Illinois Federal District Court Determines Policy Intent Trumps Policy Language

In an interesting decision handed down late last year, an Illinois federal district court in Ohio Security Insurance Company v. Truck Tire Sales, Inc. determined coverage was not available after carefully considering the policy intent and application for insurance. The district court held that irrespective of broad policy language, “the policy reflects that it was sought for the purpose of insuring [the insured’s] activities related only to [one part of its business].”

The dispute arose when an employee of the named insured, Truck Tire Sales, …

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Illinois Federal Court Refuses to Extend NY Insurance Law 3420 to Policy Not Issued or Delivered in New York

An Illinois federal district court in Frankenmuth Mutual Insurance Company v. The Hockey Cup, LLC held that an insurer was excused from its defense obligations due to late notice, since the court found that New York Insurance Law Section 3420(a)(5)’s requirement that insurers show prejudice to deny coverage based on late notice did not apply because the policy was not issued or delivered in New York. 

The underlying lawsuit, in which the National Hockey League was one of the plaintiffs, alleged the insureds, A&R Collectibles, …

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Eleventh Circuit Holds Unlicensed Professional Was Not Engaging In “Professional Services”

The courts frequently apply insuring agreements broadly. However, in a recent decision, a court narrowly applied the definition of “professional services” to restrict coverage. Specifically, in Chapman v. Ace American Insurance Company, the Eleventh Circuit determined the services provided by an individual holding himself out as a counselor did not constitute “professional services.”    

The underlying lawsuit concerned Mark and Barbara Chapman’s ten-year old son who was diagnosed with ADHD and had a history of behavioral problems. The Chapman family engaged the services of …

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Absent Policyholder Demand To Settle, Seventh Circuit Affirms Dismissal of Bad Faith Action Against Insurer After Unexpected Excess Judgment

The Seventh Circuit, applying Illinois law, recently tackled the highly-charged issue of a bad faith claim against an insurer for failing to settle for the policy limit. In Surgery Center at 900 North Michigan Avenue, LLC v. American Physicians Assurance Corp., Inc., the Seventh Circuit closely scrutinized the facts and affirmed the trial court’s decision that the insurer did not act in bad faith.

 The coverage dispute arose between the Surgery Center at 900 North Michigan Avenue, LLC (Surgery Center) and its insurer when …

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Illinois Appellate Court Reverses Course on Trigger for Malicious Prosecution Claims

An Illinois Appellate Court established a new rule for when malicious prosecution occurs and triggers coverage under a liability policy. In Sanders v. Illinois Union Insurance Company, the court determined that the triggering event for malicious prosecution coverage is the claimant’s exoneration, rather than the initiation of the alleged malicious prosecution. The rule established in Sanders is in direct contrast with a number of Illinois decisions, including several in the past few years that had held that the commencement of the malicious prosecution was …

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Illinois Appellate Court Reaffirms Trigger Date for Malicious Prosecution Offense Under Coverage B

In First Mercury Insurance Company v. Ciolino, the Illinois Appellate Court, First District waded into the sea-change concerning the trigger of coverage for malicious prosecution offenses under a liability policy. The First District joined the other districts to consider the issue, departed from the Seventh Circuit’s Erie prediction, and reasoned that the trigger date for malicious prosecution coverage will be similar under law enforcement liability and commercial general liability policies.

The facts giving rise to the coverage dispute stem from a lawsuit filed by …

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Sixth Circuit Uses Every Tool in the Box To Build Case for Coverage for Defrauded Policyholder

July 12, 2018, we reported on the Medidata decision handed down by the Second Circuit in which the court found coverage for a claim resulting from social engineering fraud. We suggested the ruling in Medidata lacks persuasive power due to its unusual factual circumstances and atypical policy language. The Sixth Circuit’s decision in American Tooling Center, Inc. v. Travelers Casualty & Surety Co. of America, No. 17-2014, 2018 WL 3404708 (6th Cir. July 13, 2018), will have more persuasive power, but due to …

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Second Circuit’s Decision Upholding Social Engineering Fraud Coverage Likely a Paper Tiger

In a case closely monitored by the insurance industry, the Second Circuit upheld in a non-precedential summary order a New York federal district court’s summary judgment finding coverage under the computer fraud coverage of a commercial crime policy. Medidata Solutions, Inc. v. Fed. Ins. Co., No. 17-2492, 2018 WL 3339245 (2d Cir. 2018). Although the policyholders are apt to tout the decision as a seismic victory, the atypical policy language and factual circumstances should greatly limit its persuasive value.

As background, the insured, Medidata …

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The Modern Fraudster: How Courts Are Responding to Social Engineering Fraud

In an article for Insurance Journal, Goldberg Segalla partner Jonathan L. Schwartz and associate Colin B. Willmott, members of the Global Insurance Services Practice Group in the firm’s Chicago office, write about social engineering fraud (SEF) and questions over availability of insurance coverage for SEF under commercial crime policies — an issue the Second and Sixth Circuit Courts of Appeals are set to clarify in 2018.

SEF includes now-common types of fraud involving digital communications: phishing/whaling, spoofing, and impersonating or pretexting. “A common …

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Insurer Scores a Slam Dunk in TCPA Suit Before the Ninth Circuit

A recent decision by the Ninth Circuit is sure to catch the eye of insurers for its favorable reasoning rejecting coverage as well as a potential warning sign that policyholders are seeking coverage for Telephone Consumer Protection Act (TCPA) suits beyond CGL policies. In Los Angeles Lakers, Inc. v. Federal Insurance Company, No. 15-55777, 2017 WL 3613340 (9th Cir. Aug. 23, 2017), the Ninth Circuit determined there was no coverage for violations of the TCPA under a D&O policy. In short, by analyzing the …

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