WWM Secures Summary Judgment Ruling for Client in Coverage and Bad Faith Action

Featured

On May 21, 2018, Walker Wilcox Matousek obtained summary judgment for Federal Insurance Company in the U.S. District Court for the Southern District of Illinois in Market Street Bancshares, Inc. v. Federal Insurance Company, 3:17-CV-00036-NJR-SCW (S.D. Ill. May 21, 2018).

In the declaratory judgment action, the insured sought defense, indemnity and statutory bad faith damages from Federal under a claims made liability policy issued from 2014 to 2017 in connection with an underlying lawsuit filed in 2003 alleging breach of contract, conversion and breach of fiduciary duty.  The underlying lawsuit resulted in a verdict against the insured in excess of $16 million.

On behalf of Federal, WWM removed the case to federal court and filed a counterclaim for declaratory judgment against the insured.  After conducting minimal discovery, the parties filed cross-motions for summary judgment.  Federal argued that it had no duty to defend or indemnify the insured for the 2003 underlying lawsuit because the lawsuit was not first made during the 2014 to 2017 Federal policy.  Federal alternatively argued that even if, as the insured alleged, the damages sought by the claimants in the underlying trial somehow constituted a new claim, the Related Acts provision unambiguously precluded coverage, since any new damages asserted at trial were necessarily related to the 2003 complaint.

The insured argued that the claimants’ request for damages during the 2016 trial pursuant to a contract, which had not been referenced in any pleadings or entered into evidence prior to trial, constituted a new, timely claim under the policy.  The insured also argued that the Related Acts provision is ambiguous and thus, should be interpreted in favor of the insured.  The insured further argued that Federal was estopped from denying coverage pursuant to the Illinois estoppel doctrine.

In granting judgment in Federal’s favor, the Southern District of Illinois held that the claim was first made in 2003 and that any damages sought during the underlying trial were merely variations of the damages alleged in the complaint.  The Court held alternatively that even if the damages asserted at trial constituted a new action, the Related Claims provision unambiguously precluded coverage.  The Court rejected the insured’s estoppel argument and correctly held that the doctrine was inapplicable, since Federal had no duty to defend and thus, did not wrongfully deny coverage.

Federal Insurance Company was represented by the WWM team of Ed Gibbons and Kaitlin Calov.

WWM Wins Dismissal of Putative Class Action Against Property Management Company

Featured

On April 24, 2018, WWM attorneys Ed Gibbons, Arthur McColgan, and Scott Stirling successfully obtained dismissal of a putative class action filed against WWM client Sudler and Company, in the District Court for the Northern District of Illinois. Horist v. Sudler and Company, Case No. 17 C 8113. (Click here for the Order.)

Plaintiffs brought suit under the Illinois Condominium Property Act (“Condo Act”) and the Illinois Consumer Fraud and Deceptive Practices Act (“ICFA”), and asserted common law causes of action, alleging that Sudler – a property management company – and co-defendant, HomeWise, overcharged for documentation needed in connection with selling one’s condo. Specifically, they claimed that Defendants turned the process of selling one’s condo into a “profit center” by causing the associations managed by Sudler to stop providing disclosure documents, which effectively forced sellers to utilize HomeWise, which in turn overcharged for providing the documents. Sudler and HomeWise both filed motions to dismiss.

Judge Robert Gettleman agreed with Sudler that Plaintiffs’ complaint did not contain any factual allegations that the Defendants somehow caused the associations to stop providing disclosure documents. Because of these missing facts, Judge Gettleman found that Plaintiffs did not allege an unfair practice or a violation of the ICFA.

Furthermore, Judge Gettleman held that the Condo Act does not provide a private right of action for its enforcement. In order to state a claim for violations under the Condo Act, Plaintiffs needed to establish an implied right of action in their favor, which they could not, because the Act is meant to protect buyers and associations, not sellers. Accordingly, Judge Gettleman granted the Defendants’ motions to dismiss.

