Insured-versus-Insured Exclusion Precludes Coverage For Entire Suit Brought by Insureds and Non-Insureds

Wiley Rein LLP
Contact

[author: Elizabeth Fisher]

A Kentucky federal court has held that an Insured v. Insured (IvI) exclusion that included an assistance exception precluded coverage for an entire lawsuit brought by both insureds and non-insureds and that no allocation was required. Tarter v. Navigators Ins. Co., 2021 WL 149302 (E.D. Ky. Jan. 15, 2021).

Several shareholders of a family-owned company brought suit against the president of the company. One of the plaintiffs in the suit was a director or officer in the company and several other related entities, but other plaintiffs in the suit did not hold director or officer positions in the company. In addition, another one of the plaintiffs was itself a related entity. The president of the company sought coverage from the company’s D&O insurer. The insurer denied coverage on the basis of an IvI exclusion, which precluded coverage in the first instance for any “Claim made against any Insured by or on behalf of any Insured or any security holder of the Company,” but with an assistance exception for claims brought by a security holder “acting totally independently of, and without solicitation, assistance, active participation or intervention of, the Company or any Insured Person.”

In the ensuing coverage litigation, the court granted the insurer’s motion to dismiss, holding that the insurer owed no duty to defend or indemnify the company’s president in connection with the underlying action. The court rejected the insured’s argument that an allocation was necessary because some plaintiffs in the underlying suit were insureds or securityholders and one of the plaintiffs was not. The court reasoned that because a “Claim” was defined to include an entire civil proceeding, the policy language contemplated that the exclusion would operate to preclude coverage for an entire lawsuit. The court also distinguished other cases where courts had held that an allocation was necessary under similar circumstances by pointing out that the policies at issue in those cases lacked an assistance exception, and that applying the allocation clause in this context would render the assistance exception superfluous.

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.