No Duty to Defend Accountant in Third-Party Action

TGM is an accounting firm that purchased a claims-made and reported accountant’s professional liability policy from defendant, Camico Mutual Insurance. Myers was a certified public account, principal of TGM, and qualified as an insured under the policy. The policy agreed to indemnify and defend the insured against claims arising out of its professional service. However, activities performed by an insured in his or her capacity as an agent or broker for the placement or renewal of insurance products or for the sale of annuities were not considered professional services.

Litigation arose concerning the sale of a defined benefit pension plan funded by Hartford Life Annuity Insurance Company and sold to Baja Holdings. Though Myers and TGM were not defendants, the complaint alleged that Myers, acting as a TGM accountant and tax advisor, recommended the pension plan without disclosing that he was a Hartford agent and would receive a commission. Myers eventually learned that the plaintiff intended to pursue a claim against Myers and TGM relating to the Baja policy transaction. Myers and TGM provided notice to Camico Mutual, which denied coverage.

A third-party complaint was eventually filed naming Myers and TGM as third-party defendants. Myers and TGM, in turn, sought coverage. Camico Mutual again denied coverage for the action resulting in the instant coverage dispute.

With respect to its duty to defend, the court stated that the insurer must defend where there is any "potentiality" that the claim could be covered by the policy. Here, the court noted that the allegations in the underlying action arose out of Myers’ sale and promotion of the benefit plan in his capacity as an agent or broker for Hartford. Therefore, the special exclusion endorsement clearly applied and precluded coverage.

Impact:   Duty to defend disputes is always difficult to win. However, to the extent a complaint asserts claims solely within the scope of an exclusion the insurer has a strong argument that the duty to defend was not triggered, and consequently, there is also no duty to indemnify.

For a copy of this decision, click here: http://insurancecoverage.typepad.com/insurance_and_reinsurance/2010/04/cases-for-professional-liability-monthly-april-edition.html  

TRICE, GEARY & MYERS, LLC v. CAMICO MUT. INS. CO., (N.D. Md., Mar. 25, 2010)