WWM Wins Dismissal of Coverage Case Arising From TCPA Class Action

Featured

On April 30, 2018, WWM attorneys Ed Gibbons, Arthur McColgan, and Jeremy Kerman won a motion to dismiss on behalf of WWM client ACE American Insurance Co., in the U.S. District Court for the Southern District of New York. Flores v. ACE American Ins. Co., No. 1:17-CV-08674.  (Click here for order.)

In an underlying suit, Plaintiff Victoria Flores filed a class action lawsuit against ACE’s insured – Grubhub. The complaint alleged that Grubhub violated the Telephone Consumer Protection Act (“TCPA”) by sending unauthorized text messages to thousands of consumers. Eventually, Flores and Grubhub entered into a Settlement Agreement which provided for an $8 million consent judgment. As part of the settlement, Grubhub assigned to Flores all claims and proceeds under the Grubhub insurance policy issued by ACE, and the parties agreed that the $8 million consent judgement would be paid only out of the proceeds of the Grubhub insurance policy with ACE.

Flores then brought a declaratory judgment action seeking to collect the stipulated $8 million judgment from ACE.

ACE moved to dismiss the action, arguing that, under the policy, two separate exclusions precluded coverage of the claims in the underlying suit. The first was an exclusion for all claims based on “unsolicited electronic dissemination of . . . communications by or on behalf of the Insured to multiple actual or prospective customers,” explicitly including actions brought under the TCPA. The second exclusion excluded claims based on any “violation of consumer protection laws.”

In response, Flores argued that the TCPA exclusion does not apply to the type of communication described in the complaint – individual text messages which were tailored to each customer based on restaurants they had ordered from. Instead, she argued that the exclusion applied to messages or phone calls transmitted or made en massei.e., to multiple recipients at once – as part of spam or mass marketing campaigns. Flores also argued that the “consumer protection law” exclusion did not apply because the TCPA can reasonably be interpreted to be a “privacy regulation.”

Ultimately, Judge Alvin K. Hellerstein agreed with ACE that both exclusions applied. Judge Hellerstein opined that Flores was trying to read requirements into the TCPA exclusion that simply were not there. He wrote: “there is nothing in [the TCPA exclusion] requiring that the text messages sent to the customers be identical or sent at the same time,” and found that the exclusion was unambiguous and clearly excluded coverage. Judge Hellerstein also found Flores’ argument regarding the “consumer protection law” exclusion unpersuasive, writing that a Privacy Regulation as defined in the Policy refers to laws associated with the “control and use” of personal data which require commercial entities collecting such data to adopt security measures to avoid identity theft. That is not the purpose of the TCPA, and thus it is not a privacy regulation. Accordingly, Judge Hellerstein granted ACE’s motion to dismiss.

WWM Obtains Dismissal of Coverage and Bad-Faith Action Arising Out of Malicious Prosecution Claim

Featured

WWM Attorney Christopher A. Wadley successfully obtained the dismissal of an insurance coverage and bad-faith lawsuit against Illinois Union Insurance Company, which arose out of an underlying malicious prosecution lawsuit filed by Rodell Sanders against The City of Chicago Heights. Sanders was arrested in 1994 and convicted of murder, attempted murder, and armed robbery. More than a decade later, Sanders was granted a new trial and acquitted of all charges. Sanders then sued Chicago Heights for malicious prosecution. Chicago Heights sought coverage under a liability policy it had purchased from Illinois Union, which was in effect when Sanders was acquitted. Illinois Union denied coverage on the grounds that the alleged offense of malicious prosecution did not occur during the policy period, as required to trigger coverage. Sanders and Chicago Heights subsequently settled Sanders’s claim for $15 million, and they jointly sued Illinois Union for coverage and bad faith. The court, however, dismissed the complaint, agreeing with Illinois Union that the claim was not covered. In doing so, the court held that the offense of malicious prosecution occurred, for purposes of insurance coverage, when the charges were initially filed against Sanders, rather than when he was exonerated. Sanders v. Illinois Union Ins. Co., No. 16 CH 2605 (Ill. Cir. Ct., Cook Cnty., Jan. 2, 2018).  Click here for PDF.

