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A W.R. Berkley Corp. unit has prevailed in litigation with an au pair firm based on a prior knowledge exclusion in its errors and omissions policy, in a ruling Thursday.
The 11th U.S. Circuit Court of Appeals in Atlanta affirmed a ruling by a lower court in coverage litigation filed by W.R. Berkley Corp. unit Berkley Assurance Co. in Berkley Assurance Co. vs. Expert Group International Inc. d.b.a. Expert Au Pair.
St. Petersburg, Florida-based Expert Au Pair is a federally designated sponsor for the J-1 Au Pair Program, an exchange program offered by the U.S. State Department, according to the ruling.
Under the program, foreign nationals work in host families for up to 45 hours per week in exchange for room, board, a legal wage and a small stipend for academic coursework. Expert Au Pair was designated as a sponsor of the program by the State Department in 2007, according to the ruling.
In November 2014, Expert Au Pair was named as a defendant, along with every other federally designated sponsor, in a federal class action suit filed by an au pair who had participated in the J-1 Au Pair program.
In February 2015, after being served with a copy of the initial class action, Expert Au Pair submitted a notice of loss to its E&O insurer, Richmond, Virginia-based Colony Insurance Co., an Argo Group insurer, which agreed to defend the suit under a reservation for rights, although it later filed a declaratory judgment action against Expert Au Pair, according to the ruling.
Two days later, Expert Au Pair submitted an application for claims made E&O insurance from Berkley in which it responded “no” to the question of whether there were “grounds for any claim such as would fall under the proposed insurance.”
Berkley then issued Expert Au Pair an E&O policy that covered the period of February 2015 to February 2016 that was renewed for another year for the period beginning in February 2016.
In January 2016, Expert Au Pair asked that Berkley defend it in the Colony declaratory judgment action. Berkley refused to provide coverage, citing a prior knowledge exclusion in its policy.
In October 2016, a second amended complaint was filed in the class action. Plaintiffs included Nicole Mapledoram, who had been sponsored by Expert Au Pair. She filed suit in a putative class action against Experts Au Pair charging negligent misrepresentation of applicable minimum wage laws, among other claims.
Berkley then filed suit in U.S. District Court in Tampa, Florida, seeking a declaration it was not obligated to provide coverage based on the exclusion. The District Court agreed.
Its ruling was affirmed by a unanimous three-judge appeals court panel. “Expert Au Pair cannot reasonably claim it was surprised by Mapledoram’s negligence claims,” said the ruling.
“Based on the facts known to it as of February 14, 2016, the inception date of the renewal policy, it had an objective basis to anticipate the specific negligence claim that was eventually filed against it – even if it had no reason to suspect that Mapledoram in particular would be the one to bring the claim,” said the ruling applies, in affirming the lower court’s ruling in the case.
Attorneys in the case had no comment or could not be reached.
In April, a Washington state appeals court overturned a lower court ruling and held a W.R. Berkley Corp. unit’s definition of the word “decay” in denying a roof damage claim was too narrow.
While errors and omissions rates remain soft at midyear renewals, experts say it's difficult to make overall statements due to the disparate sectors covered by E&O policies.