Does Your Business Policy Actually Protect You? If it has a “Professional Services” Exclusion, it might not

If you did not believe it before, you can believe it now—Ponzi-scheme cases make bad law.  On July 5, 2017, the Eleventh Circuit decided Furr v. National Union Fire Insurance Company of Pittsburgh (No. 15-14716), in which the court considered the impact of a “professional services” exclusion in a bank’s executive and organization liability insurance policy.*  The court held that there was no coverage for anyone because some of the claims asserted were related to the professional services that the bank rendered to the Ponzi scheme.  In denying coverage to everyone, the court reviewed this exclusion:

The Insurer shall not be liable to make any payment for Loss in connection with any Claim made against any Insured alleging, arising out of, based upon, or attributable to the Organization’s or any Insured’s performance of or failure to perform professional services for others, or any act(s), error(s) or omission(s) relating thereto.

The court upheld coverage denial (1) because the policy did not contain a severability provision and (2) because the text of the exclusion prohibited payment if a claim is made against any insured who performed or failed to perform professional services.  To be clear: if anyone was a professional subject to a claim (or performing professional services), no one gets coverage, even non-professionals.

This has two important consequences: First, if a claim is made under a policy with similar contents, then claiming a legal, accounting, or medical error will jeopardize coverage for everyone.  Second, and perhaps more importantly, this particular policy evidently does not protect a bank from claims arising from banking services because those services are professional enough to be encompassed by the exclusion.

Exclusions like the professional services exclusion (and the personal injury exclusion) are designed to keep claims inside the appropriate policy and preclude doubling-up on coverage across multiple policies.  That is fair.  A D&O policy shouldn’t cover personal injury—that is the role of the general liability policy.  But excluding coverage based on a bank’s banking services seems to have left the bank’s executives without any coverage.  That is a harsh result.

I do not mean to sound shrill, but everyone should look at their policies and make sure that they actually have the coverage that they intend to have both from the perspective of whether the company’s services would be included in the “professional services” exclusion and to make sure that an errant claim touching on a professional’s work inside the business does not jeopardize coverage for everyone.

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* I have not actually seen the policy, but this “executive and organizational” policy sounds more like a Director & Officers (D&O) policy than an Errors and Omissions (E&O) policy.

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2014 Insurance Coverage and Bad Faith Seminar

Join us September 11, 2014 from 10 a.m. to 5:30 p.m. for a complimentary day of exploration into the complexities of Insurance Coverage and Bad Faith, and the beauty of the “Imaginary Worlds”, 28 fantastic living sculptures at the Atlanta Botanical Garden.

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Five hours of credit, two tracks, and eight sessions in a beautiful location.

Topics include: Preparing for Bad Faith Depositions; Emerging Bad Faith Traps and Trends; Fraud; the Tripartite Relationship and the Duty to Defend; Cyber and Coverage;and a deep dive into homeowners’ policies,CGL, trucking, and auto/UM.

Register today as space is limited.
Registration includes lunch, admission to the gardens, and a private reception.

 

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Increased Liability for Dog Owners: Understanding Coverage for Dog Bite Injuries

Dogs are staples in homes all across the country.  They’re a man’s best friend; they grow up with your kids; and they become an integral part of the family unit.  At the end of the day, however, dogs are animals and they can be unpredictable, at times.  Dogs bite more than 4.5 million people every year in this country.  (See Dog Bite Law, www.dogbitelaw.com).  In fact, roughly 1,000 U.S. citizens require emergency care treatment each day for dog bite injuries.  (See DogsBite.org, www.dogsbite.org).  Dog bites have become so pervasive that the American Veterinary Medical Foundation (“AVMF”) holds National Dog Bite Prevention Week during the third full week of May each year.

