Professional Liability/E&O

Deciding that certain damages claimed by the underlying case plaintiff were covered “Loss” under a professional services policy, the Eleventh Circuit determined that AEGIS must pay to defend a Georgia landlord in a class action for wrongful failure to return tenants’ security deposits under O.C.G.A. § 44-7-35(c).  The policy defined “Loss” as “a compensatory monetary amount for which the Insured may be held legally liable, including judgments . . . awards, or settlements,” but specifically excluded:

Continue Reading Eleventh Circuit Determines AEGIS Must Defend Landlord in Security Deposit Class Action

An appeals court has overturned an insurer’s successful dismissal of an insurance coverage lawsuit arising from the insurer’s refusal to defend a North Carolina assisted living operator in a False Claims Act lawsuit alleging more than $60 million in damages. The court held that that the insurer improperly denied coverage under the operator’s professional liability policy (covering “damages resulting from a claim arising out of a medical incident”) because the alleged improper billing had a causal connection to the operator’s failure to render medical professional services and, therefore, “arose out of” a covered medical incident.

Continue Reading Professional Liability Insurer Breached Policy by Refusing to Defend False Claims Act Lawsuit

On February 13, 2020, a Texas federal court granted summary judgment in favor of coverage, finding the policyholder provided sufficient notice to its insurer of a potential claim for damages caused by allegedly contaminated proppant used at a well site in west Texas.  See Evanston Insurance Company v. OPF Enterprises, LLC, Civil Action No. 4:17-CV-2048 (S.D.T.X. Feb. 13, 2020) (Dkt. No. 51) .  The Court found that the policyholder’s notice of a potential claim was effective when provided to the insurer’s agent, even though it was not provided directly to the insurer itself.

Continue Reading Texas Federal Court Rejects Insurer’s Defenses to Fracking Claim

A Michigan federal court held recently in Great American Fidelity Ins. Co. v. Stout Risius Ross, Inc., et al., 2020 WL 601784, at *1 (E.D. Mich. Feb. 7, 2020), that an insurer must defend an investment advisor against lawsuits alleging that it fraudulently overvalued the stock of a company destined for bankruptcy.  The court determined that the insurer failed to show that an exclusion barring coverage for claims arising out of ERISA and other securities laws violations was broad enough to bar coverage for accompanying common law claims of fraud and negligent misrepresentation.

Continue Reading Insurer Must Defend ERISA Claims Despite “Statutory” Violation Exclusion

Ruling on cross motions for summary judgment, a federal court in New York held that AIG Specialty Insurance Company (AIG) must cover the settlement of an underlying action against its insured, SS&C Technologies Holdings, Inc. (SS&C), who was duped by e-mail scammers to issue millions in wire transfers.  The court rejected AIG’s assertion that the loss resulted from SS&C’s exercise of authority or discretionary control of client funds where SS&C only had limited administrative authority and further held that, even if SS&C had exercised the requisite authority, the exclusion was ambiguous.  A copy of the court’s decision can be found here.

Continue Reading New York Federal Court Says Social Engineering Scheme Covered Under Professional Liability Policy

Insurance companies frequently raise the so-called “dishonesty” exclusion that is typically found in most professional liability and directors and officers insurance policies.  Last week, the U.S. Court of Appeals for the Sixth Circuit took a substantial step toward curtailing that practice.  In a coverage dispute with eight-figure implications, the appellate court found in favor of the policyholder and ruled that publishing false statements does not equate to dishonesty and thus is not sufficient to support application of a dishonesty exclusion.

Continue Reading Sixth Circuit Reverses Insurer’s Overly Broad Application of “Dishonest Acts” Exclusion

The Delaware Superior Court recently held, in Conduent State Healthcare, LLC v. AIG Specialty Insurance Company, et al., that a government-conducted civil investigation constitutes a “Claim” sufficient to trigger coverage under a professional liability insurance policy. Conduent State Healthcare, LLC (“Conduent”) alleged that Defendant AIG Specialty Insurance Company (“AIG”) breached its obligations by refusing to defend and indemnify Conduent for costs incurred in connection with a Medicaid fraud investigation.

Continue Reading Governmental Civil Investigations Trigger Insurer’s Duties to Defend and Indemnify

On January 9, 2018, the Northern District of California held that the Nonprofits Insurance Alliance of California owed defense coverage to a pair of Scientology-based drug and alcohol rehabilitation centers for two lawsuits filed in Georgia and Oklahoma alleging that staff members had provided drugs and alcohol to patients, which resulted in injury and death. In Western World Ins. Co. v. Nonprofits Ins. Alliance of California, No. 14-cv-04466-EJD (N.D. Cal. Jan. 9, 2018), the court confirmed the broad scope of an insurer’s duty to defend under California law and rejected the insurer’s attempt to unreasonably expand the application of a “professional services” exclusion to avoid coverage.

Continue Reading California Court Holds that Drug- and Alcohol-related Injuries Are Not Barred by Professional Services Exclusion

This week, SEC Chairman Jay Clayton issued a statement on Initial Coin Offerings (ICO) addressing the legality, fairness, and risks associated with those offerings. Although the agency’s bulletin was one of many recent public statements by federal agencies on ICOs and cryptocurrencies generally, this new warning highlights additional issues and concerns with the ICO phenomenon that are particularly relevant to insurance coverage.

Continue Reading Initial Coin Offerings and Insurance

In Centurion Med. Liab. Protective Risk Retention Grp., Inc. v. Gonzalez, No. CV 17-01581 RGK (JCx), 2017 BL 392431 (C.D. Cal. Nov. 1, 2017), Centurion Medical Liability Protective Risk Retention Group sought a declaration that it owed no duty to defend a lawsuit alleging that its insureds—a group of medical practitioners—committed professional negligence during the delivery of a newborn child.  Centurion argued that it had no defense obligation because its insureds did not notify Centurion of the lawsuit within 20 days after it was filed, as required under the policy.


Continue Reading Don’t Hit “Snooze” on Your Notice Obligation – California Ruling Provides a Crucial Lesson for Those Purchasing “Claims-Made” Policies