Court Rejects Application of Professional Liability Exclusion
SS&C Technology Holdings is a software and software-enabled services provider. Through an email spoofing scheme fraudsters obtained transfers by SS&C on behalf of one of its clients to the tune of over $5.9 million. The parties settled the claim and SS&C sought indemnity from its E&O carrier, AIG (its cyber carrier was not involved in this dispute). AIG paid defense costs but denied coverage citing a policy exclusion. SS&C sued alleging breach of contract and seeking a judicial declaration of coverage as well as damages for alleged breaches of the covenant of good faith and fair dealing. Applying Connecticut law, the Southern District of New York mostly denied the insurer’s motion seeking dismissal on the grounds the exclusion for conduct arising out of fraudulent, criminal or malicious conduct applied. In keeping the case alive, the court relied on the tension in the exclusion’s language between the “provided however” clause and the exclusion’s first clause that it claimed opened the door to coverage here.