Regular readers know that a recurring topic I have explored on this site is the scope of the contractual liability exclusion found in many professional liability and management liability insurance policies. In prior posts I have argued that insurers sometimes apply the exclusion over-broadly so as to exclude matters that I believe should otherwise be covered under the policy. However, in a recent appellate ruling, in which the Ontario Court of Appeal concluded that as a result of the application of the contractual liability exclusion, a solar panel engineering company’s E&O insurer did not have a duty to defend the company in an underlying arbitration proceeding. As discussed below, I believe the appellate court’s reasoning is sound and that the case represents an example not only of when the exclusion may be applied appropriately but also of the appropriate limits of the exclusion’s reach. A copy of the Ontario court’s September 10. 2021 opinion can be found here.
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Multiple Endorsements Modifying Same Exclusion Render Policy Ambiguous, Negating Exclusion’s Applicability
Commercial insurance policies often are contractually complex. Many insurance policies include multiple endorsements modifying provisions of the base insurance policy form. Interpreting the way that the various parts of the policy work together is an important part of determining insurance coverage. When it is unclear how the parts relate uncertainty results. In a recent decision, the Eighth Circuit found that where multiple policy endorsements modified the same policy exclusion, the net effect of the endorsements was ambiguity, resulting in the conclusion that the exclusion did not apply at all. The appellate court’s decision is a cautionary tale for anyone involved in the insurance placement process.
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Third Circuit Finds Major Shareholder Exclusion Ambiguous
D&O insurance policies sometimes contain Major Shareholder Exclusions, precluding coverage for claims brought by shareholders’ with ownership percentages above a certain specified ownership threshold. But when is the shareholder’s ownership percentage to be determined – at the time of policy inception or at the time of the claim? This issue was among the D&O insurance coverage question presented in a recent case before the Third Circuit. The appellate court, applying Delaware law, found that the exclusionary language involved was ambiguous, and therefore resolved the issue in the policyholder’s assignee’s favor. As discussed below, the appellate court’s ruling is interesting in a number of different respects.
The Third Circuit’s opinion in the case can be found here. The Wiley Rein law firm’s October 19, 2019 post about the decision on its Executive Summary Blog can be found here.
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