Hunton Insurance Recovery Blog

On September 18, 2019, a Texas federal court vacated its prior ruling and entered summary judgment for the insured, finding that after a hacker impersonating the customer convinced the insured to wire $1 million out of the customer’s account, the insurer had a duty to defend its insured against claims by its customer because the potential for coverage existed.  See Quality Sausage Company, LLC, et al. v. Twin City Fire Insurance Co., Civil Action No. 4:17-CV-111 (S.D.TX) (Dkt. No. 110).  The prior order was based on disputed extrinsic evidence, which the court considered in deciding the duty to defend, even though Texas’ narrow exception to the “eight corners” rule is limited to only undisputed extrinsic evidence.

On August 19, 2019, a Texas appellate court reversed a trial court’s summary judgment in favor of an excess carrier, and ruled as a matter of law that an arbitration award in favor of a former officer was covered under the EPL component of a management liability policy.  In doing so, the court rejected the carrier’s reliance on an Insured v. Insured exclusion.  The court also looked to the policy’s definition of “Interrelated Wrongful Acts,” a concept typically relied on by carriers to deny or limit coverage, to sweep a variety of allegations within the scope of the policy’s EPL insuring agreement and an exception to the Insured v. Insured exclusion.