A federal appeals court on Wednesday upheld a lower court ruling in favor of entities from Allied World Assurance Company Holdings Ltd., Intact Insurance Group USA LLC and Traveler Cos. it under their faults and omissions and board members and civil servant liability insurance.
Clifton, New Jersey-based Benecard Services Inc. was sued in 2015 by a one-time partner for breach of contract and fraudulent misrepresentation, following Wednesday's judgment of the 3rd U.S. Circuit Court of Appeals in Philadelphia in Benecard Services Inc. v Allied World Specialty Insurance Co. et. al. The trial was decided in 2016 for an amount that was not revealed in the judgment.
Benecard sought coverage for its defense and settlement costs under E&O and D&O coverage and then applied to several insurers when coverage was denied. The U.S. District Court in Trenton, New Jersey, ruled in favor of insurers and was upheld by a unanimous three-judge appeals board.
About the E&O coverage, Allied World Specialty Insurance Co., a unit of Allied World Assurance Co. Holdings Ltd., paid $ 3.8 million in defense costs, but refused to reimburse any part of the settlement.
The district court held that damages were not required because Benecard had decided the underlying lawsuit without obtaining Allied World's written consent, "An express condition for coverage under the consent policy," the Court of Appeal ruled.
Among Benecard's arguments, the judgment said, was that the depletion of the coverage limit excused Benecard's failure to obtain written consent. "Benecard fails to support this excuse theory with any reference to legal authority, so we refuse to accept it," the verdict said.
Benecard also argued that the district court granted a summary judgment to Allied World in the action involving its D&O policy.
The district court considered that Benecard's claims fall within the insurance's "third party" and "professional services", says the Court of Appeal. Both provisions "unambiguously" carried coverage, the appeals panel agreed.
Another issue was the refusal of Atlantic Specialty Insurance Co., a unit of Intact Insurance Group USA LLC, to provide D&O coverage. The district court considered that the lawsuit falls within the policy's exclusion for "managed care activities", which Benecard claimed was wrong.
The panel also agreed with the lower court on this issue. "Benecard's theory is precluded by the plain text of politics," it said.
The panel also confirmed the district court's summary judgment for the Travelers unit Casualty Co of America in the D&O action and claimed that the insurer interpreted the policy correctly.