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Chubb unit not required to defend, indemnify bank: Appeals court


A Chubb Ltd. unit is not responsible for damages claimed by a bank in connection with litigation over a business dispute that began before the insurer issued it a professional liability insurance claims-made policy, a federal appeals court said in affirming a lower court ruling.

Peoples National Bank N.A., which is owned by Mt. Vernon, Illinois-based Market Street Bancshares Inc., became entrenched in litigation after a business deal involving the sale of a corporation collapsed, according to Friday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Market Street Bancshares Inc. et al. v. Federal Insurance Co., d/b/a/ Chubb Group of Insurance Cos.

The bank was sued by Terry and Robert Newman, who contended it had violated a “pledge agreement” in connection with the sale.

Chubb, which had issued a professional liability insurance claims-made policy to the bank in 2014, refused to defend and indemnify the bank in connection with the litigation, contending the damages alleged in the case could not be considered a claim under its coverage. The U.S. District Court in East St. Louis, Illinois, ruled in the insurer’s favor.

The parties’ disagreement “boils down to whether Federal Insurance had a duty, under the insurance policy, to defend and indemnify Peoples against the Newmans’ damages argument based on the Pledge Agreement,” the ruling said.

The Newmans first filed a complaint in 2003, the ruling said. Because of this timing, “the damages argument is not itself a ‘claim.’ We reach this conclusion based on the plain meaning of the policy’s terms, read in context, and in light of the policy’s purpose,” the ruling said in affirming the lower court’s decision.

Attorneys in the case did not respond to a request for comment.