No Coverage for the Guilty

We know this, but many of our clients don't: coverage is tricky. There are aspects of an insurance contract which may cut against instincts and societal expectations. For example, there are coverage implications when an insured apologizes for a perceived mistake. Anything that potentially jeopardizes the defense, including anything that can be perceived as an admission of liability, may result in a coverage denial. Along those lines, a recent decision highlights the coverage implications of a guilty plea in criminal proceedings.
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Duty to Defend Wire Fraud

In Quality Sausage Company, LLC, et al v. Twin City Fire Ins. Co., Civil Action No. 17cv111 (S.D. Texas, Sept. 18, 2019), one of the plaintiff corporations (Plaintiff) fell victim to a fraudster who submitted fraudulent wiring instructions via email to Plaintiff on behalf of one of Plaintiff's clients. Per those wire instructions, Plaintiff improperly transferred $1 million from the client’s account to the account of a sham company. Uh oh.
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Crime Policy Coverage: Direct Means Direct

In a recent decision, a Federal District Court grappled with the definition of "direct loss" under a commercial crime policy. The court in CP Food & Beverage, Inc. v. U.S. Fire Ins. Co., concluded that “direct means direct” and an insured's losses from payment card charge-backs when certain employees made fraudulent charges on customers’ payment cards were only the “indirect” result of employee theft, and therefore not covered under the insured’s policy. 
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Secrets Are No Fun, Especially When It Comes To Malpractice Coverage

The risk of a malpractice claim is real. That's the bad news. But, now that we have your attention, the good news is that insurance is available to defend and indemnify professionals who face malpractice claims. In order to receive coverage, however, professionals generally must disclose whether they are the subject of any potential claims when completing their applications.  If an insurer discovers that a professional had knowledge of a potential claim, but failed to disclose it, it could rely upon the nondisclosure as a basis to disclaim coverage.
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Alleged Crimes Are Not Covered, Right?

For most professionals, renewing your policy is a matter of fact that includes little thought beyond answering a questionnaire. However, it is incumbent upon both insurers and policyholders to regularly review policy language to determine what is, is not, or only may be covered. For example, there is often an assumption that most policies will not cover certain criminal or intentional acts, but that is not always the case. For example, in a recent New Jersey District Court decision, the court found that an insurer…
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Attorney + CEO = Coverage Denied

Attorney? Check. CEO? Check. Coverage? Unlikely. Some attorneys wear multiple hats. We have other interests, other business ventures, other opportunities to make a buck. Attorneys are often exposed to other areas of business depending on the nature of their practice. Through their role as counsel, or through other opportunities, some attorneys become more directly involved in non-legal businesses. The more traditional route is to switch to in-house counsel, but sometimes attorneys will go so far as to start a new company. While both are commonplace and not inherently problematic, issues begin to arise when an attorney is both practicing law and working for a company. The blurring of the line between lawyer and business executive not only creates potential conflicts of interest, but may have coverage consequences.
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Malpractice for a Client’s Failure to Report

Although some law schools are notorious for offering elective courses like “space law” that are of limited practical use to most attorneys, there is still a set of core classes that are invariably recommended. Courses such as tax law and corporate law often fall into this group, as most lawyers will have to consider tax repercussions or the structure of a company at some point in their careers, regardless of their practice area. One big firm is now learning that despite the dearth of classes in insurance law, it is a subject that every attorney should become familiar with.
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What to Report and When?

Applying for malpractice insurance is a critically important process and a necessary risk management tool. Professionals must be sure to complete the applications completely and must take steps to include all pertinent information. In a recent decision, the Northern District of Illinois concluded that an attorney omitted material information in his application and denied coverage. The result could be devastating for the attorney.
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What are Professional Services and Why it Matters

Clearly, it is the specific terms of an insurance contract that dictate whether certain claims are covered or denied. In an interesting decision out of Illinois, the court faced the question: when is an attorney practicing law “in the service of another” and how does that impact coverage. This distinction was critical to whether a claim against an attorney would be covered by a commercial general liability (“CGL”) policy.
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Unfair Business Practices = Professional Liability?

What is a “professional liability” claim? Most definitions would include a claim involving a skilled professional – such as an attorney, accountant, doctor or broker – sued in her professional capacity, based upon allegations of negligence in the performance of professional services. The easiest example is a claim for legal malpractice: a client gets a negative or unexpected result, believes that this result is due to failings on the part of hired counsel, and subsequently brings a claim against his attorney for damages. Pretty cut and dry, right? Nope.
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