Skarzynski Black Wins Summary Judgment on Professional Services Exclusion

Skarzynski Black won summary judgment in favor of Scottsdale Indemnity Company. See, Strategic Forecasting, Inc. v. Scottsdale Indem. Co., No. 12CV5389JMAARL, 2015 WL 9694796 (E.D.N.Y. Sept. 30, 2015).  Strategic Forecasting involved a data breach class action filed against the Insured (“Stratfor”), an operator of a web-based purveyor of geo-political intelligence content and analysis.  SB’s client, Scottsdale, issued a D&O Policy to Stratfor.  Stratfor sought coverage for the class action;  Scottsdale denied coverage arguing that the Scottsdale Policy’s broad-form professional services exclusion, which excluded coverage for all claims “arising out of” professional services, precluded coverage for the class action.  Scottsdale maintained that the operation of a website was inherently a professional service, and claims arising out of the website’s negligent operation were therefore excluded from coverage.

Scottsdale and Stratfor cross moved for summary judgment on a number of issues, including the application of the professional services exclusion.  The trial court, applying Texas law, ruled in Scottsdale’s favor, concluding that “arising out of” exclusions require the insurer merely to demonstrate “but for” causation for the exclusion to apply.  Thus, the court concluded, “but for Stratfor providing online analysis and content to its customers, those customers would not have provided Stratfor with their credit card and other personal information and would not have subsequently been injured by the hacking and Stratfor’s failure to promptly disclose the hacking.”