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.
Continue Reading New York Federal Court Holds That Imposition of Criminal Sentence Is “Final Adjudication” Triggering Conduct Exclusions
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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New York Trial Court Enforces D&O Policy’s Insured Capacity Limitations and Exception of SEC Disgorgement Amounts from Covered Loss
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.
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Pennsylvania Court Estops Insurer From Asserting Coverage Defense That Was Not Identified in Its Reservation of Rights Letter
A split appellate court in Pennsylvania has held that an insurer is estopped from asserting a policy exclusion that it failed to expressly raise in its reservation of rights letter. See Selective Way Ins. Co. v. MAK Servs., No. 1289 EDA 2019, 2020 Pa. Super. LEXIS 342 (Pa. Super. Ct. April 24, 2020). The court’s ruling is an important reminder that failure to properly reserve the insurer’s right to deny coverage can sometimes have significant consequences.
Do TCPA Claims Trigger CGL Coverage? The California Supreme Court Agrees to Decide
The California Supreme Court has agreed to decide for the first time whether class actions alleging violations of the Telephone Consumer Protection Act (“TCPA”)—which prohibits certain unsolicited fax, telephone or text message advertisements—are covered by a CGL insurance policy. See Yahoo! Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., Case No. S253593 (Cal. S. Ct., March 27, 2019). The Ninth Circuit asked the California Supreme Court to resolve the issue as a certified question of unresolved state law. See Yahoo! Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 913 F.3d 923, 926 (9th Cir. 2019).
Continue Reading Do TCPA Claims Trigger CGL Coverage? The California Supreme Court Agrees to Decide