The United States District Court for the Eastern District of Pennsylvania in December ruled that Evanston Insurance Company is not obligated to defend Tri-Arc Financial Services Inc. in an underlying lawsuit because of an exclusion in its professional liability insurance policy.
This decision comes after plaintiff Tri-Arc Financial Services Inc., a Wayne, Penn., based insurance agency, purchased a professional liability insurance policy from defendant Evanston Insurance Company, a Deerfield, Ill., based insurance provider. The policy provided $1 million in coverage for lawsuits.
In April, Tri-Arc filed the instant complaint in the Court of Common Pleas of Montgomery County, Penn. The lawsuit, Tri-Arc Financial Services Inc. v. Evanston Insurance Co. et al, sought damages for breach of contract after Evanston refused to provide coverage or defend Tri-Arc in an underlying civil action.
The underlying action involved defendent Wesco Insurance Company filing a third party petition in September 2015, requesting Tri-Arc be named as a third party defendant and assigned a percentage of liability in a lawsuit seeking the return of insurance premium payments from Wesco.
The underlying complaint filed by plaintiff Vehicle Leasing alleges that regular insurance premiums were paid to Wesco for what turned out to be a fraudulent insurance policy. These premium payments amounted to more than $1 million.
Evanston claimed it had no duty to defend Tri-Arc in the matter because the action fell under one of its policy exclusions.
This is because the underlying complaint demanded a return of premium payments, which is excluded under Evanston’s policies, according to the lawsuit.
The exclusion in question is Exclusion F, which states that the duty to defend does not apply to any claim “based upon or arising out of . . . any Claim for loss monies received by the Insured . . . for . . . premiums,” according to the lawsuit.
While Evanston typically is required to defend plaintiffs for claims arising out of professional services rendered, it is not required to defend claims against plaintiffs to recover premiums, according to the lawsuit.
The court decided in favor of Evanston that the exclusion applies, and it has no duty to defend Tri-Arc or provide coverage in the lawsuit involving Wesco and Vehicle Leasing.
“Here, the policy excludes ‘any Claim’ to recover premiums received by the Insured,” the lawsuit stated. “Because Exclusion F states that it applies to any claim to recover premiums, and contains no qualifications, the language is clear and unambiguous.”
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