In Fives St Corp. v. Allied World Surplus Lines Ins. Co., No. 5:22-cv-12683 (E.D. Mich. Aug. 29, 2024), the court held that the insured’s prior knowledge of a dispute with an equipment purchaser precluded coverage for the underlying lawsuit. BatesCarey attorneys Jonathan R. Walton, David F. Cutter and Paul E. Sowa represented the insurer in this coverage litigation.

The insurer had issued claims-made-and-reported professional liability policies to the insured over several years. During the final year, a customer sued the insured for failing to supply working parts for an assembly line. The insured demanded coverage from the insurer. When the insurer denied coverage, the insured filed a coverage action in Michigan federal court.  

BatesCarey successfully limited all discovery to a single deposition of the insured, during which they established an undisputed record that the insured knew of a potential claim prior to the relevant policy period and that the customer dispute should have been disclosed to the underwriter. Following that deposition, BatesCarey filed a motion for summary judgment. The court found that coverage was not available because the insured could not establish the insuring agreement requirement that no insured have knowledge of a wrongful act or circumstance before the policy period. The court also held that an exclusion in the insurance application barred coverage for the lawsuit.  

The court granted the insurer’s motion for summary judgment, declaring that the insurer had no duty to defend or indemnify the insureds under the policies with respect to the lawsuits.