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Ruling in Lloyd’s syndicates case partially reversed

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A federal appeals court partially reversed a lower court ruling Friday in favor of Lloyd’s syndicates in a dispute over a benefit plan third-party administrator’s errors and omissions coverage.

Lloyd’s syndicates had issued E&O policies to Anaheim, California-based KG Administrative Services Inc., according to Friday’s ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in Certain Underwriters at Lloyd’s of London v. KG Administrative Services Inc.

The focus of the ruling is the policy Lloyd’s had written for the period Jan. 1, 2019, to Jan. 1, 2020.

Before renewing Lloyd’s 2018-2019 policy for the 2019-2020 period, three lawsuits were filed against KG. As part of its renewal application, KG’s president had submitted a “warranty statement” that said it had no knowledge of any incident that could give rise to a claim.

The underwriters filed suit against KG in May 2019, in U.S. District Court in Akron, Ohio, seeking rescission of the 2019-2020 policy and a declaration it had no duty to defend KG.

The district court ruled in the insurers’ favor but was partially overturned by an appeals court panel in a 2-1 decision.  Focusing on one of the lawsuits, the majority opinion said the “key issue” was whether the warranty statement was a true warranty as opposed to a mere “representation.”

It said, “we think that KG’s ‘warranty statement’ is best understood as an ‘expression of personal belief or opinion,’ such that it was nothing more than a mere representation.”

The ruling said there is an “issue of material” as to the date of service for that lawsuit. 

It upheld the lower court’s ruling on the two other lawsuits, holding they fell under the previous policy.

The minority opinion said it dissented “from
the conclusions reached by the majority to questions not posed by appellant and supported by arguments appellant never offered.”

Attorneys in the case did not respond to requests for comment.