Investment losses not covered by professional liability insurance
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Investment losses are not considered property and therefore are not covered by professional liability policies under New York insurance law, says a state court, ruling in an insurer’s favor.
John Thomas Financial Inc., a New York-based Wall Street investment brokerage firm that engaged in day trading and raising convertible debt for startups and new companies, was eventually shut down by government regulators over numerous securities violations, according to a New York State Supreme Court ruling in Todd Tuls v. New York Marine and General Insurance Co. The ruling was issued Nov. 15, but publicized this week.
In 2012, John Thomas’ parent company, ATB Holding L.L.C., was issued a broker-dealer professional liability policy by New York-based New York Marine and General Insurance Co., a unit of ProSight Specialty Insurance Group Inc.
In 2014, following an arbitration proceeding, investor Todd Tuls reached a settlement agreement with John Thomas for $650,000. He then filed suit, seeking payment of the award from New York Marine.
Justice Anil C. Singh of the State Supreme Court in New York, which is the state’s second-highest court, granted New York Marine summary judgment dismissing the case. Among the reasons cited by the court is that New York insurance law precludes coverage for Mr. Tuls’ losses.
The ruling cited a federal case which denied coverage on the basis that there is no coverage if there has not been personal injury or property damage.
“The district court specifically rejected the argument” that the state statute “should be read expansively to include professional liability policies, noting that no New York court has ever adopted such a view given the strict construction of the statute, and the rigidly narrow cause of action it created,” said the ruling, in granting New York Marine summary judgment dismissing the case.
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