Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Insured Bears Burden of Establishing that Exception to Insured Versus Insured Exclusion Applies

Posted in Insured v. Insured Exclusion

The United States District Court for the Northern District of Illinois, applying Oklahoma law, has held that the insured bears the burden of demonstrating that an exception to an otherwise applicable exclusion applies to restore coverage.  World Water Works Holdings, Inc. v. Continental Cas. Co., 2019 WL 2576560 (N.D. Ill. June 24, 2019).

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Third Party’s Breach of Contract Claim Against Broker Survives Motion to Dismiss

Posted in Broker Duty to Claimant

The United States Bankruptcy Court for the District of Massachusetts has held that a third party claimant’s breach of contract claim could proceed against an insurance broker where the third party’s claims against the insured were known to the broker before the broker procured additional insurance that effectively reduced the amount of coverage available.  In re GlassHouse Techs., 2019 WL 2477430 (Bankr. D. Mass. May 31, 2019).

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Three Separate Policy Exclusions and Wrongful Acts Outside the Policy Period Bar Coverage for California False Claims Act Lawsuit

Posted in Breach of Contract, Related Claims and associated exclusions, Wrongful Act

The United States District Court for the Central District of California, applying California law, has held that there is no coverage for a False Claims Act settlement where the insured company’s alleged wrongful acts took place outside the policy period and were independently barred from coverage by a contract exclusion, prior acts exclusion and regulatory exclusion. Office Depot Inc. v. AIG Specialty Insurance Co. No. 2:15-cv-02416 (C.D. Cal. June 21, 2019).

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Insurer Must Defend Insured in Claim Alleging Use of Counterfeit Materials Because “Professional Services” Definition Was Ambiguous and No Exclusion Barred Coverage

Posted in Dishonesty Exclusion, Professional Services

Applying New York law, a Delaware state court has held that an insurer owed its insured a duty to defend because the factual allegations in two underlying lawsuits arguably involved the insured’s performance of “Professional Services” and no exclusion applied to otherwise bar coverage.  Steadfast Ins. Co. v. DBI Servs., LLC, 2019 WL 2613195 (Del. Super. Ct. June 24, 2019).

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First Circuit Holds UBS Puerto Rico Bond Claims Barred by Specific Litigation Exclusion

Posted in Related Claims and associated exclusions

Ruling in favor of Wiley Rein’s client—a primary D&O insurer—and two excess insurers, the U.S. Court of Appeals for the First Circuit today held that a broadly worded specific litigation exclusion bars coverage for a series of lawsuits, regulatory investigations, and arbitrations filed against the insured, a Puerto Rico subsidiary of UBS, because the matters all involve facts, situations, or circumstances alleged in the prior claims listed in the exclusion. UBS Financial Servs. Inc. v. XL Specialty Ins. Co., No. 18-1148 (1st Cir. July 3, 2019).

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Insurer Lacked Conclusive Evidence of Insured’s Involvement to Trigger I v. I Exclusion; Insured’s Compromise of Favorable Judgment to Settle Multiple Suits Not a “Loss”

Posted in Allocation, Insured v. Insured Exclusion, Loss, Notice of Claim

The United States District Court for the Central District of California, applying California law, has held that an insurer lacked adequate information to deny coverage under an insured vs. insured exclusion in a D&O policy.  MJC Supply, LLC v. Scottsdale Ins. Co., 2019 WL 2372279 (C.D. Cal. June 4, 2019).  The court also held that the insureds’ notice under one policy constituted sufficient notice of the claim under two policies issued to a different named insured.  However, the court held that the insureds were not entitled to recover the difference between a judgment entered in their favor and a subsequent settlement of multiple lawsuits because the insureds did not sustain a “Loss.”

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Claim Supplement in Renewal Application Did Not Constitute Proper Notice under Claims-Made-and-Reported Policy

Posted in Notice of Claim

Applying Texas law, a federal district court has held that an insurer owed no duty to defend or indemnify its insured because the insured’s claim supplement to a renewal application did not constitute proper notice of a claim pursuant to the terms of the claims-made-and-reported policy.  Landmark Ins. Co. v. Lonergan Law Firm, PLLC, 2019 WL 2295358 (N.D. Tex. Mar. 8, 2019).

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Former Of Counsel Is Still “Insured Person” After Leaving Law Firm

Posted in Defense Costs

The Ohio Court of Appeals has held that an “of counsel” attorney was an “Insured Person” under his former law firm’s professional liability policy for purposes of a malpractice action involving allegations that occurred both before and after the attorney worked at the firm.  Gallagher Sharp, L.L.P. v. Miller Goler Faeges Lapine, L.L.P., 2019 WL 2319296 (Ohio Ct. App. May 30, 2019).

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Fraud Exclusion Bars Coverage for Insured Found in Violation of Federal Securities Laws

Posted in Dishonesty Exclusion

The United States Court of Appeals for the Eleventh Circuit, applying Florida law, held that the fraud exclusion in a company owner’s D&O policy barred coverage because a Securities & Exchange Commission (SEC) civil action found the owner to have engaged in intentionally fraudulent conduct. Imperato v. Navigators Ins. Co., 2019 WL 2443034 (11th Cir. June 11, 2019).

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Eleventh Circuit Applies Securities Exclusion Broadly

Posted in Wrongful Act

The U.S. Court of Appeals for the Eleventh Circuit, applying Florida law, has held that a securities exclusion in a private company directors and officers insurance policy broadly barred coverage for all claims in an underlying lawsuit brought by former shareholders of an insured company arising out of the sale of their shares.  Colorado Boxed Beef Co., Inc. v. Evanston Ins. Co., No. 19-10326, 2019 WL 2479321 (11th Cir. June 13, 2019).

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