A federal appeals court affirmed at lower court ruling in favor of Scottsdale Insurance Co. in directors and officers liability coverage litigation involving a group of interrelated telecommunications firms, partly because it holds the litigation filed against it was not filed on a timely basis.
The plaintiffs in the case are four companies that share an office in Laguna Beach, California; US HF Cellular Communications LLC, Virsenet LLC; ShipCom LLC and Global Wideband HF Net LLC, according to Friday's ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in USHF Cellular Communications LLC et al. v. Scottsdale Insurance Co.
In May 2018, two founders of ShipCom, who retained 20% of the business after the remainder to USHFCC, allegedly discovered USHFCC had been planning to operate a shipCom had obtained from the Federal Communications Commission and exclude them from the potential profits. The filed suit against all four companies as well as two of the companies officials. The four companies had purchased D&O policies from Scottsdale. Scottsdale denied coverage to USCHFCC, Virsenet and ShipCom on the basis it was informed of the litigation in January 201
The companies filed suit against Scottsdale in US District Court in Columbus Ohio, which ruled that USHFCC, Virsenet and ShipCom had failed to timely report the coverage. The denied coverage to Global on for its 2015-2016 policy on the basis it had made a "material misrepresentation" in its insurance application.
The lower court's rulings were affirmed by a unanimous three-judge appeals court panel. Discussing the USHFCC, Virsenet and ShipCom policies, the ruling said, "Plaintiffs advance multiple arguments seeking to excuse their untimely reporting" of the lawsuit. The panel managed, however, that the policies "plain language" precludes their coverage under the policies.
In the case of the global policy, the ruling said the policy application asked whether there had been prior litigation. A company official first answered “yes” to the question on Aug. 25, 2015, but changed the answer six days later to say “no” in a revised application. Scottsdale said at this time, the original complaint in the ShipCom litigation against it had been filed.
Global's arguments included that the prior questioning on the application form was ambiguous, said the ruling. "Due to the prior litigation question is not susceptible to more than one reasonable interpterion, it is not ambiguous as a matter of law," the ruling said, however, in the lower court's judgment.
Attorneys in the case had no comment .
In May, a federal appeals court upheld in favor of Axis Reinsurance Co. in a D&O liability coverage disputed with a pharmaceuticals company and a company executive over a claims-made policy.