Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Eighth Circuit Affirms No Coverage for Lawsuit for Breach of Noncompetition Covenant

Posted in Breach of Contract

Applying North Dakota law, the United States Court of Appeals for the Eighth Circuit has held that an insurance policy issued to a parent company and several of its commonly owned affiliates did not provide coverage for a lawsuit against the owner of the companies and one of the insured subsidiaries for breach of a noncompetition covenant in an asset purchase agreement.  Mau v. Twin City Fire Ins. Co., — F.3d –, 2018 WL 6379281 (8th Cir. Dec. 6, 2018).

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Insurer Must Defend Utility in Suit Based on Outage, Despite Exclusion for Property Damage and Resulting Loss of Use

Posted in Bad Faith

A Washington federal district court, applying Washington law, has held that an insurer who issued a public officials and employment practices liability policy to a utility had a duty to defend the insured in an action stemming from damages to a refinery after a power outage, despite the policy’s property damage exclusion.  Indian Harbor Ins. Co. v. City of Tacoma, Wash. Dep’t of Pub. Util., 2018 WL 6304767 (W.D. Wash. Dec. 3, 2018).  The court found that the underlying complaint was ambiguous as to whether the refinery sought any damages other than those for property damage.

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Warranty Precludes Coverage for SEC Action Under Excess Policy

Posted in Prior Knowledge/Warranty Exclusion

The United States Court of Appeals for the Second Circuit, applying New York law, has held that a warranty executed before the inception of an excess directors and officers liability policy precluded coverage for a Securities and Exchange Commission (SEC) action because the insured knew of the SEC’s “escalating” investigation before the warranty was signed.  Patriarch Partners, LLC v. AXIS Ins. Co., 2018 WL 6431024 (2d Cir. Dec. 6, 2018).

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“Capacity” Exclusion Bars Coverage for Two Directors for Claims of Wrongdoing and Fiduciary Breaches Outside Their Insured Capacity

Posted in Uncategorized

Applying Delaware law, a Delaware state court has held that a policy’s “capacity” exclusion precluded coverage for two directors because the claims filed against those directors would not have been established “but for” the directors’ alleged misconduct related to third-party investment entities the directors formed to control the insured company.   Goggin v. National Union Fire Ins. Co. of Pittsburgh, 2018 WL 62661195 (Del. Sup. Ct. Nov. 30, 2018).

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Excess Insurer Not Bound by Primary Insurer’s Payment of Uninsurable Disgorgement Settlement

Posted in Excess insurance/exhaustion, Loss

Applying California law, the United States District Court for the Central District of California has held that a follow-form excess insurer was not bound by the primary insurer’s decision to pay a settlement because the settlement constituted uninsurable disgorgement that did not trigger the excess insurer’s policy.  Axis Reinsurance Co. v. Northrop Grumman Corp., No. 2:17-CV-8660 (C.D. Cal Nov. 16, 2018).

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“Professional Services” Exclusion Bars Coverage for Law Enforcement Investigations

Posted in Professional Services

A Nebraska state court has held that the “professional services” exclusion in the insured municipality’s CGL policy barred coverage for the wrongful conviction and civil rights actions brought against the municipality because its deputy sheriffs and psychologist performed “professional services” when they investigated the underlying crime. Gage County, Neb. v. Employers Mut. Cas. Co., No. CI 17-1822, (Neb. Dist. Ct., Lancaster County, Nov. 1, 2018).

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Fourth Circuit Affirms that All Claims Arising from Negligent Design of Two, Nearly Identical Bridges Constitute “Related Claims”

Posted in Related Claims and associated exclusions

In a win for an insurer represented by Wiley Rein, the United States Court of Appeals for the Fourth Circuit, applying North Carolina law, affirmed that all claims against an engineering firm for the negligent design of two bridges constituted “related claims,” subject to a single limit of liability.  Stewart Eng’g, Inc. v. Continental Cas. Co., No. 18-1386 (4th Cir. Nov. 7, 2018).  A summary of the district court’s opinion can be found here.

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Two Class Action Lawsuits Are “Related,” Despite Different Plaintiffs and Different Time Periods

Posted in Related Claims and associated exclusions

Applying California and Virginia law, a federal district court has held that two class action lawsuits alleging similar wrongful conduct, but brought by different classes for different class periods, were nonetheless related and constituted a single claim.  Northrop Grumman Corp. v. AXIS Reinsurance Co., 2018 WL 5314918 (D. Del. Oct. 26, 2018).

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