Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Professional Services

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No E&O Coverage for Breach of Contract and Intentional Torts

Posted in Breach of Contract, Professional Services, Wrongful Act
The Supreme Court of Vermont has held there is no coverage for breach of contract and intentional torts under an errors and omissions (E&O) liability policy, where all counts of the complaint rested on allegations that the insured used misrepresentations and falsehoods to undermine a competitor, which did not fall within the definition of “professional… Continue Reading

Availability of Information Regarding Ongoing Lawsuit Does Not Preclude Exclusions for Prior Acts or Pending Litigation

Posted in Professional Services, Related Claims and associated exclusions
The United States District Court for the Northern District of Illinois, applying Illinois law, has held that there is no coverage under a professional liability policy where the claim arose out of the same set of facts upon which a separate lawsuit against the insured was filed before the policy incepted.  Arch Ins. Co. v.… Continue Reading

Insurer Must Defend Insured in Claim Alleging Use of Counterfeit Materials Because “Professional Services” Definition Was Ambiguous and No Exclusion Barred Coverage

Posted in Dishonesty Exclusion, Professional Services
Applying New York law, a Delaware state court has held that an insurer owed its insured a duty to defend because the factual allegations in two underlying lawsuits arguably involved the insured’s performance of “Professional Services” and no exclusion applied to otherwise bar coverage.  Steadfast Ins. Co. v. DBI Servs., LLC, 2019 WL 2613195 (Del.… Continue Reading

Duty to Defend Triggered Given “Possibility” of Wrongful Act

Posted in Professional Services, Wrongful Act
The United States District Court for the District of South Carolina, applying South Carolina law, has denied a professional liability insurer’s motion to dismiss, holding that the insured’s alleged conduct could fall within the policy’s definition of “Wrongful Act,” thus giving rise to a duty to defend.  Harriman v. Associated Indus. Ins. Co., 2019 WL… Continue Reading

ERISA Exclusion Bars Coverage for Claims Arising From Denial of Employee’s Insurance Benefits

Posted in Professional Services
The United States District Court for the Southern District of California has held that a liability insurer had no duty to defend a claim made against an insured arising out of the denial of an employee’s life insurance benefits because coverage was barred by an ERISA exclusion.  By Referral Only, Inc. v. Travelers Prop. Cas.… Continue Reading

Ninth Circuit Holds Section 533 and Financial Services Exclusion Do Not Bar Coverage for Alleged Mortgage Modification Scam

Posted in Professional Services, Public Policy prohibition on insurance
The Ninth Circuit, applying California law, has held that an insurer improperly failed to defend its insured in connection with a lawsuit alleging that the insured engaged in an ongoing mortgage modification fraud scheme, because one count in the lawsuit did not require willful conduct and therefore was not necessarily uninsurable under California Insurance Code… Continue Reading

False Claims Act Investigation Does not Implicate “Professional Services”

Posted in Professional Services
A Louisiana federal court has held that settlement of a False Claims Act investigation did not trigger the insuring agreement of a bankers professional liability policy because the claim was not made by a third-party client for acts in rendering or failing to render professional services.  Iberiabank Corp. v. Ill. Union Ins. Co., 2019 WL… Continue Reading

Professional Services and ERISA Exclusions Do Not Bar Coverage for Mismanagement Lawsuit Brought by Pension Fund Against Real Estate Advisory Fund

Posted in Allocation, Personal Profit/Advantage exclusion, Professional Services
The United States Court of Appeals for the First Circuit, applying Massachusetts law, has affirmed the district court’s holding that a professional services exclusion in a real estate advisory fund’s D&O policy did not excuse the duty to defend a lawsuit brought by an investor in the fund because the allegations at issue were ambiguous… Continue Reading

“Professional Services” Exclusion Bars Coverage for Law Enforcement Investigations

Posted in Professional Services
A Nebraska state court has held that the “professional services” exclusion in the insured municipality’s CGL policy barred coverage for the wrongful conviction and civil rights actions brought against the municipality because its deputy sheriffs and psychologist performed “professional services” when they investigated the underlying crime. Gage County, Neb. v. Employers Mut. Cas. Co., No.… Continue Reading

Negligent Supervision of Funds Exclusion Bars Coverage for Trust Investment Losses

Posted in Loss, Professional Services
The United States District Court for the Eastern District of Virginia, applying Virginia law, has held that a professional liability policy’s exclusion for “negligent supervision” of funds applied to bar coverage for damages resulting from an insured attorney’s reckless investment of trust assets.  ALPS Prop. & Cas. Ins. Co. v. Farthing, 2018 WL 4927366 (E.D.… Continue Reading

Alleged Fraudulent Submission of Medicaid Claims Does Not Constitute Rendering or Failure to Render Medical Professional Services