WWM Successfully Represents Insurer in Bad-Faith Action Alleging Failure to Settle

WWM attorneys Robert P. Conlon, Christopher A. Wadley, and Ryan J. Rodman successfully represented RSUI Indemnity Company before the United States Court of Appeals for the Seventh Circuit in a lawsuit alleging that RSUI failed, in bad faith, to settle an underlying claim. In the lawsuit, West Side Salvage, Inc. alleged that RSUI breached a duty to settle an underlying lawsuit arising out of a grain bin explosion at a ConAgra facility in Chester, Illinois. In response, RSUI argued that it did not breach a duty to settle because either the claim was not covered or, even if covered, it did not act in bad faith. The trial court entered summary judgment in RSUI’s favor, concluding that the claim was covered, but that RSUI did not act in bad faith as a matter of law. The Seventh Circuit affirmed. The court concluded that the claim was excluded from coverage under the policy’s exclusion for damage to property on which the insured was performing operations. Accordingly, the court held that RSUI did not breach a duty to settle. West Side Salvage, Inc. v. RSUI Indem. Co., No. 16-3928 (7th Cir. Dec. 18, 2017).

WWM Successfully Represents Insurer in Seventh Circuit Appeal Affirming Denial of Coverage for Overdraft Class Action

WWM attorneys Edward P. Gibbons and Christopher A. Wadley successfully represented Federal Insurance Company (“Federal”) before the United States Court of Appeals for the Seventh Circuit, in a case involving coverage for an underlying class action arising out of a bank’s imposition of overdraft fees. Specifically, on October 12, 2017, the Seventh Circuit affirmed that Federal did not have a duty to defend or indemnify BancorpSouth, Inc. (“BancorpSouth”) in an underlying class action alleging that BancorpSouth engaged in various practices and procedures that resulted in the imposition of overdraft fees on its customers. The court concluded that an exclusion in BancorpSouth’s professional liability policy, which excluded coverage for claims “based upon, arising from on in consequence of any fees or charges,” was unambiguous and applied to preclude coverage for the underlying lawsuit. In reaching that conclusion, the court observed that all of the underlying plaintiff’s allegations against BancorpSouth arose from the bank’s alleged imposition of excessive overdraft fees.

The plaintiff had initiated his lawsuit against BancorpSouth in May 2010, claiming that BancorpSouth engaged in a number of practices that resulted in the imposition of excessive overdraft fees, including resequencing debit card transactions and failing to provide customers with accurate balance information. BancorpSouth sought coverage for the lawsuit, but Federal declined. BancorpSouth later settled the action for $24 million and sued Federal for reimbursement. BancorpSouth also claimed that Federal had denied coverage in bad faith.

The United States District Court for the Southern District of Indiana dismissed BancorpSouth’s lawsuit, concluding that the exclusion applied to bar coverage. BancorpSouth appealed, arguing that the underlying complaint contained allegations related to BancorpSouth’s general banking practices and procedures that did not implicate the exclusion. The Seventh Circuit, however, rejected that argument. While acknowledging that the underlying complaint contained allegations related to BancorpSouth’s banking practices and procedures, the court explained that those allegations could not be “read in a vacuum” and that each alleged act was tied to the bank’s overdraft fee scheme. Consequently, the court held that the exclusion barred coverage, and it affirmed the dismissal of BancorpSouth’s complaint.

The case is BancorpSouth, Inc. v. Federal Insurance Co., No. 17-1425 (7th Cir. Oct. 12, 2017).

WWM Wins Summary Judgment in the Southern District of New York

On August 10, 2017, Walker Wilcox Matousek obtained summary judgment for RSUI Indemnity Company in the U.S. District Court for the Southern District of New York in Abrams v. RSUI Indemnity Co., No. 16-CV-4886 (JGK), 2017 WL 3433108 (S.D.N.Y. Aug. 10, 2017).

The insured in Abrams sought reimbursement from RSUI under a Directors & Officers Liability Insurance Policy for defense expenses the insured incurred in defending an underlying lawsuit pending in New York Supreme Court, styled Southern Advanced Materials, LLC v. Robert S. Abrams, and John Does 1-10, Index No. 650773/2015 (the “SAM Action”). Specifically, the insured sought reimbursement from RSUI for defense expenses he incurred prior to giving RSUI notice of the SAM Action in April 2016. The SAM Action was filed in March 2015 and RSUI’s insured allegedly incurred more than $3.5 million in defense expenses prior to notifying RSUI of the lawsuit. While RSUI agreed to defend the insured under a reservation of rights after April 2016, RSUI denied the insured’s claim for defense expenses incurred prior to notice.

