Catlin Specialty Insurance v. QA3 Financial
U.S. DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Judge Lorna Schofield
Catlin insured broker-dealer QA3 Financial against claims for wrongful acts committed in rendering or failing to render professional services for a client. "Professional Services" included the sale, attempted sale, or servicing of securities. After losses on private placement securities sales exempt from registration under the Securities Act of 1933, QA3's clients sued it—and commenced arbitration—alleging inadequate due diligence. Catlin advised QA3 that under its interpretation of the subject policy's Amended Definitions of Securities Endorsement, the aggregate limit for claims arising from private placements was $1 million. QA3 countered that the limit applied to only six specifically enumerated private placements listed on the Endorsement, and that otherwise a $7.5 million limit applied. In Catlin's action for a declaration as to the meaning of their contract, QA3 counterclaimed for breach and bad faith. District court denied both parties judgment. It found the subject contract ambiguous and unable to be made unambiguous by application of the canons of construction urged by the parties. As questions of fact remained for the factfinder, the court denied the parties' respective motions seeking summary judgment.