The California Appellate Court gives us a concise summary of why the answers to a securities firm’s application for professional liability insurance, resulted in no coverage as soon as a claim was made on the policy:
When the securities firm applied for professional liability insurance, it disclosed one of the customer claims but not the facts that would support other potential customer claims arising out of investments through the same entity as that involved in the disclosed claim. The insurer refused to defend the securities firm against undisclosed claims because the policy's application included an exclusion for nondisclosure of facts that might lead to a claim. In affirming the judgment, we hold that the trial court correctly entered judgment in favor of the insurer on the ground that there was no insurance coverage because all of the undisclosed claims arose out of the same events as the disclosed claim and therefore the facts underlying the undisclosed claims should have been disclosed.
Crown Capital Securities, L.P. v. Endurance American Specialty Insurance Co., ___ Cal. Rptr. 3d ___, 2015 WL 1607164, *1 (Cal. 2d DCA April 10, 2015).
In this case, the California Appellate Court identified the determinative language in the application as an “exclusion.” Similar language, requiring the applicant to disclose facts which might lead to a claim, is found in most if not all applications for insurance of all kinds.
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