RSUI maintained that it was not responsible for the insured’s pre-notice defense expenses under the policy, stressing that the D&O Policy was a claims-made policy that required the insured to give notice to RSUI as a condition precedent to coverage. RSUI also noted that the policy required RSUI’s consent before the insured could incur any covered defense expenses, and that the insured in Abrams did not have consent prior to giving notice to RSUI. In response, the insured argued that the policy did not specifically disclaim pre-notice defense expenses and that RSUI must show prejudice before denying that claim.

On cross-motions for summary judgment, Judge John G. Koetl ruled in RSUI’s favor, holding that Delaware law (which applied to interpret the policy) enforces the plain language of the RSUI Policy, including the notice and consent provisions requiring notice as a condition precedent and consent prior to incurring any defense costs. 2017 WL 3433108 at *4. The Court rejected the insured’s argument that RSUI must show prejudice before denying the claim, stating that the policy language and applicable Delaware law did not support that analysis. Id. at *5-6. Accordingly, the Court granted RSUI’s motion for summary judgment and denied the insured’s motion.

RSUI was represented by the WWM team of William P. Bila and Kevin A. Lahm.

WWM Wins Summary Judgment Based on Prior Knowledge Exclusion

Walker Wilcox Matousek recently obtained summary judgment for Westport Insurance Corporation in the U.S. District Court for the Southern District of Florida with the court finding that the insured’s claim was not covered by Westport’s policy pursuant to its prior knowledge exclusion.  David R. Farbstein, P.A. v. Westport Ins. Co., 2017 WL 3425327, Case No. 16-cv-62361-BLOOM/Valle.

The insured sought coverage for a legal malpractice action filed against it in March 2016.  Caravan, Inc. v. David R. Farbstein, P.A., et. al., Case No. 2016 CA 002459, Fifteenth Judicial Circuit in and for Palm Beach County, Florida.  The claimant alleged that it retained the insured to represent it in the sale of property.  The insured assisted in review and drafting the sales contract.  As the closing approached, the claimant realized the contract did not require the buyer to assume a substantial pre-payment penalty in the existing mortgage.  The claimant alleged he instructed the insured that the contract required the buyer to either assume the existing mortgage or pay the pre-payment penalty.

The claimant alleged that the insured advised in a July 2015 conversation that it should complete the transaction with the existing terms.  It is further alleged that the insured informed the claimant that he carried an “errors and omissions” policy.  Months after this discussion the insured completed a renewal application for a Westport policy and denied knowledge of any claim or potential claim against him.

The claimant filed suit against the insured in March 2016.  The insured tendered his defense to Westport.  After investigation, Westport denied his claim for a defense citing the policy’s prior knowledge exclusion, which precludes coverage for claims that insured reasonably knew may be asserted at the time the policy is issued.  The insured filed a declaratory judgment action against Westport seeking coverage in the underlying action.

On behalf of Westport, WWM removed the case to federal court, filed a counterclaim for declaratory judgment against the insured, and a third-party complaint for declaratory action against the claimant as an indispensable defendant.  After conducting discovery, Westport moved for summary judgment arguing that the undisputed facts demonstrated the insured reasonably knew or should have known of a potential claim.  The Southern District of Florida Court found that the allegations in the underlying complaint demonstrated that the insured could reasonably have foreseen the claim at the time the policy was issued and granted Westport’s motion for summary judgment, while simultaneously denying the insured’s competing motion for partial summary judgment.

Westport was represented by the WWM team of Robert Conlon and Christopher Shannon.

