Court Declines to Recognize Scrivener’s Errors in D&O Policy’s Capacity Exclusion

Wiley Rein LLP
Contact

The United States District Court for the Southern District of New York, applying Georgia law, has declined to recognize certain punctuation and spacing errors in the capacity exclusion of a directors and officers liability policy, resulting in the narrowing of the exclusion in favor of coverage.  See LOR, Inc. v. Allied World Nat. Assurance Co., 2021 WL 4200642 (S.D.N.Y. Sept. 15, 2021).  The court reasoned that the D&O insurer was responsible for defining the exclusion clearly and in explicit terms.

An insurer denied coverage for a claim based upon a D&O policy’s capacity exclusion because the claim alleged acts committed outside the insureds’ capacities as officers of the insured company.  The insured disagreed with the insurer’s reading of the exclusion, arguing that a subparagraph under the exclusion narrowed its scope such that the exclusion only applied to claims “brought by or on behalf of any Insured[.]”  The insurer took the position that this subparagraph was not meant to limit the scope of the capacity exclusion, but was instead a wholly separate exclusion.  The insurer contended that its inclusion as a subparagraph of the capacity exclusion was due to simple punctuation and spacing errors. 

In coverage litigation, the insurer counterclaimed for a declaration that it had no duty to indemnify the company, and the company moved to dismiss the counterclaim.  The insurer urged the court to recognize the intent of the policy as opposed to applying the exclusion as stated with the scrivener’s errors.  The court disagreed with the insurer, relying on the principle that insurers have a duty to define exclusions in clear terms and explicit terms.  The court found that the insurer’s interpretation required “reading multiple changes into the Policy,” which was “simply not the natural reading of the language.”  Further, the court found that reading “corrections to punctuation and formatting” into the policy was “unavailable” where the mistakes were attributable to drafting by the insurance company.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Wiley Rein LLP | Attorney Advertising

Written by:

Wiley Rein LLP
Contact
more
less

Wiley Rein LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.