Public Policy prohibition on insurance

In a much-watched case, the Delaware Supreme Court has held that Delaware law governs a dispute regarding insurance coverage for a federal securities class action under D&O policies issued in California to a California company, where the company was incorporated in Delaware.  RSUI Indemnity Company v. Murdock, 2021 WL 803867 (Del. March 4, 2021).  The Court also held that a breach of the duty of loyalty based on fraudulent conduct is insurable under Delaware law and the policies’ profit/fraud exclusion did not apply.

Continue Reading Delaware Supreme Court Applies Delaware Law in D&O Coverage Dispute Involving California Company Incorporated in Delaware

Upholding a “law most favorable” provision with respect to the insurability of ill-gotten gains, the Delaware Superior Court has concluded that Delaware law, rather than New York law, applies to a coverage dispute regarding coverage for settlement amounts allegedly constituting ill-gotten gains. Sycamore Partners Mgmt., L.P. v. Endurance Am. Ins. Co., 2021 WL 761639 (Del. Super. Ct. Feb. 26, 2021). Because such amounts are insurable as a matter of Delaware public policy, the amounts at issue constituted covered Loss.

Continue Reading Under “Law Most Favorable” Provision, Delaware Law Applies and Does Not Prohibit Coverage for Settlement of Alleged Ill-Gotten Gains

The United States District Court for the Southern District of New York, applying New Jersey law, has held that an insurer was estopped from denying coverage under a retroactivity provision in an engineering firm’s professional liability policy because the insurer’s reservation of rights, which was issued three years after accepting control of the insured’s defense, was untimely and defective.  RLI Ins. Co. v. AST Eng’g Corp., 2019 WL 7114986 (S.D.N.Y. Dec. 20, 2019).

Continue Reading Untimely Reservation of Rights Estops Insurer from Denying Coverage

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 § 533. First One Lending Corp. v. Hartford Casualty Ins. Co., 2017 WL 1018305 (9th Cir. Mar. 5, 2019). The court further held that a financial services exclusion did not completely bar coverage because at least some allegations bore an “insufficient causal nexus with financial services,” thus triggering the insurer’s duty to defend.

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

The United States District Court for the Southern District of Florida has denied an insured’s request for indemnity from its insurer for the amount owed under a settlement agreement with the state of Florida over grand theft charges against the insured.  The court held that, under Florida law, the settlement does not constitute covered “Loss” because the payments were restitutionary in nature, regardless whether there was an admission of guilt or final adjudication.  Philadelphia Indem. Ins. Co., v. Sabal Ins. Group, Inc., 2017 WL 4310700 (S.D. Fla. Sept. 28, 2017).

Continue Reading No Indemnification for Insured’s “Restitutionary In Nature” Settlement Payments, Even Without Admission of Guilt or a Final Adjudication

Applying Texas law, the United States Court of Appeals for the Seventh Circuit has held that public policy prohibits enforcement of a settlement arrangement in which an insurer with no duty to defend played no role in the settlement, the plaintiff promised to seek damages only from the insurer, and the insured defendant admits liability, stipulates to damages, and assigns its claim against the insurer to the plaintiff.  Hendricks v. Novae Corporate Underwriting, Ltd., 2017 WL 3573390 (7th Cir. Aug. 18, 2017).

Continue Reading Pre-Trial Settlement and Assignment of Rights Unenforceable Against Insurer with No Duty to Defend

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, 2017).  In so holding, the court found that the insurer was not estopped from declining coverage based on an insured’s prior knowledge of a claim despite issuance of a prior reservation of rights letter that only reserved the insurer’s right to raise “all policy provisions and defenses.”

Continue Reading Lack of Prior Knowledge of Claim a Condition Precedent to Coverage

A California federal district court has granted an errors and omissions liability insurer’s motion for summary judgment that it had no duty to defend a suit against its insured alleging violations of the California False Claims Act (CFCA), holding that the underlying suit created no potential for coverage and that there was no reasonable expectation of coverage in light of the nature and kind of risks covered by the policy.  Office Depot, Inc. v. AIG Specialty Ins. Co., No. CV 15-02416-SVW-LPRx (C.D. Cal. Jan. 4, 2017).

Continue Reading No Coverage for California False Claims Act Suit