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Suit against Hanover in alleged embezzlement time-barred


Coverage litigation against a Hanover Insurance Group Inc. unit by a sports brokerage, whose chief financial officer had allegedly embezzled from it, was filed too late, a federal appeals court ruled Thursday, in affirming a lower court ruling. 

Lake Placid, New York-based allegedly discovered in January 2016 that its chief financial officer was embezzling from the company, according to the ruling by the 2nd U.S. Circuit Court of Appeals in New York in Inc. v. Hanover Insurance Co.

Sportsinsurance submitted a claim under its Hanover policy, which Hanover denied in January 2017, according to the ruling.

Sportsinsurance then pursued legal action against the CFO in Quebec. In July 2019, a Canadian court found the CFO had wrongfully misappropriated money from it. The company then submitted a second claim to Hanover, which once again denied it.

In March 2020, Sportsinsurance sued Hanover in U.S. District Court in Albany, New York, charging it had breached the policy terms and the implied covenant of good faith and fair dealing.

The district court ruled that the company’s lawsuit was time-barred under the policy, and was affirmed by a three-judge appeals court panel. 

A limitations provision in Hanover’s policy states that legal action cannot be filed against the insurer unless it is within two years after the loss was discovered, the ruling said.

By January 2017, the insurer had investigated and denied the claim, it said. “Sportsinsurance had a full year to bring a legal action against Hanover. It did not. The Limitation Provision is fair and reasonable and thus enforceable,” the ruling said, in affirming the lower court.

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

Last month, a federal appeals court 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.