Thomas Boley, a Law Clerk at Wiley Rein LLP, authored this post. Edited by Matt Beato.

Applying New York law, the Southern District of New York concluded that a trial court judgment qualified as a “final adjudication” even though it was under appeal. Cumis Specialty Ins. Co., v. Kaufman, 2022 WL 4534459 (S.D.N.Y. Sept. 28, 2022).

The carrier issued an E&O policy to a credit union affording specified coverage to the defendant, the union’s former Chief Executive Officer, as an additional insured. A jury convicted the CEO of graft under federal law, and the CEO appealed the conviction. After the officer was sentenced, the insurer denied coverage on the grounds that that the trial court’s judgment triggered the dishonest acts exclusion, which precluded coverage for acts that are found to be deliberately dishonest upon a “final adjudication.” Notably, the policy did not by its terms mandate that the final adjudication be “non-appealable.”

The court determined that the dishonest acts exclusion applied because the trial court judgment qualified as a “final adjudication” for the purposes of the exclusion. The court relied on case law holding that “the imposition of a sentence constitutes a final judgment against the accused” and that such judgment became “final” notwithstanding any future appeal.

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