Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Category Archives: Wrongful Act

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Law Firm Entitled to Coverage for Claim Alleging Failure to Transfer Client Materials and to Notify Clients of Departing Attorneys

Posted in Insured v. Insured Exclusion, Wrongful Act
Applying Massachusetts law, a federal district court has held that an insurer owed a duty to defend based on allegations regarding a law firm’s failures to notify clients of an attorney’s departure and to transfer client materials.  Governo v. Allied World Ins. Co., 2018 WL4685566 (D. Mass. Sept. 28, 2018).  In reaching this determination, the… Continue Reading

Resident’s Three Claims Against Condo Association Spanning Multiple Years Deemed Single Claim Subject to Single Limit

Posted in Related Claims and associated exclusions, Wrongful Act
The United States District Court for the Northern District of Illinois has held that three claims brought by a resident against a condominium owners’ association for alleged discrimination and retaliation involved related wrongful acts and therefore are properly treated as a single Claim deemed first made during the claims-made policy period when the first such… Continue Reading

Court Denies Reconsideration of Holding that Securities Exclusion Bars Coverage for Claims Involving Misrepresentations Made During Sale of Securities

Posted in Wrongful Act
Applying Texas law, a federal district court has denied a motion for reconsideration of its prior ruling that a securities exclusion barred coverage for claims involving alleged misrepresentations made in connection with the sale of securities.  Gleason v. Markel Am. Ins. Co., 2018 WL 3819928 (E.D. Tex. Aug. 10, 2018).  The court rejected the insured’s… Continue Reading

Lawsuits Involving a “Continuing Pattern of Anticompetitive Behavior” Constitute Related Claims

Posted in Related Claims and associated exclusions, Wrongful Act
The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has affirmed a district court’s holding that multiple lawsuits filed against the insured over a fifteen-year period involving a “continuing pattern of anticompetitive behavior” constitute claims “related logically, causally or in any other way.”  Health First, Inc. v. Capitol Specialty Ins. Corp.,… Continue Reading

Insured’s Payment to Stockholders to Settle Bankruptcy Dispute Relates to Prior Notice of Circumstances

Posted in Related Claims and associated exclusions, Wrongful Act
Applying Rhode Island law, the United States District Court for the District of Rhode Island has held that an insured was entitled to coverage for a settlement because the settlement related back to a prior notice of circumstances.  Twin River Worldwide Holdings, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2018 WL 3640995… Continue Reading

Stockholder Demand Letter for Legal Expenses for Stockholder Dispute Constitutes Covered Claim for Wrongful Act

Posted in Allocation, “Claim”, Notice of Claim, Wrongful Act
The United States District Court for the District of Rhode Island has concluded that a stockholder demand letter for legal expenses in connection with a dispute regarding the rights of different classes of stockholders constitutes a covered claim for a wrongful act.  Twin River Worldwide Holdings, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh,… 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

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

Securities Exclusion Bars Coverage for Claims Bearing “Incidental Relationship” to Excluded Conduct

Posted in “Claim”, Wrongful Act
Applying Texas law, a federal district court has held that a broadly-worded securities exclusion bars coverage of claims “incidental” to alleged misrepresentations made in connection with the sale of securities.  Gleason v. Markel Am. Ins. Co., 2018 WL 538324 (E.D. Tex. Jan. 24, 2018).  The court further held that an exception for claims involving transactions… Continue Reading

Eleventh Circuit Holds Prior Acts Exclusion Does Not Apply to Claim by FDIC Against Failed Bank

Posted in Related Claims and associated exclusions, Wrongful Act
The U.S. Court of Appeals for the Eleventh Circuit has held that a prior acts exclusion in a directors and officers liability policy does not bar coverage for a lawsuit brought by the Federal Deposit Insurance Corporation (FDIC) against a failed bank, because the wrongful acts at issue occurred after the prior acts date and… Continue Reading

Lawsuit Filed by Company Against Former Officer Does Not Trigger Employment Practices Liability Coverage

Posted in Defense Costs, Notice of Claim, Wrongful Act
The United States District Court for the District of Oklahoma has held that a lawsuit filed by a company against its former president did not implicate its policy’s Employment Practices Liability coverage because the lawsuit was not filed by or on behalf of an employee, as required by the policy.  Statton v. Allied World Specialty… Continue Reading

Ninth Circuit Affirms Allegations of Discrimination and Harassment Triggered Duty to Defend Class Action for California Labor Code Violations

