Accounting Services Do Not Involve Professional Liability Policy When Not Performed “For Financial Institutions” | Wiley Kidney LLP
Applying New Jersey law, the United States District Court for the Southern District of Florida held that an insurer had no duty to defend or indemnify an insured’s subsidiary because the services of audit did not trigger the policy’s assurance agreement when the services were not performed “for financial institutions”, as required by the policy’s definition of “management consulting services”. . ECB USA, Inc. v. Chubb Ins. New Jersey Co, 2022 WL 611536 (SD Fla. 25 February 2022). The Court also reformed the policy to include the insured’s subsidiary as an insured based on the intention of the parties when negotiating the policy.
From 2002 to 2019, the insured maintained professional liability insurance offering specific coverage for claims related to “management consulting services”, defined as “services oriented towards expertise in banking finance, accounting, risk analysis and systems, design and implementation, asset recovery and strategy”. planning for financial institutions. A subsidiary of the insured was sued in connection with the audit of the financial statements and submitted the lawsuit to the insurer for coverage under the policy issued for the insurance period 2017-2018 (the “policy 2017-2018”). The insurer denied coverage on the grounds that the alleged audit services were not “management consulting services” within the meaning of the 2017-2018 policy and therefore the claim did not fall within the scope of the claim. coverage of the 2017-2018 policy insurance agreement.
In the ensuing coverage dispute, the insured and the insurer sought summary judgment. In addition to stating that the claim did not allege “management consulting services”, the insurer argued that the subsidiary was not an insured under the 2017-2018 policy, although it was insured in previous years, because the 2017-2018 policy was not intended to be a renewal of the previous year’s policy. The insured, in turn, argued that the audit services at issue fell within the definition of “management consulting services” and requested a reform of the 2017-2018 policy to include the affected subsidiary as a assured on the basis of the intention of the parties that the 2017-2018 policy The 2018 policy be a renewal of the previous year’s policy.
The Court granted in part and denied in part the motions of both parties. The Court held that the parties intended the 2017-2018 Policy to be a renewal of previous policies issued to the insured, and therefore the Court reformed the 2017-2018 Policy to include the subsidiary as an insured. However, the Court concluded that the insurer had no obligation to defend or indemnify the subsidiary for the lawsuit. The Court explained that although the financial audit at issue qualified as “accounting” services within the meaning of “management consulting services”, these services were not rendered “for financial institutions”, as required also the express definition of this term in the Policy. The Court held that the “for financial institutions” requirement applied to each of the services set out in the definition, including “accounting”.