The Fourth Circuit has held that an insurer correctly denied coverage for costs that the insured law firm and one of its attorneys incurred when the government investigated the attorney because neither a search warrant executed at the firm’s office nor letters the government sent to the attorney were “Claims,” as that term is defined in the subject professional liability policy. See Brown Goldstein Levy LLP v. Federal Insurance Co., No. 22-1023, 2023 U.S. App. LEXIS 12217 (4th Cir. May 18, 2023).

Continue Reading Fourth Circuit Holds Government Investigation Costs Are Not Covered Under Lawyers Professional Liability Policy Because Search Warrant and Target Conflict Letters Are Not Claims Against An Insured

The Southern District of New York recently addressed a “Wrongful Employment Practices Act” exception to an Insured versus Insured (“IVI”) exclusion in In re Seabury FxOne LLC v. U.S. Specialty Ins., No. 21-cv-837, 2023 U.S. Dist. LEXIS 31255 (S.D.N.Y. Feb. 24, 2023). In 2015, the CEO of Seabury FxOne LLC (“Seabury”) issued a demand letter alleging corporate misconduct and interference with the CEO’s ability to perform. Soon after the initial demand letter, the CEO resigned, arguing constructive discharge and retaliation as he allegedly had been cut off from critical information. Additional demand letters were exchanged and an unsuccessful mediation occurred, with the CEO ultimately initiating arbitration in August 2018 against Seabury and several related entities. By that point, the CEO’s allegations had evolved so the arbitration demand focused on dilution of the CEO’s shares, while the earlier demands focused on alleged wrongful termination and retaliation.

Continue Reading Southern District of New York Holds Employment Practices Wrongful Act Exception to an Insured Versus Insured Exclusion Applied To Former CEO’s Claims, but That an Allocation Was Required

The Ninth Circuit has held that California Insurance Code § 533 bars indemnity coverage for retaliation claims brought against the County of Sacramento Sheriff’s Department under California’s Fair Employment and Housing Act (“FEHA”). See County of Sacramento v. Everest National Insurance Co., No. 22-15250, 2023 U.S. App. LEXIS 3387 (9th Cir. Feb. 13, 2023).

Continue Reading Ninth Circuit Holds That California Insurance Code Section 533 Bars Indemnity Coverage for Employment Retaliation Claims

A federal court in California recently held that a D&O policy issued to Ceradyne, Inc. affords no coverage for an $11.3 million settlement of breach of fiduciary duty claims alleging that Ceradyne’s directors undervalued the company and agreed to sell it to 3M for an inadequate price. See Ceradyne, Inc. v. RLI Ins. Co., No. 2:21-cv-6373 JVS (KES), 2022 U.S. Dist. LEXIS 198217 (C.D. Cal. Oct. 31, 2022). Continue Reading California Federal Court Holds That Settlement of Post-Merger Breach of Fiduciary Duty Claim Brought Against Acquired Company’s Directors Is Not Covered by Its D&O Policy

A federal court in New York recently addressed what constitutes a “final adjudication” triggering conduct exclusions. In Cumis Specialty Insurance Co. v. Kaufman, No. 21cv11107 (DLC), 2022 U.S. Dist. LEXIS 176535 (S.D.N.Y. Sept. 28, 2022), the court held that the subject conduct exclusions barred defense coverage for the insured’s appeal of his criminal conviction, rejecting the insured’s argument that a “final adjudication” of excluded conduct required his appeal to be decided. Continue Reading New York Federal Court Holds That Imposition of Criminal Sentence Is “Final Adjudication” Triggering Conduct Exclusions

In a recently unsealed opinion, a trial court in Delaware granted summary judgment to three excess insurers holding that a prior knowledge exclusion in warranty letters provided to the excess insurers precludes coverage for government investigations, enforcement actions, and civil and criminal litigation concerning Infinity Q Capital Management LLC (“Infinity Q”). See Infinity Q Capital Management, LLC, et al. v. Travelers Casualty and Surety Company, et al., C.A. No. N21C-07-158 EMD CCLD, 2022 WL 2902803, 2022 Del. Super. LEXIS 363 (Del. Super. Ct., Aug. 15, 2022). Continue Reading Delaware Court Holds That Warranty Letters’ Prior Knowledge Exclusion Bars Coverage

Statutory penalty interest can be a significant exposure for insurers in some jurisdictions. A court’s recent ruling in Alticor Global Holdings Inc., et al. v. American International Specialty Lines Insurance Co., et al., Case No. 1:17-cv-388, 2022 U.S. Dist. LEXIS 130101 (W.D. Mich. June 8, 2022), illustrates the potentially steep cost. Continue Reading Michigan Coverage Dispute Highlights Steep Cost of Statutory Penalty Interest

Delaware state and federal courts have issued several important rulings on allocation under D&O insurance policies. Most recently, in SSC Technologies Holdings, Inc. v. Endurance Assurance Corp., No. N20C-01-088 EMD CCLD, 2022 Del. Super. LEXIS 164 (Del. Super., April 26, 2022) (Davis, J.), the court declined to apply the “larger settlement rule” for allocation when there are covered and uncovered matters. Continue Reading Recent Rulings in Delaware Courts on Allocation Under D&O Policies

A trial court in New York has granted summary judgment for a group of D&O insurers seeking a declaration that policies issued to AR Capital, LLC (“AR Capital”) do not provide coverage for settlements and consent judgments in actions alleging false and misleading SEC filings by VEREIT, Inc. (“VEREIT”), which is a real estate investment trust sponsored and managed by AR Capital. See XL Specialty Ins. Co. v. AR Capital, LLC, Case No. 650018/2019, 2021 N.Y. Misc. LEXIS 444 (N.Y. Supr. Ct., Feb. 2, 2021). The court’s ruling enforces the insured capacity limitation within the D&O policies’ definition of Wrongful Act, the exception of SEC disgorgement amounts from covered Loss, and an insured capacity exclusion.

Continue Reading New York Trial Court Enforces D&O Policy’s Insured Capacity Limitations and Exception of SEC Disgorgement Amounts from Covered Loss

After the Fourth Circuit held that a commercial general liability (“CGL”) policy could cover a data incident in 2016, confusion arose as to whether CGL policies would continue to cover data breaches. A recent California lawsuit by the smart-TV maker Vizio against two of its insurance companies shows that this confusion also arises when an insured invokes CGL policies to cover litigation arising from alleged data misuse.

Continue Reading Somebody’s Watching Me: A Recent Smart-TV Lawsuit Seeks Insurance Coverage for Privacy Litigation