WWM Wins Motion for Judgment on Pleadings Based on Specific Litigation Exclusion in D&O Policy

Walker Wilcox Matousek recently obtained judgment on the pleadings for insurer RSUI in the District Court for the Northern District of Illinois, with the court finding no coverage under a Directors & Officers policy pursuant to the Specific Litigation Exclusion in the policy.  RSUI Indemnity Co. v. Worldwide Wagering, Inc., et al., 1:17-cv-01690 (N.D. Ill. July 17, 2017).

World Wide Wagering (“WWW”), sought coverage for an underlying bankruptcy adversary complaint filed against it in December 2016, alleging, among other things, that WWW transferred funds to avoid paying a $78 million judgment against it in a prior lawsuit: Empress Casino Joliet Corporation, et. al. v. Rod Blagojevich, et. al., Case No. 1:09-cv-03585 (the “Riverboat Matter”).  The bankruptcy adversary complaint also re-alleged some of the allegations from the Riverboat Matter, specifically that WWW’s subsidiaries, a group of horseracing track owners in Illinois, allegedly paid bribes to former Governor Rod Blagojevich in exchange for his support for legislation that would require Illinois riverboat casinos to pay 3% of their revenue to the racetrack owners.

The adversary complaint further alleged that WWW intentionally shielded and fraudulently transferred some of its assets, knowing they were at risk for the judgment in the Riverboat Matter.  RSUI denied coverage for the bankruptcy proceeding based on the Specific Litigation Exclusion in the D&O policy, which excluded coverage for any claims made against the insureds “alleging, arising out of, based upon or attributable to, directly or indirectly, in whole or in part” the Riverboat Matter.

On behalf of RSUI, Walker Wilcox Matousek initiated a coverage action and filed an early motion for judgment on the pleadings based primarily on the Specific Litigation Exclusion.   WWW filed a counterclaim and contemporaneous motion for summary judgment, arguing that the bankruptcy adversary complaint triggered a duty to defend because at least some of the claims in the underlying lawsuit did not arise out of the Riverboat Matter.  The Northern District of Illinois Court, relying on Delaware law, found that the Specific Litigation Exclusion applied to bar coverage for the entire case because the bankruptcy adversary complaint needed only arise “in part” out of the Riverboat Matter.  Ultimately, the court granted RSUI’s motion for judgment on the pleadings and denied WWW’s motion for summary judgment, also dismissing WWW’s counterclaim.

RSUI was represented by the WWM team of Bill Bila, Jeremy Kerman, and Cassandra Jones.

Florida District Court Finds That A Non-Insured Party Does Not Preclude Application of Insured Versus Insured

Bill Bila and Cassandra Jones recently obtained judgment on the pleadings in the Southern District of Florida, finding no coverage under a Directors & Officers policy pursuant to an Insured versus Insured exclusion.

The January 30, 2017, ruling came after the insureds initiated coverage litigation, arguing that the insurer had a duty to defend the underlying lawsuit, as well as a duty to indemnify for the settlement amount. The insured condominium association initially tendered the underlying lawsuit, which was brought by the former association board president and another condominium unit owner, alleging that the board mismanaged the installation of hurricane resistant glass. The underlying lawsuit was filed in November 2013, and the former Association president served in that capacity until early 2012. The insurer denied coverage for the underlying lawsuit, raising several exclusions, including the Insured versus Insured exclusion. The parties in the underlying lawsuit reached a mediated settlement in March 2016, after which the insureds instituted a coverage action in Florida State court, seeking recovery of their underlying defense costs and the amount of the settlement.

On behalf of the defendant, our firm removed the case to federal court, filed a counterclaim and subsequent motion for judgment on the pleadings. Plaintiffs did not dispute that the former board president served on the board within three years of the underlying lawsuit, as required under the policy’s Insured versus Insured exclusion. Instead, plaintiffs argued that the insurer wrongfully refused to defend because the presence of a non-insured plaintiff in the underlying lawsuit required allocation between covered and uncovered matters. The court, relying on Florida law, found that the Insured versus Insured exclusion applied to bar coverage for the entire case from its inception because both insured and non-insured persons were initial parties to the suit. The court rejected plaintiffs’ allocation argument, finding that the provisions were inapplicable because the action was not covered.

The Marbella Condominium Association v. RSUI Indemnity Co., 9:16-cv-80987, Southern District of Florida