Rescind Renewal Policy Based on Misrepresentations in Prior Policy’s Application

Posted in Loss, Prior Knowledge/Warranty Exclusion, Rescission
An Illinois intermediate appellate court, applying Illinois law, has held that a renewal insurance policy may only be rescinded based on material misrepresentations made in the renewal application, and not based on misrepresentations made in applications for prior policies.  Ill. State Bar Ass’n Mut. Ins. Co. v. Rex Carr Law Firm, 2017 WL 2806126 (Ill.… Continue Reading

An Insured’s Prior Knowledge Precludes Coverage for Other Insureds Seeking Coverage; Prior Litigation Exclusion Applies to Arbitration Demand

Posted in Prior Knowledge/Warranty Exclusion
Applying California law, the United States Court of Appeals for the Ninth Circuit has held that prior knowledge of wrongful acts that could reasonably be expected to give rise to a claim possessed by an insured who is not seeking coverage may bar coverage for other insureds under the same policy.  Woo v. Scottsdale Ins.… Continue Reading

Attorney’s Prior Knowledge Bars Coverage for Client’s Malpractice Claim

Posted in Prior Knowledge/Warranty Exclusion, Professional Services
The United States District Court for the Northern District of Ohio, applying Ohio law, has granted summary judgment in favor of an insurer, holding that an insured attorney could reasonably have expected a claim where he received a letter addressed to multiple parties indicating that the attorney’s former client was represented by new counsel, who… Continue Reading

Disgorgement Payment Is Insurable Loss Where Payment Did Not Disgorge Insured’s Own Profits, but Those of its Customers

Posted in Loss, Personal Profit/Advantage exclusion, Prior Knowledge/Warranty Exclusion
A New York trial court, applying New York law, has held that a $140 million disgorgement payment by an insured broker-dealer to the U.S. Securities and Exchange Commission constitutes insurable loss, based on evidence that the payment did not disgorge the insured’s ill-gotten gains, but rather those of its customers.  J.P. Morgan Secs. Inc. v.… 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

Lack of Prior Knowledge of Claim a Condition Precedent to Coverage

Posted in Prior Knowledge/Warranty Exclusion, Public Policy prohibition on insurance
The United States District Court for the District of West Virginia, applying West Virginia law, has held that lack of prior knowledge of a claim constitutes a condition precedent to coverage under an accountant’s professional liability policy.  Camico Mutual Ins. Co. v. Hess, Stewart & Campbell P.L.L.C., 2017 WL 926770 (S.D. W. Va. Mar. 8,… Continue Reading

Multiple Clients’ Claims Against Accountant Deemed Related and Subject to Lower Limit of Liability Due to Insureds’ Prior Knowledge of One Client’s Claim

Posted in Prior Knowledge/Warranty Exclusion, Related Claims and associated exclusions
The United States District Court for the District of South Carolina, applying South Carolina law, has held that multiple clients’ claims against an accountant and his former firm constitute a single claim under a professional liability policy because they are logically connected to the accountant’s loss of faculty from Parkinson’s disease.  CAMICO Mutual Insurance Co.… Continue Reading

Architect’s Prior Knowledge Bars Coverage for Professional Liability Claim

Posted in “Claim”, Notice of Claim, Prior Knowledge/Warranty Exclusion
A New York federal court has held that an architecture firm is not entitled to coverage under a claims-made professional liability policy because the insured had a reasonable expectation of liability prior to the policy’s inception date.  University of Pittsburgh v. Lexington Ins. Co., 2016 WL 7174667 (S.D.N.Y. Dec. 8, 2016).… Continue Reading

Fifth Circuit Holds that Prior Knowledge Exclusion is Unduly Broad

Posted in Bad faith/duty to settle, Prior Knowledge/Warranty Exclusion, Wrongful Act
The United States Court of Appeals for the Fifth Circuit, applying Texas law, has held that the prior knowledge exclusion contained in a lawyers professional liability policy was unduly broad as written and would be construed to apply to wrongful acts reasonably likely to lead to a malpractice claim.  OneBeacon Ins. Co. v. T. Wade… Continue Reading

