Financial Management Advisers v. American International Specialty Line Insurance Company

Background

FMA is a firm that provides investment advice and portfo- lio management services. Malamed is FMA’s President and Chief Investment Officer, and acts as the financial advisor to many of FMA’s clients.

In May of 2002, FMA purchased from AISLIC an Invest- ment Management Insurance Policy to cover claims made against the FMA Parties for “Wrongful Acts” in the rendering of, or failure to render, investment advisory services. A “Wrongful Act” is defined as “any breach of duty, neglect, error, misstatement, misleading statement, omission or other act wrongfully done or attempted by the Insured.” The initial policy issued to FMA (“Policy I”) covered the period from May 2, 2002 to May 2, 2003. In May of 2003, AISLIC issued a “renewal” policy (“Policy II”) covering the period from May 2, 2003 to May 2, 2004. Each policy is subject to a $2 million limit of liability.

The dispute in this case arises from the effect of two provi- sions, one in each of the AISLIC policies. Endorsement No. 3 of Policy I provides:

If written notice of a Claim has been given to the Insurer . . . then a claim which is subsequently made against the Insureds and reported to the Insurer alleg- ing,…