Frankly, My Dear, I Don’t Give a “Dam”: Seventh Circuit Holds Professional Liability Insurer Off the Hook in Neighborhood Dispute Tangentially Related to Unobtained Dam Permit

In Madison Mutual Insurance Co. v. Diamond State Insurance Co., No. 15-3292 (7th Cir. Mar. 21, 2017), the Seventh Circuit handed down a decision delineating the obligations between a professional liability insurer and a homeowner’s insurer. At bottom, the court refused to hold a professional liability insurer responsible for the defense of a suit that only tangentially referencing the insured’s professional services. As background, Dr. William and Wendy Dribben purchased a house in 1999 at Heartland Oaks, an exclusive development.
Continue reading...

Enough is Enough: Fifth Circuit Holds Duty to Defend Does Not Include Costs of Prosecuting Insured’s Fee-Dispute Counterclaim

Aldous v. Darwin National Assurance Co., No. 16-10537 (5th Cir. Mar. 16, 2017), presents a thicket of coverage issues. However, the clearest and most significant one for the insurance industry is that the duty to defend, under Texas law, does not extend to the cost of prosecuting an insured’s counterclaim. This coverage litigation started as an attorney-client dispute over the non-payment fees and then morphed into a legal malpractice action. Darwin National Assurance Co. insured Aldous under a professional liability
Continue reading...

Presumed Innocent: But Rescission Still Available to Void Coverage Due to Misrepresentations

A court rescinded a Georgia attorney’s professional liability coverage after his partner stole more than a million dollars from clients and lied about it on their firm’s insurance application. A federal district court in Georgia granted an insurer’s motion for summary judgment earlier this month, permitting rescission of the professional liability insurance policy issued to the attorney’s law firm. ProAssurance Cas. Co. v. Smith, No. CV415-051, 2016 U.S. Dist. LEXIS 105033 (S.D. Ga. Aug. 9, 2016). From 2013 to 2014, the attorney’s
Continue reading...

Impactful Wisconsin Supreme Court Decision Overturns “Unsound” Precedent

In Marks v. Houston Casualty Company, the Wisconsin Supreme Court reached a decision upholding the application of a business enterprise exclusion in a professional liability policy. Importantly, the decision clarifies Wisconsin law such that an insurer may rely upon policy exclusions in denying coverage outright. The coverage dispute arose out of six lawsuits filed against David Marks for his involvement in various enterprises across different industries. The lawsuits generally alleged Marks, as an officer or director of numerous entities (including
Continue reading...

Rescission Available to Insurer Whose Insured Lied in Insurance Application About Use of Experimental Weight Loss Techniques

In Essex Insurance Company v. Galilee Medical Center S.C d/b/a MRI Lincoln Imaging Center, the insured, Galilee, represented to its insurer, Essex, that it did not offer any weight loss drugs to its patients. After a former patient brought suit against Galilee based on complications from injections of a weight loss drug, Essex sought to rescind its policy. The Seventh Circuit Court upheld summary judgment granted to Essex, finding that false statements made by Galilee provided a basis for rescission.
Continue reading...

No Coverage for Financial Firm that Invested Clients’ Money in Ponzi Scheme

A securities firm sought coverage under a professional liability policy for claims by customers that suffered losses on real estate investment vehicles. The Panel for the Second Appellate District in California found that the policyholder was not entitled to coverage because the “application exclusion” in the firm’s policy bars coverage for the claims asserted, as the policyholder did not disclose the facts of the claims against it to the insurer in its application. The claimants brought suit, asserting that the
Continue reading...

Texas Federal District Court Holds Both Professional Liability Insurers on the Hook for Insured’s Defense

In Corinth Investors Holdings, LLC v. Evanston Insurance Co., 2015 U.S. Dist. LEXIS 36273 (E.D. Tex. Mar. 24, 2015), the U.S. District Court for the Eastern District of Texas held that two professional liability insurers were both on the hook to defend an insured in an action where notice of the claim could have been received under separate, concurrent insurance policies issued by the two entities. Corinth Investors Holdings, LLC, d/b/a Atrium Medical Center was the named insured under a
Continue reading...

Insurers Have No Duty To Defend Chiropractor Against Failure To Warn of Sexual Assault Claim

In Hanover American Insurance Co. v. Balfour, 2015 U.S. Dist. LEXIS 874 (10th Cir. Jan. 21, 2015), the U.S. Court of Appeals for the Tenth Circuit affirmed an Oklahoma federal district court’s rulings in favor of two insurers arising out of a claim against a chiropractor for negligent failure to warn her patient of the insured’s husband propensity to commit a sexual assault.  The Tenth Circuit first found that under the subject chiropractor’s malpractice policy, the underlying complaint failed to
Continue reading...

Demand for Refund Constitutes a Claim under Professional Liability Policy Says Eighth Circuit

In Philadelphia Consolidated Holding Corp. v. LSI-Lowery Systems Inc., 2015 U.S. App. LEXIS 349 (8th Cir. Jan. 9, 2015), the Eighth Circuit affirmed the district court’s grant of summary judgment in favor of Philadelphia Consolidated Holding Corporation, d/b/a/ Philadelphia Insurance Companies (PIC).  The Eighth Circuit found that PIC was not required to defend and indemnify its insured, LSI-Lowery Systems, Inc. (LSi) because LSi failed to satisfy the policies’ claims made and reported requirement. In the underlying suit, LSi sold business
Continue reading...

Settlement of Ill-Gotten Gains Suit Does Not Constitute Repayment or Restitution

On Tuesday, December 16, in U.S. Bank Nat. Ass’n v. Indian Harbor Ins. Co., 2014 WL 7183851 (D. Minn. Dec. 16, 2014), the US District Court for the District of Minnesota granted US Bank’s summary judgment motion, finding insurance coverage in an overdraft-fee dispute settlement. The three underlying class action lawsuits were filed against US Bank National Association and US Bancorp by plaintiffs claiming the bank unlawfully inflated customers’ overdraft fees. The banks provided customers with account overdraft protection and
Continue reading...