Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Prior Knowledge/Warranty Exclusion

Subscribe to Prior Knowledge/Warranty Exclusion RSS Feed

Court Holds Prior Acts Exclusion Bars Coverage for Securities Lawsuit

Posted in Prior Knowledge/Warranty Exclusion
In a win for Wiley Rein’s client, the United States District Court for the Central District of California has held that a prior acts exclusion in a management liability policy bars coverage for a securities lawsuit brought by shareholders alleging misrepresentations before the prior acts date and continuing after the prior acts date.  Jayhawk Private… Continue Reading

Collateral Estoppel Bars Relitigation of Issues Bearing on Prior Knowledge of Potential Claim

Posted in Prior Knowledge/Warranty Exclusion
An Alaska federal court has held that a state court’s finding in the underlying litigation that an insured should have known of a potential claim by a date before inception of a policy collaterally estopped the insured from relitigating that issue in a coverage dispute concerning a prior knowledge provision.  ALPS Prop. & Cas. Ins.… Continue Reading

No Coverage Due to Material Misrepresentation on Insurance Application Based on Totality of Circumstances

Posted in Prior Knowledge/Warranty Exclusion, Rescission
An intermediate New Jersey appellate court has affirmed a trial court’s decision concluding that no coverage was available for a legal malpractice claim because the insured law firm made material misrepresentations on its insurance renewal application in failing to disclose the insured’s knowledge of circumstances that could result in a professional liability claim.  Ironshore Indem.,… Continue Reading

Four Claims Regarding Same Appraisal Methodology Are Covered but Related and Therefore Confined to One Policy Year

Posted in Bad faith/duty to settle, Prior Knowledge/Warranty Exclusion, Related Claims and associated exclusions
The United States District Court for the Northern District of Illinois, applying New York law, has held that a real estate service firm’s professional liability insurance policies cover four claims regarding the firm’s allegedly improper use of a certain appraisal methodology because neither the prior knowledge exclusion nor an exclusion regarding investment activity applied.  Cushman… Continue Reading

Prior Knowledge Exclusion in Application Bars Coverage for Undisclosed Claim that Led to Litigation

Posted in Prior Knowledge/Warranty Exclusion
In a win for Wiley Rein’s client, a Maryland federal district court has ruled that a prior knowledge exclusion contained in a policy application barred coverage for a lawsuit filed during the policy period because it arose from a demand letter received by the insured before the application was completed.  Madison Mechanical, Inc. v. Twin… Continue Reading

Court Holds Prior Litigation and Event Exclusion Does Not Apply

Posted in Prior Knowledge/Warranty Exclusion, Related Claims and associated exclusions, Wrongful Act
The United States District Court for the Southern District of Indiana has held that a prior litigation and event exclusion in a directors and officers liability policy did not bar coverage for a shareholder suit against the insured.  Emmis Commc’n Corp. v. Illinois Nat’l Ins. Co., 2018 WL 1410191 (S.D. Ind. Mar. 21, 2018).  The… Continue Reading

Allegations of Fraudulent Scheme by Lawyer to Induce Payment of Insurance Benefits Constitutes “Professional Legal Services”

Posted in Dishonesty Exclusion, Prior Knowledge/Warranty Exclusion, Professional Services
The United States District Court for the District of New Jersey has held that allegations that a lawyer and his law firm engaged in a fraudulent insurance scheme to induce payment of personal injury protection benefits while representing clients constituted “Professional Legal Services” under the firm’s professional liability policy, triggering the duty to defend.  Arzadi… Continue Reading

Letter Advising Insured Attorney to Put Carrier on Notice Does Not Make Subsequent Claim Foreseeable

Posted in Prior Knowledge/Warranty Exclusion
The Court of Appeals for the Sixth Circuit, applying Ohio law, has held that a letter from a former client to an insured advising him to put his insurer on notice of potential claims did not make a claim reasonably foreseeable and, as a result, did not preclude coverage for a subsequent claim.  Gonakis v.… Continue Reading

Lack of Civil Lawsuit Precludes Duty to Defend, While Prior Knowledge Exclusion Bars Indemnity Coverage

Posted in “Claim”, Bad Faith, Prior Knowledge/Warranty Exclusion
The United States District Court for the District of New Mexico, applying New Mexico law, has held that an insurer owed no duty to defend a title and escrow agent against a demand by a title insurer because no civil proceeding had been brought against the insured.  The court also held that the insured owed… Continue Reading

Prior Knowledge Condition Bars Coverage Where Insured was Warned of Negligence Claim Before Policy Incepted

Posted in Prior Knowledge/Warranty Exclusion
The California Court of Appeal has held that a prior knowledge condition barred coverage for a claim brought against an insured because the insured was warned prior to the policy’s inception that it would face a claim for professional negligence.  Admiral Ins. Co. v. Superior Court, 2017 WL 5590076 (Cal. Ct. App. Nov. 21, 2017).… Continue Reading

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