Insurer not liable to defend insurance agency due to exclusion

Evanston Insurance Co. is not obligated to defend an insurance agency in a lawsuit seeking return of premium payments because of an exclusion in its insurance agents and brokers professional liability insurance policy, says a U.S. District Court.

Wayne, Pennsylvania-based Tri-Arc Financial Services Inc., which provides auto and mortgage insurance products to financial institutions, had purchased professional liability coverage policies from Deerfield, Illinois-based Evanston Insurance Co. that provided $1 million in coverage, according to the Dec. 8 ruling by the U.S. District Court in Philadelphia in Tri-Arc Financial Services Inc. v. Evanston Insurance Co. et al. The opinion was publicized this week.

In September 2015, New York-based Wesco Insurance Co., a unit of AmTrust Financial Services Inc., filed a petition requesting that Tri-Arc be included as a third-party defendant, and assigned a percentage of liability, in a lawsuit filed against it in connection with a residual value policy that it had underwritten and Tri-Arc marketed, according to court papers.

Evanston refused Tri-Arc’s request to defend it in the lawsuit on the basis the underlying complaint demanded a return of the premium payments, which is excluded under the policies.

The U.S. District Court judge agreed. “We are compelled to conclude that the claim against plaintiff involves a claim to recover premiums,” said Judge R. Barclay Surrick in his ruling. 

“Since the underlying lawsuit seeks damages in the form of lost premium payments, we conclude that (the policy exclusion) applies and defendants do not have a duty to defend plaintiff,” said Judge Surrick, in granting Evanston’s motion to dismiss the case.