The United States District Court for the Northern District of Illinois, applying Illinois law, has held that an insurer had a duty to defend an insured condominium association and its board members against an underlying lawsuit because the association’s board members allegedly committed ‘Wrongful Acts’ under the directors and officers coverage part of a business liability policy. Cambridge Mut. Fire Ins. Co. v. Bell & Arthur Condo. Ass’n, et al., 2022 WL 13827758 (N.D. Ill. Oct. 21, 2022).LitigationLiability
In doing so, the court interpreted ‘Wrongful Acts’ to include both negligent and intentional acts. The court also held that the policy’s conduct exclusion did not preclude coverage because the underlying lawsuit did not allege any intent to mislead or defraud on the part of the insureds.
Owners of an insured association’s condominiums brought a lawsuit in state court for multiple torts, accusing the association and its board members of mismanagement.
Among other things, the association and board members allegedly violated the municipal code, caused property damage and bodily injury, failed to allow a records inspection, and breached their fiduciary duty by adopting rules and regulations through procedures that violated Illinois law.
After receiving notice of the underlying lawsuit, the association’s business liability insurer sought a declaratory judgment that it owed no duty to defend under the directors and officers coverage of its policy.