Threatening Email Should Have Been Reported on Policy Application
An insurance company sold a professional liability insurance policy to a title and escrow agency that excluded claims known or foreseeable to the agency at the time of the policy’s inception. The insurer subsequently declined to pay a claim arising from the agency’s erroneous transfer of an investor’s funds because, before the agency bought the policy, that investor sent an email threatening to sue the agency for this transfer. On appeal, the investor, acting as a judgment creditor of the agency, contended the email threatened but did not affirmatively promise a lawsuit. The Sixth Circuit held the insured had prior knowledge of a potential claim based on the letter especially since the agency had also been sued for similar errors by other investors in the same scheme.