Recent Court Decisions in Insurance Law

Claim by Broker’s Competitor Falls Within Broker’s Professional Liability Coverage

Massachusetts 

A professional liability insurer brought an action against its insured, an insurance broker, arising out of the broker’s sale of surplus lines policies to real estate brokers in California. The USDC ruled for the broker and, applying Massachusetts law, the First Circuit affirmed. The Circuit Court rejected the insurer’s argument that sale of surplus lines policies was outside the scope of professional services inherent in the practice of the insurance broker profession. It also found that the broker’s professional liability coverage applied, even though the underlying claim was brought by a competitor of the broker and not a client. The Court also ruled that the policy exclusion for “unfair competition of any type” did not apply as that exclusion is directed at acts or omissions causing confusion on the part of consumers.

Utica Mutual v. Herbert H. Landy Insurance Agency, 820 F.3rd 36 (First Circuit April 19, 2016)

No Coverage for Stalking Allegations

New Hampshire 

The New Hampshire Supreme Court affirmed a Superior Court Ruling that stalking allegations against a club member were not covered under his homeowner’s policy/umbrella liability policy or the club’s employment practice liability and non-profit D&O liability policy. A fellow club member claimed that Todd had hacked her computer and smashed the window of her car because she spoke out against him at a club meeting. The alleged conduct was inherently injurious so not an occurrence or accident within the scope of the homeowner’s policy. The computer hacking did not involve invasion of a private occupancy so it did not fall within coverage for injuries caused by an offense under the umbrella liability policy. Computer hacking and auto vandalism were not within the scope of Todd’s employment at the club or otherwise related to business of the club and, therefore, they were not covered by the EPL policy. Finally, the acts alleged did not constitute “personal injury” under the D&O policy because policy language describing “invasion of the right of privacy” as personal injury related only to interests in real property. 

Todd v. Vermont Mutual Insurance Company, 2016 WL 1381486 (April 7, 2016)

Second Reservation of Rights Letter Unnecessary

Massachusetts

The United States District Court ruled that a single reservation of rights letter was sufficient to preserve the carrier’s coverage defenses, even if the policyholder was later made subject to a new 93-A third party claim. The Court noted that the single reservation of rights was clearly based on the insured’s conduct and not on “a technical formulation of the legal claims.” If the policyholder was actually confused by the absence of a second reservation of rights letter, it was incumbent on him to raise the question with his carrier.

American Guaranty & Liability Insurance Co. v. John F. Lamond, et als., 2016 WL 1312008 (April 4, 2016)

CGL Carrier Has No Direct Duty to a Party Asserting Rights Under an "Insured Contract"

Massachusetts

Policyholder sold a roller coaster subject to an agreement that it would defend and indemnify its customer against any personal injury claims. It was conceded that the customer had rights to coverage from the CGL carrier as a party to an “insured contract”, however, those rights could not be asserted by the customer but only by the policyholder.

Jiminy Peak v. Wiegand Sports, 2016 WL 1050260 (USDC Mass. 03/16/16)