Trice, Geary & Myers, LLC v. Camico Mut. Ins. Co. (U.S. Ct. Apps., Fourth Circuit, Dec. 22, 2011)
The Fourth Circuit ruled that a professional liability insurer had a duty to defend its insured against negligence suits arising from advice the accounting firm gave relating to defined pension plans which were entirely funded by life insurance policies. The underlying actions accused the insured of negligence for recommending the plans which led to audits by the IRS citing numerous defects with the plans. The insurer argued that the policy excluded coverage for claims “in connection with or arising out of any act, error or omission by any Insured in his/her capacity as an [insurance] agent or broker.” The Court found that the underlying allegations of substandard tax and accounting advice raised a potentiality for coverage triggering the duty to defend.
The district court granted summary judgment in favor of the insurer finding that all of the claims asserted were in connection with or arising out of the accounting firm’s acts, errors, or omissions regarding the sale of life insurance and annuity products. The Fourth Circuit applied Maryland law to the case and analyzed the issue under a two-prong inquiry focusing on the language and requirements of the policy and the allegations of the suit. Under the first part of the inquiry the Court held that the language of the endorsement applies only to claims asserting insurance agent or broker professional liability and therefore did not preclude coverage for the insured. The Court found that the gravamen of the underlying actions was that the insured rendered substandard accounting and tax advice.
Under the second part of the inquiry, the court focused on the issue of the capacity in which the insured acted when he provided advice to the plaintiffs in the underlying actions. Finding that the underlying claims alleged actions relating to the insured’s role as accounting and tax advisors and not as insurance agents or brokers, the Court held that the insured had a duty to defend. The Court stated that although one of the underlying actions contained a “fleeting” allegation relating to the insured’s status as an insurance agent, this sole allegation did not put all of the actions within the Exclusion. Additionally, the Court stated that while the district court had noted that the insureds received a commission on the insurance sales, that fact alone is not enough to show a principal-agent relationship or employment as a broker.
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