The First Circuit has held, under Massachusetts law, that an insurer’s actual knowledge of a claim does not excuse the insured from reporting the claim to the insurer as required by the policy. President and Fellows of Harvard College v. Zurich Am. Ins. Co., 77 F.4th 33 (1st Cir. 2023). In so holding, the court followed a “well-beaten path” in Massachusetts recognizing that notice provisions in claims-made policies must be strictly enforced regardless of whether the insurer is prejudiced by the insured’s failure to comply with the policy’s notice requirements.
Eleventh Circuit Holds That Georgia Law Does Not Require Reimbursement of Defense Costs Paid Subject to a Reservation of Rights Absent Policy Language Requiring Reimbursement
The Eleventh Circuit has held, in a matter of first impression under Georgia law, that a reservation of rights letter including a right to reimbursement did not entitle insurers to reimbursement of defense costs absent policy language expressly providing for such right. See Continental Casualty Co. v. Winder Laboratories, LLC, __ F.4th __, 2023 U.S. App. LEXIS 17852 (11th Cir. July 13, 2023).
Fourth Circuit Holds That Reverse Triangular Merger Was Acquisition of Insured Entity for Purpose of Subject D&O Policy’s Bump Up Provision
The Fourth Circuit has held in a published decision that a 2015 reverse triangular merger between Willis Group Holdings plc (“Willis”) and Towers Watson & Co (“Towers Watson”) was “the acquisition of all or substantially all the ownership interest in or assets” of Towers Watson within the terms of the Bump Up Provision in the Towers Watson D&O policies. See Towers Watson & Co. v. National Union Fire Insurance Co. of Pittsburgh, Pa., 67 F.4th 648 (4th Cir. 2023).
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 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).
Ninth Circuit Holds That California Insurance Code Section 533 Bars Indemnity Coverage for Employment Retaliation Claims
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).
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 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).
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New York Federal Court Holds That Imposition of Criminal Sentence Is “Final Adjudication” Triggering Conduct Exclusions
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.
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Delaware Court Holds That Warranty Letters’ Prior Knowledge Exclusion Bars Coverage
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).
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Michigan Coverage Dispute Highlights Steep Cost of Statutory Penalty Interest
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.
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Recent Rulings in Delaware Courts on Allocation Under D&O Policies
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.
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