Underground Subway Station Seattle


CGL Policy Does Not Cover Fraud Claims Asserted Against Insured

In Am. Mgmt. Servs. E. LLC v. Scottsdale Ins. Co., 2016 U.S. Dist. LEXIS 51768 (W.D. Wash. April 16, 2016 (unpublished), the insured was sued in two states for alleged fraudulent mismanagement of certain military housing projects, which the insured operated for the U.S. Army.  The insured had general commercial liability insurance policies issued by two different insurers.  The policies covered the insured for liability arising from “bodily injury” or “property damage” caused by an “occurrence.”

The claims against the insured were for alleged fraud, bribery and kickbacks related to the insured’s management of the housing projects.  When the insured sought a defense under the policies, the insurers denied a defense.  The insured sued the insurers for breach of contract, bad faith, violation of IFCA and violation of the CPA.  The court found that there was no coverage under the policies because the insured’s intentional conduct was not an accident under the policies’ definitions.  The policies defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  Since there was no possibility of coverage, the insurers had no duty to defend.