Executive Summary Blog

Legal developments affecting professional liability insurers

The United States District Court for the Central District of California, applying California law, has held that an insurer was not entitled to summary judgment in full, finding that triable issues of fact remained regarding the insurer’s alleged failure to provide an immediate defense to the insured corporation and to assign separate counsel for an insured director.  Celerity Educ. Grp. v. Scottsdale Ins. Co., 2019 WL 430497 (C.D. Cal. Feb. 4, 2019).…
Applying Maine law, a federal district court has held that an insurer did not have a duty to defend an insured mental health agency in a billing fraud investigation by the state health department because the sanctions sought by the department did not constitute “damages” within the meaning of the insured’s professional liability policy.  Oceanway Mental Health Agency, Inc. v. Philadelphia Indem. Ins. Co., 2019 WL 302486 (D. Maine Jan. 23, 2019).…
The United States Court of Appeals for the First Circuit, applying Massachusetts law, has affirmed the district court’s holding that a professional services exclusion in a real estate advisory fund’s D&O policy did not excuse the duty to defend a lawsuit brought by an investor in the fund because the allegations at issue were ambiguous as to the insured’s alleged misconduct aside from investing in the properties at issue.  Scottsdale Ins. Co. v. Byrne, No.
An Alabama federal district court has ruled that a third-party claim seeking indemnification for a medical malpractice suit, allegedly resulting from the insured’s allegedly faulty performance of technology services, was barred from coverage by “medical services” and bodily injury exclusions.  Jackson, Key & Assocs., LLC v. Beazley Ins. Co., Inc., 2018 WL 6710041 (S.D. Ala. Nov. 30, 2018) (report and recommendation adopted on December 20, 2018).…
The United States Court of Appeals for the Seventh Circuit, applying Indiana law, has revived a coverage dispute over whether a medical malpractice insurer’s professional liability insurer must cover the malpractice insurer’s post-verdict excess settlement of an underlying wrongful death claim, finding that factual questions remain as to whether the malpractice insurer’s refusal to settle the wrongful death claim on behalf of its insured physician was an actual “Wrongful Act” triggering a prior knowledge exclusion. …
Applying California law, the United States District Court for the Northern District of California has held that coverage is precluded under a claims-made D&O policy based on two exclusions: a specific circumstances exclusion and a prior notice exclusion.  Landmark Am. Ins. Co. v. Navigators Ins. Co., 2018 WL 6591620 (N.D. Cal. Dec. 14, 2018).…
In an issue of first impression in California, a California appellate court has rejected a shareholder plaintiff’s effort to avoid enforcement of a Delaware company’s forum selection bylaw, despite the shareholder’s arguments that the bylaw was inconsistent with California law and was otherwise unreasonable given the manner and timing of its adoption.  Drulias v. 1st Century Bancshares, Inc., __ Cal.Rptr.3d __, 2018 WL 6735137 (Cal. Ct. App. Dec. 21  2018).  While Delaware law plainly…
Ruling on summary judgment, the Delaware Chancery Court has held that forum selection clauses in three separate companies’ corporate charters requiring that any claims under the Securities Act of 1933 be brought in federal court are “ineffective and invalid.”  Sciabacucchi, et al. v. Salzberg, et al., C.A. No. 2017-0931-JTL (Del. Ch. Dec. 19, 2018).  In doing so, the court noted that the source of the 1933 Act claims was federal law, distinct from…
The Supreme Court of Delaware has held that under Delaware law, the three-year statute of limitations period applicable to a statutory bad faith action governed by Louisiana law commences when the insured could plead a prima facie case and was therefore barred.  Homeland Ins. Co. of New York v. Corvel Corp., 2018 WL 6061261 (Del. Nov. 20, 2018).…