Posted in Professional Services
Applying North Carolina law, the United States District Court for the Middle District of North Carolina has held that an insurer had no duty to defend or indemnify an insured for a qui tam action alleging false Medicaid reimbursement submissions because the suit failed to allege a claim arising out of the rendering of or… Continue Reading

Alleged 42 U.S.C. § 1983 Violations Not Professional Services Caused by “Negligence”

Posted in Allocation, Bad faith/duty to settle, Other Insurance, Professional Services, Subrogation
The United States District Court for the Northern District of Alabama has held that alleged constitutional due process violations under 42 U.S.C. § 1983 do not constitute professional services “caused by the negligence” of an insured.  Madison County v. Evanston Ins. Co., 2018 WL 4680213 (N.D. Ala. Sept. 28, 2018).… Continue Reading

No Personal Injury Coverage for Payment Card Breach Because Damages Resulted from Hacker’s Criminal Conduct, Not Insured’s Data Security Practices

Posted in Cyber Policies and Issues, Professional Services
A Florida federal district court has ruled that a claim asserting that an insured’s negligent data security practices led to a payment card breach did not trigger personal injury coverage under a CGL policy.  See St. Paul Fire & Marine Ins. Co. v. Rosen Millennium, Inc., No. 6:17-cv-540-Orl-41GJK (M.D. Fla. Sept. 28, 2018).  The court… Continue Reading

First Circuit Holds Physician’s Accessing of Ex-Wife’s Medical Records Allegedly to Harass Does Not Constitute “Professional Services”

Posted in Professional Services
Applying Maine law, the United States Court of Appeals for the First Circuit has held that a professional liability insurer had no duty to defend a physician for claims arising out of his alleged improper accessing of his ex-wife’s medical records on the basis that such action did not constitute the rendering of professional services. … Continue Reading

Faulty Workmanship Exclusion in Professional Liability Policy Bars Coverage for Faulty Design and Construction

Posted in Professional Services
The United States District Court for the District of Colorado, applying Colorado law, has held that an arbitration award for faulty design and construction was potentially recoverable as “damages” under a professional liability policy, but coverage was ultimately precluded by an unambiguous and broad “Faulty Workmanship” exclusion.  Rockhill Ins. Co. v. CFI-Global Fisheries Mgmt., 2018… Continue Reading

Alleged Sexual Abuse by Teacher Not Covered as “Educational Employment Activities”

Posted in Professional Services
Applying Virginia law, the United States District Court for the Western District of Virginia has held that an educators professional liability insurance policy did not afford coverage for a lawsuit against an insured school teacher accused of sexually abusing a student.  Horace Mann Ins. Co. v. Barney, 2018 WL 1733989 (W.D. Va. Apr. 10, 2018). … Continue Reading

Text Messages Sent in Violation of TCPA Held to Implicate Professional Services Coverage

Posted in Loss, Professional Services
A New York federal district court, applying New York law, has held that the sending of unsolicited text message advertisements in violation of the Telephone Consumer Protection Act (TCPA) triggered professional services coverage under a Miscellaneous Professional Liability (MPL) policy.  Illinois Union Ins. Co. v. US Bus Charter & Limo, Inc., 2018 WL 1193464 (E.D.N.Y.… Continue Reading

Court Holds Insurance Exclusion Bars Coverage for Lawsuit Arising Out Of Lapse in Client’s Insurance Policy

Posted in Professional Services, Wrongful Act
The United States District Court for the District of New Jersey has held that an exclusion in a professional liability policy applicable to claims arising out of the failure to effect or maintain any insurance precludes coverage for defense costs incurred in an action against an insured on the basis that the action arose out… 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

Breach of Fiduciary Duty Claim Against Lawyer Acting as Both Escrow Agent and Attorney for Counterparty Triggers Duty to Defend Notwithstanding Business Enterprise Exclusion

Posted in Professional Services
The Illinois Intermediate Appellate Court, applying Iowa law, has affirmed that a professional liability insurer must provide a defense for an attorney who allegedly mishandled funds that he was holding in escrow related to the plaintiff’s transaction with another company for which the attorney was vice president and legal counsel. Willey v. Minn. Lawyers Mutual… Continue Reading

Professional Services Exclusion Bars Coverage in Connection with Pipeline Explosion

Posted in Exclusion lead-in language (Arising out of), Professional Services
A California appellate court has held that a pipeline owner’s insurer is not entitled to reimbursement of defense costs and settlement payments from the insurer for the staffing agency that supplied personnel to the pipeline because the professional services exclusion in the staffing agency’s policy unambiguously barred coverage.  Energy Ins. Mut. Ltd. v. ACE American… Continue Reading