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A Zurich Insurance Group unit must defend a utility in a putative class action suit under its directors and officers liability insurance policy’s definition of occurrence, says a federal appeals court, in affirming a lower court ruling.
Auburn, Maine-based Electricity Maine LLC, a private energy company, was sued in November 2015 in a putative class action whose charges include negligence and negligent misrepresentation, according to Monday’s ruling by the 1st U.S. Circuit Court of Appeals in Boston in Zurich American Insurance Co. v. Electricity Maine LLC et al.
The litigation charged the utility had engaged in misconduct that resulted in customers receiving higher bills than it had represented, and sought damages of about $35 million for a variety of Maine state common-law claims.
Electricity Maine tendered notice of the suit to Zurich Insurance Group unit Zurich America, which filed suit in U.S. District Court in Portland, Maine, seeking a declaration it was not obligated to defend the utility. The District Court ruled in the utility’s favor, which was upheld by a unanimous three-judge appeals court panel.
Zurich contended it is not obligated to defend Electricity Maine because the complaint in the underlying action does not allege its conduct qualifies as an “occurrence” or caused any “bodily injury.”
“The Policy defines an ‘occurrence’ to be ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions,’” said the ruling.
It “does not define what constitutes an ‘accident,’ but the Maine Law Court… has explained that an ‘accident’ is ‘commonly understood to mean… an event that takes place without one’s forethought or expectation an undesigned, sudden and unexpected event,’” said the ruling, citing earlier cases.
The underlying lawsuit’s negligence and negligent misrepresentation claims “would appear to seek recovery for the kind of conduct that fits comfortably with the definition of an ‘accident’ as these claims require proof only of ‘event(s) that take () place without one’s forethought or expectation,” said the suit, in again citing one of the earlier cases, and affirming the lower court’s ruling.
“That is not to say that either the negligent misrepresentation claims, or the negligence claim has merit,” said the ruling. “But, even a ‘broad, conclusory allegation, such as negligence’ that is ‘legally sufficient to withstand a motion to dismiss’ will trigger an insurer’s duty to defend ‘whenever the allegation show a potential that liability will be established with the coverage,’” said the ruling, in citing an earlier case and affirming the lower court’s ruling denying Zurich’s motion for summary judgment.
Electricity Maine attorney Timothy E. Steigelman, of law firm Drummond Woodsum Strategic Consulting LLC in Portland, said, “We thought the district court got it right below and we think the 1st Circuit got it right on appeal. We’re glad that Zurich will be required to fulfill its contractual obligations to its insureds." Zurich’s attorney did not respond to a request for comment.
A federal appeals court affirmed a lower court decision and ruled last week that a Markel Corp. unit is not obligated to defend or indemnify a housing corporation under D&O liability policy exclusion because of a previous comparable action.
Zurich Insurance Group units are not obligated to defend or indemnify a financial services firm charged with violating the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act based on exclusions in the insurers’ commercial general liability and umbrella policies, says a federal court in Thursday’s ruling.