Kenneth Labbate, Mark Katz and Sanjit Shah Secure Summary Judgment in Favor of Professional Liability Insurer Upholding Disclaimer Under Policy's Prior Knowledge Exclusion

Mound Cotton Prevails in Declaratory Judgment Action recovering in excess of $350,000 for its client: 

In May 2010, Mound Cotton secured summary judgment on behalf of a professional liability insurer in the U.S. District Court for the District of New Jersey in declaratory judgment action seeking a declaration that it's client did not owe coverage to a New Jersey law firm.

The firm's client had issued a professional liability insurance policy to the law firm, which subsequently sought coverage in connection with an action filed against it in New Jersey State Court.  Our client provided a defense under a full reservation of rights, and at its insured's insistence, settled the state court action against the law firm, again fully reserving all rights.  In its federal court declaratory judgment action, we argued on behalf of our client that it did not owe a defense to the law firm, inter alia, by reason of the prior knowledge exclusion in the policy.

By Order dated May 12, 2010, U.S. Senior District Judge William H. Walls accepted our arguments holding that the policy's prior knowledge exclusion “operates to exclude coverage for the claims brought against Defendants in the underlying state court action.”  Accordingly, Judge Walls ordered that the law firm was required to “reimburse [our client] for the costs it expended with regard to the defense and indemnification of Defendants.”  The May 12, 2010 decision represented a complete victory for Mound Cotton’s client.