Hunton Insurance Recovery Blog

The Delaware Supreme Court recently affirmed a grant of summary judgment in favor of a mortgage lender who sought coverage for a government investigation under its management liability insurance policy, in the case ACE American Ins. Co. v. Guaranteed Rate, Inc., No. 360, 2022 (Del.). We previously reported on the trial court’s grant of summary judgment to the policyholder and ruling in favor of the policyholder on cross-motions for judgment on the pleadings. The Supreme Court rejected the insurers’ arguments that it had no duty to defend the policyholder in connection with a $15 million False Claims Act (FCA) investigation and settlement.

A Delaware court recently granted summary judgment to a mortgage broker targeted in a federal government investigation for alleged False Claims Act violations, holding that the company’s directors and officers liability (“D&O”) insurer was required to indemnify more than $15 million in settlement costs with the U.S. Department of Justice. Guaranteed Rate, Inc. v. ACE American Insurance Company, No. N20C-04-268 MMJ CCLD (Del. Super. Ct. Sept. 6, 2022). We previously reported on the policyholder’s earlier victory in this case, in which the court held that a Civil Investigative Demand (“CID”) from federal authorities triggered the insurer’s obligation to pay defense costs under the D&O policy.

In an appeal to the Ninth Circuit, a private equity firm has asked the court to reverse an order finding there was no coverage for a suit alleging it concealed that a facility it sold was run by Joaquín “El Chapo” Guzmán. AKN Holdings had purchased a manufacturing facility in Reynosa, Mexico, from Thermo Fisher, unaware that the facility “was overrun” by the drug cartel of “El Chapo.” After discovering the concealment, AKN Holdings sued Thermo Fisher and, while that suit was pending, in turn sold the facility to FINSA, also without disclosing the cartel activities or its pending lawsuit.

While policyholders have experienced a wide range of conflicting rulings related to COVID-19 business interruption losses, a recent Northern District of Illinois decision shows that the pandemic continues to present a range of exposures beyond business interruption losses, including for claims under directors and officers liability policies. In Federal Insurance Co. v. Healthcare Information and Management Systems Society, Inc., No. 20 C 6797 (N.D. Ill. Oct. 19, 2021), the court rejected the insurer’s broad reading of a professional services exclusion, contract exclusion, and the insurability of alleged restitution to deny coverage under a D&O policy for losses arising from a cancelled trade show.

In an important decision for policyholders, a New York state appellate court rejected AIG’s effort to avoid defending McGraw-Hill in a series of copyright suits.  In doing so, it reversed the trial court and rejected the insurer’s attempted use of the contract exclusion and fortuity doctrine as a bar to coverage under various multimedia liability insurance policies.

On December 6, 2016, a Connecticut appellate court held that a contract exclusion in a public entity errors and omissions liability insurance policy did not relieve the insurer's duty to defend when there was at least a possibility of coverage based on the allegations against the insured. The court reasoned that the fact finder could determine that the underlying negligent misrepresentation claim may not have arisen out of contract, thereby putting the claim beyond the scope of the policy's contract exclusion.  For a more detailed analysis of the Town of Monroe v. Discover Prop. & ...