The United States District Court for the Southern District of New York recently granted a title agent’s motion for summary judgment regarding a professional liability insurer’s duty to defend the agent, despite the fact that the agent was served with a subpoena before the liability insurer issued the policy. See Protective Specialty Ins. Co. v. Castle Title Ins. Agency, Inc., 2020 WL 550700 (S.D.N.Y. Feb. 3, 2020). In the case, the plaintiff professional liability insurer issued three consecutive professional liability policies to the defendant title agency between 2014 and 2017. In July of 2015, defendant was served with a subpoena duces tecum by SR Holdings I, LLC, who was seeking documents regarding various property transfers. In September of 2015, defendant applied for a second year of coverage from plaintiff. As part of the application, defendant confirmed that it was not aware of any claims against it. Plaintiff issued another policy. In 2016, SR Holdings filed a state court lawsuit against defendant, among others, alleging that it “negligently and/or fraudulently delayed” in submitting real estate documents for recording. Plaintiff then brought this action seeking a declaratory judgment that it was not required to defend defendant in the state court action. Plaintiff argued that the 2015 subpoena constituted a “claim” that defendant failed to report, and that because the 2016 action was “related” to the unreported 2015 claim, both were excluded from coverage. The parties cross-moved for summary judgment.
The Court granted defendant’s summary judgment motion and denied plaintiff’s. The Court first held that insurance policies should be interpreted according to the general rules of contract interpretation and that “[u]nambiguous terms are to be given their plain and ordinary meaning.” In this case, the parties disputed whether the 2015 subpoena constituted a claim, which the application defined as “a written demand by subpoena upon an Insured as a non-party to litigation or arbitration involving Professional Services provided by such Insured.” The Court rejected plaintiff’s argument that any subpoena “involving Professional Services provided by such Insured” was a claim. Instead, it agreed with defendant that the phrase “involving Professional Services provided by such Insured” modifies “litigation or arbitration,” not “subpoena.” Because the 2015 subpoena was part of SR Holdings’ judgment collection action, which did not involve defendant’s professional services, it was not a claim against defendant. Accordingly, the Court found that plaintiff had a duty to defend defendant.