In a case in which Wiley represented the insurer, the United States District Court for the Eastern District of Virginia, applying New York law, has held that three prior knowledge exclusions barred coverage under an architects and engineers professional liability policy as a matter of law where, before the policy period incepted, the insured (1) knew that a pressure vessel in a boiler system which it had serviced had exploded, causing property damage and bodily injury; (2) received three pre-suit letters from potential claimants; and (3) issued two internal litigation holds.  ChemTreat, Inc. v. Certain Underwriters at Lloyd’s of London, No. 19-cv-63 (E.D. Va. Sept. 21, 2020).
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Continue Reading Prior Knowledge Exclusions Apply Where Insured Received Three Letters from Potential Claimants and Issued Two Litigation Holds Before Policy Incepted

A California court ruled that a forum selection provision in a Delaware company’s registration statement requiring that certain securities litigation be brought solely in federal court was enforceable.  Wong v. Restoration Robotics, Inc., Case No. 18CIV02609 (Cal. Sup. Ct., San Mateo County, Sept. 1, 2020).  The California court’s ruling could signal the beginning of a broader trend, started in Delaware, that would be helpful to securities defendants, and, in turn, to insurance carriers.
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Continue Reading California Court Enforces Federal Forum Selection Provision For 1933 Act Claims

Applying Michigan law, a federal district court has held that an employment practices liability insurer had a duty to defend a lawsuit that derived in part from facts or circumstances that were the subject of an EEOC claim and lawsuit filed prior to the policy period.  City of Grosse Pointe v. U.S. Specialty Ins. Co., 2020 WL 3961481 (E.D. Mich. July 13, 2020).
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Continue Reading EPL Insurer Must Defend Lawsuit Derived in Part from EEOC Claim and Retaliation Lawsuit Filed Prior to Policy Period

The United States District Court for the District of Colorado, applying Colorado law, has held that a professional liability insurer was not obligated to defend an attorney accused of discovery misconduct. The court ruled that an order requiring the attorney to show cause why he should not be sanctioned did not seek Damages, as defined in the policy, and fell within an exclusion for claims seeking payment of legal fees and costs. Godin & Baity, LLC v. Markel Ins. Co., Inc., 2020 WL 5076764 (D. Colo. Aug. 27, 2020). The court also addressed and rejected the insured’s “reasonable expectations” argument, as the facts did not satisfy either of the two conditions under which Colorado law recognizes the doctrine.
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Continue Reading Sanctions Carve-Out Bars Coverage for Show Cause Order Issued to Attorney

Applying California law, a federal district court has held that a request for payment of overdue legal fees does not constitute a claim for purposes of a D&O policy. Domokos v. Scottsdale Ins. Co., Case No. 5:20-cv-00366 (N.D. Cal. July 16, 2020). The court also held that the policy’s prior acts, breach of contract, and creditor claims exclusions did not bar coverage.
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Continue Reading Pre-Policy Email Demanding Payment of Overdue Legal Fees is Not a Claim

Applying Arizona law, the United States District Court for the District of Arizona held that an insurer that breached its duty to defend bears the burden of demonstrating that an allocation of defense costs between covered and non-covered claims is possible. Tapestry on Cent. Condo. Ass’n. v. Liberty Ins. Underwriters Inc., 2020 WL 4607248 (D. Ariz. Aug. 11. 2020).
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Continue Reading Insurer that Breached Duty to Defend Bears Burden on Allocation of Defense Costs

The United States Securities and Exchange Commission has increased its focus in recent years on investment advisers who manage private funds. The Division of Enforcement of the SEC reported that in fiscal year 2019, 36% of all civil and stand-alone administrative proceedings were brought against investment advisers and investment companies.
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Continue Reading Private Funds: SEC Examination and Enforcement Priorities

A Texas court of appeals found no coverage under two excess directors and officers liability policies for an appraisal action brought by dissenting shareholders to a merger pursuant to Section 262 of the Delaware General Corporation Law.  Zale Corp. v. Berkley Ins. Co., 2020 WL 4361942 (Tex. Ct. App. July 30, 2020).  The court held that the litigation right created by the appraisal statute turns on the act of executing the merger and not on any “wrongful act” preceding the merger.  Thus, because the merger was consummated after the policy period, there was no “wrongful act” during the policy period sufficient to trigger coverage for the appraisal suits.
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Continue Reading Texas Court Holds “Instrumental Act” in Appraisal Litigation is Execution of Merger

The United States District Court for the District of Connecticut, applying Connecticut law, has denied cross-motions for summary judgment, finding that fact issues remain with regard to whether the insured reasonably could have expected a pre-policy period enforcement notice to give rise to claim.  Wallingford Grp., LLC v. Arch Ins. Co., 2020 WL 4464629 (D. Conn. May 11, 2020).
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Continue Reading Fact Issues Preclude Summary Judgment on Prior Knowledge Exclusion

The United States Court of Appeals for the Eleventh Circuit, applying Georgia law, has held that an insurer has a duty to defend a lawsuit where an award of attorneys’ fees might constitute covered “Loss,” even though the lawsuit did not otherwise seek covered amounts.  AEGIS Elec. & Gas Int’l Serv. Ltd. v. ECI Mgmt. LLC, No. 19-11114, 2020 WL 4359610 (11th Cir. July 30, 2020).
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Continue Reading 11th Circuit Holds Insurer Must Defend Lawsuit Where Award of Attorneys’ Fees Was the Only Potentially Covered Relief