Expert Au Pair believed that this claim was covered by the E&O liability insurance policy it had obtained from Berkley Assurance Company, which covered negligence claims against Expert Au Pair in connection with the rendering of professional services. Berkley had issued an E&O policy to cover the period February 14, 2015 to February 14, 2016. It later issued a renewal policy to cover the period February 14, 2016 to February 14, 2017.

Berkley refused to defend Expert Au Pair, citing the prior knowledge exclusion in its policy. Berkley filed an action for declaratory relief, claiming that the lawsuit was not covered because Expert Au Pair had knowledge of the grounds for the lawsuit before the inception date of the policy.

The U.S. District Court for the Middle District of Florida concluded that the prior knowledge exclusion applied, and Expert Au Pair appealed to the Eleventh Circuit.

The Berkley Policy

The exclusion in the Berkley policy provided:

As of the inception date of this policy, no insured had any knowledge of any circumstance likely to result in or give rise to a “claim” nor could have reasonably foreseen that a “claim” might likely be made.

The Eleventh Circuit's Decision

The Eleventh Circuit affirmed.

In its decision, the circuit court pointed out that knowledge “[a]s of the inception date of this policy” mattered for purposes of the exclusion. The circuit court then rejected Expert Au Pair's contention that the “inception date of this policy” was in February 2015, when the initial policy went into effect.

Rather, the Eleventh Circuit decided, the initial and renewal policies were “discrete and separate” contracts, and the relevant inception date was in February 2016.

The circuit court reasoned that the insurance contracts “clearly” contemplated that each policy was distinct for purposes of determining coverage. The two policies had distinct policy numbers and policy periods, and coverage limits and premiums were defined with respect to the respective policy period. Moreover, the circuit court continued, each policy contained the same coverage conditions, including the prior knowledge exclusion.

The Eleventh Circuit then ruled that Expert Au Pair had knowledge “[a]s of the inception date” of the renewal policy – February 14, 2016 – that it was “likely” that it would be sued for negligence given that multiple other sponsors had been accused of negligent misrepresentation for essentially the same conduct Expert Au Pair was alleged to have committed.

In the circuit court's opinion, it did “not matter that Expert Au Pair may have believed that its actual conduct made it different than other sponsors.” According to the Eleventh Circuit, the question under the prior knowledge exclusion in this case was whether Expert Au Pair “could have reasonably foreseen that a 'claim' might likely be made,” not whether such a claim would be likely to succeed. The circuit court said that, notwithstanding that Expert Au Pair may have had reasons to believe that its practices differed from other sponsors, “it also knew that it was alleged to have committed essentially the same conduct” as the other sponsors.

The Eleventh Circuit concluded that “[a]ny reasonable insured in these circumstances could have foreseen that a similar claim 'might likely be made' against it as well, even if they believed such a claim unfounded.”

The case is Berkley Assurance Co. v. Expert Group Int'l, No. 18-14506 (11th Cir. June 27, 2019). Attorneys involved include: For BERKLEY ASSURANCE COMPANY, Plaintiff – Appellee: David Clark Borucke, Aram Papkin Megerian, Cole Scott & Kissane, PA, TAMPA, FL. For EXPERT GROUP INTERNATIONAL INC., d.b.a. Expert Au Pair, Defendant – Appellant: Bogdan Enica, Law Office of Bogdan Enica, MIAMI, FL.