COURT FIND SALE OF SECURITIES EXCLUSION APPLIES, NO DUTY TO DEFEND AND GRANTS SUMMARY JUDGMENT TO INSURER
Recently, the Federal District Court, Sherman Division granted summary judgment in favor of a For-Profit Management Liability insurer, enforcing the broad “arising-out-of” exclusionary language of the policy. In Gleason v. Markel American Ins. Co., No. 4:17-CV-00163, 2018 WL 538324, *1 (E.D. Tex.—Sherman Division, Jan. 24, 2018, mem. op.), Tom Gleason and Julie Gleason (“the Gleasons”) owned Oregon Ice Cream, LLC (“the Company”) and entered an agreement to sell their interest to a third party. Subsequently, the third party brought suit against the Gleasons alleging that they made false representations in the purchase agreement and during the negotiations. The Gleasons prevailed on all the claims brought against them and were awarded attorney’s fees and costs. Nonetheless, the Gleasons brought suit against their insurer, Markel American Insurance Company (“Markel”), for denying them a defense.
Markel denied coverage to the Gleasons pursuant to the policy provision excluding losses “based upon, arising out of or in any way involving the actual, alleged or attempted purchase or sale, or offer or solicitation of an offer to purchase or sell, any debt or equity securities . . . .” The Court agreed with Markel that coverage was excluded under the provision, stating: “[e]ven if the Gleasons [were] correct that some of the [third-party’s] allegations [were] not caused by the sale of the Gleasons’ interest in the Company, all of the allegations bore, at the very least, an incidental relationship to the sale of the their interest . . . .” The Court held that the third party’s suit against the Gleasons fit into the exclusion, and affirmed summary judgment in favor of Markel.