Looking at today’s (1/9/08) Mealey’s Emerging Insurance Disputes, I again see coverage disputes concerning shootings and other assaults. Is it me or have these coverage disputes become more frequent recently? You would think that incidents of severe and intentional violence would be beyond any view of insurance. But, apparently insureds are seeking coverage for these incidents.
According to the July 19, 2007 L.A. Times, the Archdiocese's insurers will pay $227 million of the $660 million sexual abuse settlement. Amazing. If the policies were subject to standard "occurrence" language and intentional act limitations it would seem that several bars to coverage might apply. Clearly, the acts were intentional. The injuries would also be "expected", if not intended. Settling insurers were undoubtedly concerned about a policyholder-friendly court ignoring fundamental restrictions on coverage.
Policyholders seem to be pushing harder on claims involving intentional wrongdoing. I was glad to see a court push back earlier this month. The Fourth Circuit rejected a theft claim made under an E&O policy, Gulf Underwriters Insurance Co. v. KSI Services (decided May 1, 2007).
The policyholder’s bookkeeper embezzled. She pled guilty to a criminal charge. The policyholder made a claim under its E&O policy to recover liabilities arising from the embezzlement. The insurer disclaimed.
This wasn’t an error or omission; this was a theft!
Plus, the E&O policy expressly excluded “damages or claim expenses … arising directly or indirectly out of … [a]n act or omission that a jury, court or arbitrator finds dishonest, fraudulent, criminal, malicious or was committed while knowing it was wrongful.” This claim arose out of criminal embezzlement. The exclusion must apply.
The Fourth Circuit upheld the carrier’s denial: “Generally, protection from dishonest or criminal acts is provided by fidelity bond, not by errors and omissions policies that exclude damages arising out of dishonest or criminal acts.”
It’s great to see a court reject a claim arising from intentional wrongdoing.Enter keywords:
