Insurer Had Duty to Defend Where at Least One Allegation “Possibly” Constituted a Wrongful Act

The United States District Court for the District of Connecticut, applying Connecticut law, has granted summary judgment in favor of an insured, holding that an underlying complaint alleged at least one act that could “possibly” fall within the policy’s definition of “wrongful acts,” triggering a duty to defend.  Fernandez v. Zurich Am. Ins. Co., 2017 WL 923910 (D. Conn. March 8, 2017).

The insurer issued a professional liability policy to a company that provided staffing and recruiting services.  The insurer denied coverage for an action against the insured, alleging that the insured improperly solicited employees from a competitor, on the grounds that the complaint did not allege a “wrongful act” within the meaning of the policy.  The policy defined “wrongful act” to include “[a]ny actual or alleged act, error or omission, misstatement, or misleading statement in the course of providing ‘staffing services.’”  In the coverage action that followed, the insured moved for summary judgment on its breach of duty to defend and breach of contract claims.

The court determined that the complaint alleged some acts that “at least ‘possibly’ constituted ‘wrongful acts’” under the policy.  The court pointed to allegations that the insured placed at least one temporary employee from the underlying plaintiff in a job with one of the insured’s customers and placed advertisements on job search websites.  Because the phrase “in the course of” means “during and as part of the specified activity,” the court reasoned that these allegations describe acts that were done “in the course of” providing staffing services to the insured’s clients as required by the policy.”  The court rejected the insurer’s argument that “in the course of” required a causal nexus between the injuries alleged and the staffing services provided.  The court concluded that because there was at least one allegation possibly within the scope of coverage, the insurer owed a duty to defend and was liable for breach of contract.


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