The insurance policies
The plaintiffs in this case were Infinity Q (a registered investment advisor organized as a Delaware LLC), Leonard Potter (a director of Infinity Q), and Scott Lindell (Infinity Q’s CEO, who also served as chief risk officer and chief compliance officer).
Beginning in 2014, Infinity Q held a $5 million professional liability primary insurance policy. In August 2020, each of the three insurer defendants in this case – Travelers, Axis, and Arch – submitted quotes to Infinity Q for three layers of excess insurance. All three of the email quotes indicated in some way, although using slightly different language, that the insurer would require the insured to issue an “excess warranty” before the policy could be issued. These quotes were transmitted to Infinity Q through its retail broker, who provided Infinity Q with two copies of the same draft form warranty letter. The draft form letter was addressed to Arch. In subsequent correspondence, the retail broker advised Infinity Q how to execute the warranty letter for Travelers and Arch, but mistakenly advised Infinity Q that Axis did not require a warranty letter.
The warranty letter contained very broad language representing that “[n]o person or entity for whom this insurance is intended has any knowledge or information of any act, error, omission, fact or circumstance that may give rise to a claim under the proposed insurance” and agreeing that “any claim for, based upon, arising from, or in any way related to any act, error, omission, fact or circumstance of which any such person or entity has any knowledge or information shall be excluded from coverage under the proposed insurance.”
Infinity Q confirmed to its retail broker that it “would like to bind all three layers of excess” and sent the two copies of the warranty letter to the retail broker. The first copy was addressed to Arch, and Infinity Q inserted the policy limit numbers applicable to Arch. For the second copy, Infinity Q neglected to change the recipient from the default Arch to Travelers, but did insert the specific policy limit numbers applicable to Travelers.
Infinity Q’s wholesale broker communicated Infinity Q’s acceptance to all three insurers. While the broker only sent the warranty letters to Travelers and Arch in the first instance, he forwarded them along to Axis when Axis wrote back indicating that it was conditioning coverage on the receipt of a warranty letter. The three excess insurers then issued policies to Infinity Q. In addition to the exclusions in the warranty letter, all three of the excess policies contained their own prior or pending litigation exclusions.