Actual Or Alleged Contractual Liability Or Obligation Of Directors is
Specifically Excluded
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Post 4820
Paraco Gas Corporation (“Paraco”), a closely-held family corporation that distributes propane fuel and equipment, appealed a June 22, 2023 judgment of the district court dismissing its breach of contract and declaratory judgment claims against Ironshore Indemnity, Inc. (“Ironshore”), an insurance company that issued Paraco the liability insurance policy at the heart of this dispute. Ironshore issued an insurance policy for Directors, Officers, and Private Company Liability coverage (the “D&O Policy” or “Policy”) to Paraco.
As its name suggests, the D&O Policy provided insurance coverage for certain acts of Paraco’s officers and directors. After a suit was brought against Joseph and Christina Armentano, who were Paraco officers, alleging that Joseph had transferred shares in violation of the terms of two Paraco Shareholder Agreements, Paraco sought coverage for defense and indemnity under the Policy for the suit (the “Underlying Action”).
In Paraco Gas Corporation, Joseph Armentano, Christina Armentano v. Ironshore Indemnity, Inc., No. 23-1069-cv, United States Court of Appeals, Second Circuit (June 17, 2024) the Second Circuit interpreted the policy as it related to the facts.
THE SUIT
The district court dismissed Paraco’s suit because an exclusion provision of the insurance policy unambiguously excluded liability coverage for the Underlying Action.
THE POLICY
The D&O Policy provides a blanket statement of coverage, followed later by an exclusionary provision for certain acts. Section III.N.’s exclusion provision reads as follows: “Section III. The Insurer shall not be liable to make any payment for Loss in connection with any Claim made against any Insured: . . . N. alleging, arising out of, based upon or attributable to any actual or alleged contractual liability or obligation of the Company or an Insured Person under any contract, agreement, employment contract or employment agreement to pay money, wages or any employee benefits of any kind.” (emphasis added).”
As an initial matter, Paraco conceded that nine out of the ten claims in the Underlying Action “arise out of” alleged breaches of the two Paraco Shareholder Agreements.
The suit, in Count IV of the Underlying Action, sought declaratory relief stating that the Class A Shareholder Agreement remained in effect and governed the rights of Paraco shareholders, and that an agreement signed by Joseph purporting to terminate the Class A Shareholder Agreement was invalid.
CONCLUSION
Count IV alleges the existence of facts showing that Appellants violated the terms of the Class A Shareholder Agreement and the claim could not exist but for Joseph’s alleged violation of the agreement’s right of first refusal and stock transfer provisions. Thus, the claim is clearly positioned within the Policy exclusion.
The Second Circuit concluded that each claim in the Underlying Action arose from an “actual or alleged contractual liability or obligation of” Paraco, Joseph, or Christina, under the relevant shareholder agreements. Thus, any legal duty Ironshore had under the D&O Policy to defend and/or indemnify Paraco did not exist because the entirety of the Underlying Action falls within the Policy’s exclusion clause.
ZALMA OPINION
As a contract an insurance policy will always be read as written to provide coverage or eliminate coverage. Once the Second Circuit concluded that the contractual liability alleged in the underlying complaint was excluded Ironshore had no duty to defend or indemnify its insureds.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Insurer’s Exclusion for Claims of Assault & Battery is Effective
Post 5250
Read the full article at https://lnkd.in/gBzt2vw9, see the video at https://lnkd.in/gEBBE-e6 and at https://lnkd.in/gk7EcVn9, and at https://zalma.com/blog plus more than 5250 posts.
Bar Fight With Security is an Excluded Assault & Battery
In The Cincinnati Specialty Underwriters Insurance Company v. Mainline Private Security, LLC, et al., Civil Action No. 24-3871, United States District Court, E.D. Pennsylvania (December 16, 2025) two violent attacks occurred in Philadelphia involving young men, Eric Pope (who died) and Rishabh Abhyankar (who suffered catastrophic injuries). Both incidents involved security guards provided by Mainline Private Security, LLC (“Mainline”) at local bars. The estates of the victims sued the attackers, the bars, and Mainline for negligence and assault/battery. The insurer exhausted a special limit and then denied defense or indemnity to Mainline Private Security.
INSURANCE COVERAGE
Mainline had purchased a commercial ...
Marine Insurer May Dispose of Vessel to Avoid Waste
Post 5249
Read the full article at https://lnkd.in/gfn_UHdp, see the video at https://lnkd.in/gDWVccnr and at https://lnkd.in/gv9nsBqk, and https://zalma.com/blog plus more than 5200 posts.
In Western World Insurance Company v. The Estate Of Shawn Arsenault, No. 25-cv-13413-PGL, United States District Court, D. Massachusetts (December 17, 2025) the USDC was asked to resolve a marine insurance dispute after the sinking of the F/V Seahorse, a commercial fishing vessel, off Cape Cod on June 8, 2025. The vessel’s owner and operator, Shawn Arsenault, died in the incident.
Western World Insurance Company issued a hull insurance policy for the vessel. With no personal representative yet appointed for the estate, the insurer cannot determine the proper payee for the insurance proceeds.
The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Marine Insurer May Dispose of Vessel to Avoid Waste
Post 5249
Read the full article at https://lnkd.in/gfn_UHdp, see the video at https://lnkd.in/gDWVccnr and at https://lnkd.in/gv9nsBqk, and https://zalma.com/blog plus more than 5200 posts.
In Western World Insurance Company v. The Estate Of Shawn Arsenault, No. 25-cv-13413-PGL, United States District Court, D. Massachusetts (December 17, 2025) the USDC was asked to resolve a marine insurance dispute after the sinking of the F/V Seahorse, a commercial fishing vessel, off Cape Cod on June 8, 2025. The vessel’s owner and operator, Shawn Arsenault, died in the incident.
Western World Insurance Company issued a hull insurance policy for the vessel. With no personal representative yet appointed for the estate, the insurer cannot determine the proper payee for the insurance proceeds.
The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Zalma’s Insurance Fraud Letter
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ZIFL Volume 29, Issue 24
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
Zalma’s Insurance Fraud Letter
Merry Christmas & Happy Hannukah
Read the following Articles from the December 15, 2025 issue:
Read the full 19 page issue of ZIFL at ...
The Professional Claims Handler
Post 5219
Posted on October 31, 2025 by Barry Zalma
An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
How to Create Claims Professionals
To avoid fraudulent claims, claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
