In Western Heritage Bank v. Federal Insurance Co., Western was sued by Hawkins for putting a lien on his property for the debts of a former tenant. Hawkins claimed the bank's liens were fraudulently placed on the property, and the Bank refused to remove the lien. Western wanted Federal to defend it against the claims, but Federal said there was an exclusion in the Director and Officers Liability (“DOL”) coverage and thus, no duty to defend. Exclusion 4.j. excluded coverage “for Loss on account of any Claim . . . based upon, arising from, or in consequence of the performing or failure to perform Professional Services or Lending Services.” The trial court said that the liens arose from a loan given to Hawkins' tenant, and thus arose out of lending services, and was excluded. The Tenth Circuit ruled that there were two exceptions to the exclusion -- legal services and post control actions.
Exceptions to exclusions cannot create coverage if there is no coverage under the policy in the first place. (“Exceptions to exclusions [in commercial general liability insurance policies] narrow the scope of the exclusion and, as a consequence, add back coverage. But it is the initial broad grant of coverage, not the exception to the exclusion, that ultimately creates (or does not create) the coverage sought.”)
Despite this, the Bank failed to present arguments or facts to show how the Hawkins claims fit within the exceptions and the summary judgment was affirmed.