399_C071

NOTE – This is from our older court case archives. It may involve situations that are inapplicable to newer coverage forms. Please be aware of this possibility when reading and using this case.

Malpractice and Professional Liability Insurance	Aggregate Limit
Insurance Limits

Aggregate Limit Rather Than Each Claim Limit Ruled Applicable

Accountants Professional Liability Insurance carried by an accounting firm was written with a $1 million policy limit for each claim and a $2 million aggregate limit. The question for the court in this case involved the meaning and application of the two terms.

A number of shareholders in a corporation and several banks that extended loans to it brought their complaints in single legal proceedings. The common denominator was that all relied on financial reports that the insured accounting firm prepared for the corporation, and suffered losses because of alleged errors in the reports. The issue was whether the aggregate or each claim limit of the policy was applicable.

Litigation involving the audit and report preparation was settled and it was agreed that the aggrieved parties would be assigned the accounting firm’s rights under the insurance policy. The court found that the words “claim” and “aggregate” were not defined in the insurance contract, but there was nothing ambiguous about their meaning with respect to the insurance.

The insurer contended that all of the third party claims giving rise to the litigation constituted a single claim because they all arose from the insured’s accounting work for the corporation during the policy period. The United States District Court disagreed, finding nothing in the language of the policy to support that argument.

The court concluded that the word “claim” had reference to the demand of a third-party claimant against the insured. It did not, as used in the policy, refer to “claim” by the insured against the insurer. The court concluded that the individual complaints against the accounting firm were claims in the aggregate rather than one claim, though made in one litigation, and that the “aggregate” limit of insurance was applicable. Summary judgment to this effect was granted to the plaintiff.

The National State Bank, Elizabeth, N.J., Plaintiff v. American Home Assurance Company, Defendant. United States District Court, Southern District of New York. No. 79 Civ. 5796. June 30, 1980. CCH 1980 Fire and Casualty Cases 78.