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Federal Court Rules Trust Administrators Will Get No Coverage

March 23, 2023

Johnson & Bell Shareholders, Glenn F. Fencl and Steven M. Shear, received a federal court ruling that their insurance client did not owe coverage to two trust administrators for claims brought against them by a beneficiary.  The Northern District of Illinois court found that the added claims are related to an underlying suit and are not covered by the administrators’ policy.  

In this case, the co-administrators sold real estate held by one of the members of a family foundation to a property developer.  In 2019, the property developer sued the co-administrators in state court attempting to recover costs of remediation after an underground storage tank containing petroleum leaked into the soil on the property.  The property developer claimed the co-administrators had prior knowledge of the contaminants and failed to disclose their existence in the sale. In 2021, the family foundation submitted a third-party complaint alleging it wasn’t aware of an amendment the co-administrators and the property developer added to the sales agreement lowering the purchase price from $6M to $5.6M.  The foundation is seeking to recover the $400K difference from the sale.

In March 2022, we obtained summary judgment in favor of our insurance client when the court found that the co-administrators were not afforded insurance in the property developer’s lawsuit because they failed to report the existence of a claim during the relevant policy period. That order was later vacated by our insurance client so it could add the foundation to the property developer’s suit. The co-administrators sought defense for the foundation’s lawsuit from our insurance client, arguing that the insurance policy is ambiguous and both of the underlying lawsuits make different claims and are unrelated.  We argued that the claims are related as they both stem from the real estate sale and therefore subject to the court’s previous ruling that the claims are untimely and not covered.  The court agreed and ruled in our client’s favor.


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