Troutman Sanders Obtains Dismissal in Large Professional Liability Coverage Dispute
The Circuit Court of Cook County, Illinois, recently dismissed all claims against Troutman Sanders’ client, Continental Casualty Company, in an insurance coverage dispute in which the insureds were seeking approximately $50 million from their professional liability insurers, including Continental.
In 2008, Hilco Financial, LLC defaulted on tens of millions of dollars in loans when its asset-backed lending business collapsed. Hilco Financial’s loans were secured by third-party borrowers’ assets, which had been appraised by two other Hilco companies. When those borrowers began to default, the collateral proved to be worth far less than the appraised value, which led Hilco Financial to default on its own debts. The banks sued, alleging that the sister companies had provided them with false appraisals that significantly overvalued the assets used to collateralize Hilco Financial’s loans. The banks contend that the allegedly false appraisals were intended to induce them to approve the loans while concealing the associated risks.
Hilco sought coverage for the underlying actions under claims-made policies that were issued in two consecutive policy periods. Hilco reported the issues with the appraisals to its primary carrier during the first policy period, but it argued that the banks’ complaints, which were filed in the second policy period, contained claims broader than those it had previously reported. Based on this assertion, Hilco argued that it was entitled to coverage under policies issued in both periods.
Continental, which had issued an excess policy only during the second policy period, moved to dismiss the claims against it, arguing that all of the allegations made against Hilco constituted a single “related claim” that was first made prior to the inception of the Continental policy. Continental also argued that the portion of the allegations the insured contended were first made during its policy period did not involve “professional services” within the meaning of the policy. The court agreed and granted the motion to dismiss all claims against Continental.
Continental is represented by Wallace Christensen from Troutman Sanders’ Washington D.C. office and Christopher White and Seth Erickson from Troutman Sanders’ Chicago office.
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