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Hanover off hook under D&O policy in family dispute


A federal appeals court has affirmed a lower court and ruled that a Hanover Insurance Group Inc. unit does not have to defend or indemnify a company under its claims-made directors and officers liability policy involving a family dispute, based on the claim’s timing.

Jane Dunteman, the family matriarch, held a minority stake in Du-Kane Asphalt Co. and Crush Crete Inc., both of which are based in Addison, Illinois, which were owned and operated by her husband, Paul Dunteman Sr., and other family members, according to Monday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in The Hanover Insurance Co. v. R.W. Dunteman Co., et al.

The couple divorced in 2009. Jane died in March 2017 and Mr. Dunteman six months later.

Hanover Insurance Co. had issued claims made claims-made D&O liability policies to the companies in 2017 and 2018.

Ms. Dunteman’s death led to litigation in state court over the size of her interest in the family business, with her estate, which was represented by daughter Audrey, contending she owned 24% of the business, and her four brothers alleging it was less.

In August 2017, the estate filed suit in state court seeking a declaratory judgment against Du-Kane Asphalt asking the court to invalidate a wrongful reduction in Jane’s ownership interest.

In July 2018, the two companies and the Dunteman brothersPaul Jr., Jeffrey, Roland and Matthew – notified Hanover of the estate’s suit, and sought coverage under the 2018 policy. Hanover denied the request, because the estate’s lawsuit was first filed during the 2017 policy period and the insureds had failed to provide notice of it within the time prescribed by the policy.

The insurer filed suit in U.S. District Court in Chicago, seeking a declaration it did not owe a defense or indemnity in the litigation. The district court ruled in the insurer’s favor, and was affirmed by a three-judge appeals court panel.

Among the insureds’ arguments was that a second amended complaint, which added additional defendants, “created a distinct claim” that was first made during the 2018 policy period, the ruling said.

Under “the policy’s aggregation provisions, the new allegations against additional defendants clearly related to the claim that was first made during the 2017 policy period,” the ruling said, in affirming the lower court’s decision.

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