Catlin Specialty Insurance Company v. QA3 Financial Corp, 2013 U.S. Dist. LEXIS 101685 (S.D. NY, 7/19/13)

Both parties’ motions for summary judgment were denied where there remained material issues of fact with respect to the coverage issue.

The plaintiff agreed to insure the defendant against claims made for “a Wrongful Act committed solely in the rendering or failure to render Professional Services for a client.” When some of the defendant’s clients commenced arbitrations and lawsuits against it, the defendant submitted the claims to the plaintiff for coverage. The clients argued that they had sustained losses on private placements, i.e., a non-public offering of securities that are exempt from registration under the Securities Act of 1933. While neither party disputed that the claims were covered, they did dispute the aggregate limit for the claims. The aggregate limit for claims arising out of private replacements was $1 million. The defendant, however, argued that the limit applied only to specifically enumerated private placements listed in the endorsement of the policy and that, otherwise, an aggregate limit of $7.5 million applied. The plaintiff argued that the $1 million limit in the applicable endorsement applied to all private placements, while the defendant argued that the limit applied only to the six enumerated funds listed in the endorsement and that, otherwise, the $7.5 million limit applied. The court ruled that the contract was susceptible to both interpretations and that neither side was persuasive in arguing that the contract was unambiguous. Neither a plain reading nor an application of the cannons of construction urged by the parties was sufficient to render the contract unambiguous. The court also ruled that while the evidence presented by both sides was probative, none of the evidence was sufficient, when read in the light most favorable to the non-moving party, to find that there was no issue of material fact remaining. As a result, both motions for summary judgment were denied.

Case Law Alerts, 4th Quarter 2013