Posted in Wrongful Act
The United States Court of Appeals for the Ninth Circuit has held that an employment practices liability insurer had a duty to defend a class action complaint alleging various California Labor Code violations based on the presence of potentially covered allegations of discrimination and harassment.  PHP Ins. Serv., Inc. et al. v. Greenwich Ins. Co.,… Continue Reading

Contract Exclusion Bars Coverage for Claims Arising from Asset Purchase Agreement’s Non-Compete Clause

Posted in Breach of Contract, Defense Costs, Wrongful Act
Applying North Dakota law, a federal district court has held that a contract exclusion contained in a directors and officers liability policy precludes coverage for claims arising from a non-compete clause in an asset purchase agreement.  Mau v. Twin City Fire Ins. Co., 2017 WL 4479731 (D.N.D. Oct. 3, 2017).  The court also held that… Continue Reading

Court Holds that Insured’s Expectations Do Not Override Language of Consumer Protection Exclusion

Posted in Wrongful Act
A New Jersey federal district court, applying New Jersey law, has held that a professional liability insurer was entitled to judgment on the pleadings on the basis that coverage for a complaint against its insured for violations of consumer protection laws was barred by the policy’s exclusion for consumer protection claims.  Hanover Insurance Co. v.… Continue Reading

Insurer’s Allegations that Declaratory and Injunctive Relief Are Not Covered Loss Survive Motion to Dismiss

Posted in Excess insurance/exhaustion, Loss, Wrongful Act
The United States District Court for the Northern District of California has denied an insured’s motion to dismiss an umbrella insurer’s declaratory judgment action.  Great American Ins. Co. v. Quintana Homeowners Ass’n., 2017 WL 3453394 (N.D. Cal. Aug. 11, 2017).  The insurer alleged that it had no duty to defend or indemnify after exhaustion of… Continue Reading

Antitrust Exclusion Precludes Duty to Defend

Posted in Wrongful Act
The New York Supreme Court for the County of New York, applying Michigan law, has held that an antitrust exclusion bars coverage for an antitrust lawsuit despite limited allegations of covered disparagement.  Carfax, Inc. v. Ill. Nat’l Ins. Co., No. 655198/2016 (N.Y Sup. Ct. May 16, 2017).… Continue Reading

Insurer Has No Duty to Defend Claim Seeking Restitution and Other Unspecified Relief

Posted in Loss, Personal Profit/Advantage exclusion, Wrongful Act
An Illinois federal district court has held that a lawsuit seeking to recover amounts an insured wrongfully refused to pay to another sought only uninsurable restitutionary-type relief, not “Damages,” and thus did not trigger an insurer’s defense obligations under an E&O policy.  Westport Ins. Corp. v. M.L. Sullivan Ins. Agency, Inc., 2017 WL 56635 (N.D.… 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

Sixth Circuit Enforces 24-Month Contractual Limitations Period In Bond; Employee’s Knowledge Bars Coverage for Company Under E&O Policy

Posted in Professional Services, Wrongful Act
The United States Court of Appeals for the Sixth Circuit, applying Michigan law, has held that an insured securities broker-dealer’s failure to bring legal proceedings within the 24-month period specified by its financial institution fidelity bond precluded coverage for losses resulting from an employee’s embezzlement scheme.  Hantz Fin. Servs., Inc. v. Am. Int’l Specialty Lines… Continue Reading

Under Errors and Omissions Policy, No Duty to Defend Suit Alleging Only Intentional Misconduct

Posted in Dishonesty Exclusion, Wrongful Act
The Court of Appeals of Indiana, applying Indiana law, has held that an insurer had no duty to defend its insured against a complaint alleging only intentional misconduct where the policy covered only negligent acts, errors and omissions.  Mt. Vernon Fire Ins. Co. v. Louis Jancetic, 2016 WL 6584268 (Ind. Ct. App. Nov. 4, 2016). … Continue Reading

Negligent Misrepresentation Claim Alleges Wrongful Act Despite Contract-Based Damages

Posted in Personal Profit/Advantage exclusion, Wrongful Act
A Massachusetts intermediate appellate court has held that a claim for negligent misrepresentation alleged a Wrongful Act, even though the alleged damages were based on contractual services. Winbrook Comm. Servs., Inc. v. U.S. Liability Ins. Co., 2016 WL 3245059 (Mass. App. Ct. June 14, 2016). Additionally, the court held that the creation of an opportunity… Continue Reading