The U.S. Eleventh Circuit Court of Appeals recently held that a professional liability insurer had no duty to defend against claims for sanctions and non-pecuniary relief. Jones, Foster, Johnston & Stubbs, P.A. v. Prosight-Syndicate 1110 at Lloyd’s, 2017 WL 586450 (11th Cir. Feb. 14, 2017).
The insured, a law firm, sought coverage under its professional liability policy in response to a motion for contempt and sanctions for using privileged information in violation of a protective order. The insurer refused to defend, asserting that the policy applied only to claims seeking damages, not sanctions. The policy defined the term “damages” as “compensatory judgments, settlements, or awards” but not “sanctions” or other penalties. The insured was sued for breach of contract, breach of the covenant of good faith, and declaratory relief. Among other things, the insured argued that the attorneys’ fees and costs sought along with the sanctions were compensatory in nature, and therefore triggered the duty to defend. The court found that the policy did not extend coverage to claims seeking sanctions and held that the insurer had no duty to defend. The insured appealed.
The Eleventh Circuit affirmed, holding that the insurer had no duty to defend the insured against the claim for sanctions. The Eleventh Circuit noted any assessment of attorneys’ fees and costs pursuant to contempt still served as a form of punishment through the sanctions.