by Christopher Graham and Joseph Kelly

Protection Strategies, Inc. v. Starr, Case No. 1:13-cv-00763 (E.D. Va. Sept. 10, 2013)

Starr issued a “Resolute Portfolio for Private Companies” policy to Protection Strategies, Incorporated (“PSI”) which provided coverage for PSI and its officers.

PSI received a February 1, 2012 search and seizure warrant and subpoena from the NASA Office of the Inspector General (“OIG”) and a June 2012 letter from U.S. Attorney for the Eastern District of Virginia indicating that it was investigating PSI for civil liability related to PSI’s participation in the Small Business Administration Section 8(a) program.

PSI retained counsel and submitted its counsel’s invoices to Starr. Starr refused to reimburse for defense costs stating “the NASA Subpoena [and] Search and Seizure Warrant … are not demands for relief or proceedings commenced by the service of a complaint or similar document,” and thus “there is no coverage or reimbursement available for the invoices submitted by Dickstein Shapiro as there is no Claim against PSI.”

Starr’s policy defines “Claim” as:

any “written demand for monetary, non-monetary, or injunctive relief
made against an Insured” and any “judicial, administrative, or
regulatory proceeding, whether civil or criminal, for monetary,
non-monetary or injunctive relief commenced against an Insured … by
(i) service of a complaint or similar pleading; (ii) return of an
indictment, information, or similar document (in the case of a
criminal proceeding); or (iii) receipt or filing of a notice of
charges.”

The court found Starr had a duty to defend PSI because:

“[t]he search warrant was a written order demanding non-monetary
relief in the form of PSI’s obligation to turn over numerous files and
records. Both the warrant and the subpoena were a result of legal
proceedings that required a finding of probable cause, leaving no
question that the government had identified PSI as a target for
criminal and civil liability.”

Tags: Virginia, D&O, duty to defend, search warrant, subpoena