A New Jersey federal district court has ruled that a broad exclusion in a D&O Policy for claims arising out of services provided to third parties barred coverage for a claim arising out of an insured’s provision of services to its client, and the inclusion in the policy of narrower exclusions (for professional services and insurance company services) did not create any ambiguity.  Benecard Servs., Inc. v. Allied World Specialty Ins. Co., 2020 WL 2842570 (D.N.J. May 31, 2020).

Continue Reading D&O Policy’s “Third-Party Services” Exclusion Bars Coverage for Claim Brought by Insured’s Client

The Supreme Court’s June 22 decision in Liu v. Securities and Exchange Commission addressed important issues about the SEC’s authority to obtain “disgorgement” and the meaning of the term.  This article summarizes the Court’s ruling in Liu, including the Court’s characterization of the term disgorgement and limitations on the SEC’s ability to obtain the remedy.  It then identifies practical implications of the decision in the context of SEC enforcement, as well as potential insurance coverage implications of the decision.

Continue Reading Liu v. SEC: What Is “Disgorgement”?

The U.S. District Court for the Southern District of New York, applying New York law, has held that no coverage is available for related claims reported to the insurer after the end of the policy period in which the first claim was madeBerkley Assurance Co. v. Hunt Constr. Group, Inc., 2020 WL 3000399 (S.D.N.Y. June 4, 2020).

Continue Reading No Coverage for Related Claims Reported After Policy Period During Which Claim Was First Made

Applying the law of Puerto Rico, a federal district court held that coverage was unavailable for an underlying lawsuit under a claims-made policy because the claim was deemed first made prior to the inception of the policy period.  Galarza-Cruz v. Grupo HIMA San Pablo, Inc., 2020 WL 2843028 (D.P.R. May 28, 2020).

Continue Reading No Coverage for Claim Deemed First Made Prior to Inception of Policy Period

Applying North Carolina law, the United States Court of Appeals for the Fourth Circuit has held that a False Claims Act (“FCA”) suit against an insured for allegedly submitting false Medicaid reimbursement claims fell within an errors and omissions policy’s coverage grant for “damages resulting from a claim arising out of a medical incident.” Affinity Living Grp., LLC v. StarStone Specialty Ins. Co., 2020 WL 2630845 (4th Cir. May 26, 2020).
Continue Reading Fourth Circuit: FCA Suit Alleging False Medicaid Reimbursement Claims “Arises out of a Medical Incident” under North Carolina Law

The United States District Court for the District of New Jersey, applying Delaware law, has held that an exclusion precluding coverage for misappropriation of trade secrets in a directors and officers liability policy barred coverage for a claim brought against the insured by a competitor alleging the negligent failure to supervise an employee.  Sprout Health, LLC v. RSUI Indem. Co., 2020 WL 2507776 (D.N.J. May 15, 2020).  The court determined that the negligence count was “directly contingent” on a showing that the insured’s employee misappropriated the competitor’s trade secrets.

Continue Reading Negligent Failure to Supervise Claim Barred by Misappropriation of Trade Secrets Exclusion

The U.S. Court of Appeals for the Ninth Circuit, applying California law, affirmed a district court’s ruling that an insurer did not act in bad faith by failing to defend its insureds and settle a claim where there was a “genuine issue” as to the insurer’s liability.  Sharp v. Evanston Ins. Co., 2020 WL 2569694 (9th Cir. May 21, 2020).  However, the court concluded that the insurer’s denial of coverage was incorrect because various policy exclusions requiring malice and California Insurance Code Section 533 did not apply to bar coverage for the insureds’ alleged negligent mishandling of fiduciary funds.

Continue Reading Ninth Circuit Holds That Alleged Misappropriation of Client Funds Triggers E&O Coverage, But No Bad Faith Where Insurer’s Denial Was Reasonable

The U.S. Court of Appeals for the Ninth Circuit, applying California law, has held that a fiduciary liability policy potentially provided coverage for a complaint alleging errors in the administration of an employee benefits program.  Erickson-Hall Constr. Co. v. Hartford Fire Ins. Co., 2020 WL 1744338 (9th Cir. Apr. 8, 2020).

Continue Reading Alleged Errors In Employee Benefits Administration Potentially Trigger Fiduciary Liability Policy

The U.S. Court of Appeals for the Third Circuit, applying California and Virginia law, has found that wrongful acts alleged in two ERISA class actions comprising different class periods are causally and logically related.  Northrop Grumman Corp. v. AXIS Reinsurance Co., 2020 WL 1933264 (3rd Cir. Apr. 22, 2020).

Continue Reading Class Actions Comprising Different Class Periods Causally and Logically Related

The Eastern District of New York, applying New York law, has held that alleged violations of the New York Labor Law (NYLL) and the Fair Labor Standards Act (FLSA) did not constitute covered “Wrongful Acts” as defined by the applicable employment practices liability insurance policy.  Sirob Imports Inc. v. Mount Vernon Fire Ins. Co., 2020 WL 1550587 (E.D.N.Y. Mar. 31, 2020).  However, the court concluded that such allegations were ultimately covered under the policy’s Fair Labor Standards Act Sub-Limit Endorsement because the two statutes were “similar.”

Continue Reading Alleged Violations of Fair Labor Standards Act and New York Labor Law Not “Wrongful Acts” Under Employment Practices Liability Policy