In addition to becoming a health and safety concern, the increased prevalence of dog bites is also leading to increased liability for dog owners.  Many homeowners probably do not even know if their homeowner’s insurance policy covers dog bite injuries.  Moreover, due to the rising cost of medical expenses and inflated legal settlements, many insurance companies are excluding dog bite injuries from coverage, or only including them as a covered event for an added cost.  Some insurance companies have gone as far as refusing to offer coverage for certain types of breeds with a reputation for aggressive behavior, including these eleven breeds: (1) Pit Bulls and Staffordshire Terriers; (2) Doberman Pinschers; (3) Rottweilers; (4) German Shepherds; (5) Chows; (6) Great Danes; (7) Presa Canarios; (8) Akitas; (9) Alaskan Malamutes; (10) Siberian Huskies; and (11) Wolf-hybrids.  (See Catey Hill, 11 Riskiest Dog Breeds for Homeowners and Renters, Forbes (Mar. 30, 2012, 10:57 AM), http://www.forbes.com).  If you choose to purchase one of these dogs and welcome them into your home, be forewarned that it may be difficult or even impossible to get insurance coverage to protect you against an unfortunate event.  There are some carriers now—Xinsurance for example—that provide individuals with the ability to create custom personal liability policies that address areas traditional policies fail to cover, such as dog bites.

In Georgia, two essential elements must be proven in order to support an action for damages in connection with a dog bite—the animal must have a vicious or dangerous character, and knowledge of this propensity on the part of the owner must be demonstrated.  See Levy v. McKay, 149 Ga. App. 251, 253 S.E.2d 872 (1979).  Consequently, although insurance coverage for certain breeds may be unavailable, owners are protected by a plaintiff’s significant burden to sustain a cause of action.

If you own a dog or plan on purchasing a canine in the near future, examine closely your insurance policy to ensure that canine inflicted injuries are not excluded.  And, to be on the safe side, engage your insurance agent to go over the policy with you so all relevant sections of the policy are reviewed in order to guarantee the proper analysis.

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Legal Liability and Insurance Coverage in a Social Media World

city girl on phone, taxi, appIf you have not noticed, taxi cab and limo service providers are facing stiff competition.  Uber and Lyft—and Hailo coming this spring—are transportation network companies that match passengers and drivers together via a smartphone application.  Both Uber and Lyft have enjoyed resounding success across the country by providing quicker service to those in need of transportation; they also serve suburban areas that historically did not enjoy access to such services.

Naturally, however, with success comes detractors and intense probing from outsiders.  The most recent hot topic on the table for these self-proclaimed tech companies is that of legal liability and insurance coverage.  If an Uber or Lyft driver gets into an accident, who is liable?  The driver alone, or both the driver and the company?  In a traditional employee-employer relationship, if an employee is in the course and scope of his employment, and his negligence results in bodily injury or property damage, then the employer is vicariously liable for the employee’s actions.

Uber and Lyft officials, however, maintain that drivers are not their employees; but rather, are independent contractors.  As independent contractors, the drivers are solely liable for property damage and bodily injury caused while transporting passengers or while driving in search of passengers.  The companies claim that they do not have influence over the drivers or the cars they operate; rather, they merely control the application that facilitates the connection between passengers and drivers, and thus are not liable for the negligence of the driver.

In evaluating whether an individual is working as an employee or independent contractor, courts examine several factors: (1) the extent of control the employer exercises over the work; (2) whether the worker is engaged in a distinct occupation or business; (3) whether or not the work performed is usually done under the direction of the employer; (4) the skill required in the particular occupation; (5) whether the employer supplies the tools and the place of work for the one employed; (6) the length of time the person is employed; (7) the method of payment, whether by time of by the job; (8) whether or not the work to be performed is a part of the regular business of the employer; (9) whether or not the parties believe they are creating an agency relationship; and (10) whether the employer is or is not in business.  See Moss v. Cent. of Ga. R. Co., 135 Ga. App. 904, 906, 219 S.E.2d 593, 596 (1975).

As Uber and similar app-based companies continue to grow, accidents will occur, and courts across the country will be evaluating the legal liability for not only the drivers, but the app-based companies.  In fact, California will likely put this conundrum to the test, shortly, due to an accident that occurred in San Francisco on New Year’s Eve where a six year old girl was killed by an Uber driver as she walked through a crosswalk.

Other states, including Georgia, are attempting to address the problem through legislation.  Representative Alan Howell from Hartwell introduced a bill that would implement several stringent restrictions and regulations on companies like Uber and Lyft to bring them more in line with the Atlanta taxi and limo industry.  Most notably, the bill would require drivers to obtain commercial liability insurance, which would at least ensure a significant minimum liability insurance threshold for Uber and Lyft drivers.  Irrespective of these efforts, this question of legal liability and insurance liability coverage will spawn intense legal discourse in the coming months and years.

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