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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ZIFL Volume 30, Number 2
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
Post number 5260
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th 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/ This issue contains the following articles about insurance fraud:
Read the full 19 page issue of ZIFL at https://zalma.com/blog/wp-content/uploads/2026/01/ZIFL-01-15-2026.pdf.
The Contents of the January 15, 2026 Issue of ZIFL Includes:
Use of the Examination Under Oath to Defeat Fraud
The insurance Examination Under Oath (“EUO”) is a condition precedent to indemnity under a first party property insurance policy that allows an insurer ...
ERISA Life Policy Requires Active Employment to Order Increase in Benefits
Post 5259
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In Katherine Crow Albert Guidry, Individually And On Behalf Of The Estate Of Jason Paul Guidry v. Metropolitan Life Insurance Company, et al, Civil Action No. 25-18-SDD-RLB, United States District Court, M.D. Louisiana (January 7, 2026) Guidry brought suit to recover life insurance proceeds she alleges were wrongfully withheld following her husband’s death on January 9, 2024.
FACTUAL BACKGROUND
Jason Guidry was employed by Waste Management, which provided life insurance coverage through Metropolitan Life Insurance Company (“MetLife”). Plaintiff contends that after Jason’s death, the defendants (MetLife, Waste Management, and Life Insurance Company of North America (“LINA”)) engaged in conduct intended to confuse and ultimately deny her entitlement to...
Failure to Respond to Motion to Dismiss is Agreement to the Motion
Post 5259
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In Mercury Casualty Company v. Haiyan Xu, et al., No. 2:23-CV-2082 JCM (EJY), United States District Court, D. Nevada (January 6, 2026) Plaintiff Mercury Casualty Company (“plaintiff”) moved to dismiss. Defendant Haiyan Xu and Victoria Harbor Investments, LLC (collectively, “defendants”) did not respond.
This case revolves around an insurance coverage dispute when the parties could not be privately resolved, litigation was initiated in the Eighth Judicial District Court of Nevada. Plaintiff subsequently filed for a declaratory judgment in this court.
On or about April 15, 2025, the state court action was dismissed with prejudice pursuant to a stipulation following mediation. Plaintiff states that the state court dismissal renders its ...
Court Must Follow Judicial Precedent
Post 5252
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Insurance Policy Interpretation Requires Application of the Judicial Construction Doctrine
In Montrose Chemical Corporation Of California v. The Superior Court Of Los Angeles County, Canadian Universal Insurance Company, Inc., et al., B335073, Court of Appeal, 337 Cal.Rptr.3d 222 (9/30/2025) the Court of Appeal refused to allow extrinsic evidence to interpret the word “sudden” in qualified pollution exclusions (QPEs) as including gradual but unexpected pollution. The court held that, under controlling California appellate precedent, the term “sudden” in these standard-form exclusions unambiguously includes a temporal element (abruptness) and cannot reasonably be construed to mean ...
Lack of Jurisdiction Defeats Suit for Defamation
Post 5250
Posted on December 29, 2025 by Barry Zalma
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He Who Represents Himself in a Lawsuit has a Fool for a Client
In Pankaj Merchia v. United Healthcare Services, Inc., Civil Action No. 24-2700 (RC), United States District Court, District of Columbia (December 22, 2025)
FACTUAL BACKGROUND
Parties & Claims:
The plaintiff, Pankaj Merchia, is a physician, scientist, engineer, and entrepreneur, proceeding pro se. Merchia sued United Healthcare Services, Inc., a Minnesota-based medical insurance company, for defamation and related claims. The core allegation is that United Healthcare falsely accused Merchia of healthcare fraud, which led to his indictment and arrest in Massachusetts, causing reputational and business harm in the District of Columbia and nationwide.
Underlying Events:
The alleged defamation occurred when United ...
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 ...