Subjective Standard Applies to Rescission of E&O Policy Based on Response to Application Question

Posted in Prior Knowledge/Warranty Exclusion, Rescission
The United States District Court for the Southern District of Ohio, applying California law, has held that an errors and omissions insurer is not entitled to rescission of its policy based on an alleged misrepresentation by the insured on the application for the policy.  Maxum Indem. Co. v. Nat’l Condo & Apartment Ins. Grp., 2016… Continue Reading

No Coverage for Claims Arising Out of Attorney’s Theft of Client Funds Before Policy Period

Posted in Dishonesty Exclusion, Personal Profit/Advantage exclusion, Prior Knowledge/Warranty Exclusion, Related Claims and associated exclusions
The United States District Court for the Middle District of Tennessee, applying Tennessee law, has held that an insurer had no duty to defend or indemnify an insured attorney for claims arising out of his theft from his clients’ estates because the attorney had knowledge of the theft and could reasonably foresee a claim before… Continue Reading

Insured Lawyers’ Material Misrepresentations Warrant Rescission and Coverage also Barred by Prior Knowledge Exclusion

Posted in Prior Knowledge/Warranty Exclusion, Rescission
The United States District Court for the Northern District of Mississippi, applying Mississippi law, has granted summary judgment in favor of an insurer, holding that the insurer is entitled to rescind a lawyers professional liability policy based on the insured attorneys’ material misrepresentations in the insurance application.  Imperium Ins. Co. v. Shelton & Assocs. P.A.,… Continue Reading

Fact Issues Regarding “Relatedness of Claims” Preclude Motion for Judgment on the Pleadings

Posted in Prior Knowledge/Warranty Exclusion, Related Claims and associated exclusions
The United States District Court for the District of Arizona has held that mere reference to a “pyramid scheme” in a prior lawsuit is insufficient to warrant judgment on the pleadings regarding the relatedness of a later claim alleging a pyramid scheme. Hanover Ins. Co. v. Vemma Int’l Holdings, Inc., 2016 WL 4059606 (D. Ariz.… Continue Reading

Prior Knowledge Precludes Coverage Where Undisclosed “Events Bore the Seeds of a Malpractice Claim” Against Insured Lawyer

Posted in Prior Knowledge/Warranty Exclusion
The United States Court of Appeals for the Sixth Circuit, applying Michigan law, has held that an insured attorney’s failure to disclose a potential claim on her renewal application precluded coverage for a later filed suit. Thomson v. Hartford Cas. Ins. Co., 2016 WL 4036403 (6th Cir. July 28, 2016).… Continue Reading

Prior Knowledge Condition Does Not Bar Coverage for Suit Alleging Negligent Licensure of Foster Parent

Posted in Prior Knowledge/Warranty Exclusion
Applying Florida law, the United States District Court for the Middle District of Florida has held that a prior knowledge exclusion does not preclude an insurer’s duty to defend a foster care licensing agency in a lawsuit alleging negligent licensing.  Diamond State Ins. Co. v. Boys’ Home Ass’n, Inc., 2016 WL 1110422 (M.D. Fla. Mar.… 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

No Prejudice Necessary to Deny Coverage for an Insured’s Late Notice under Consecutive Claims-Made-and-Reported Policies

Posted in Notice of Claim, Prior Knowledge/Warranty Exclusion
A federal court in Alaska has granted summary judgment in favor of an insurer, holding that coverage was precluded by the insured’s failure to report a claim made during the first of two consecutive policy periods until after the inception of the second policy period. Alaska Interstate Constr., LLC v. Crum & Forster Spec. Ins.… Continue Reading

No Coverage for Claims Arising from Failure to Appeal Adverse Decision

Posted in Bad faith/duty to settle, Prior Knowledge/Warranty Exclusion, Professional Services, Related Claims and associated exclusions
Applying Massachusetts law, a Massachusetts federal court has held that no coverage was available under two claims-made policies because the insured knew before policy inception that a client would bring a claim when the insured failed to perfect an appeal of an adverse zoning decision. Gandor v. Torus Nat’l Ins. Co., 2015 WL 6043621 (D.… Continue Reading