Florida Coverage Case Hinged on Punctuation Question

Coverage disputes often hinge on the exact wording of an insurance policy. In a case in federal court in South Florida, the issue came down to not only the wording, but the punctuation – namely, a question about a single comma.

“As a general matter, insurance policies and insurance salesmen have long been the butt of jokes. The former are not known for beautiful prose nor the latter for exciting conversation,” U.S. District Judge Robert Scola wrote last week. “But insurance contracts can provide fodder for scores of attorneys, grammarians, and logophiles, where, as here, the meaning of one phrase and the placement (or omission) of one comma can make the difference between coverage and nothing.”

In ECB USA vs. Chubb Insurance and Executive Risk Indemnity, Scola found that the policy punctuation was not unclear and it let the insurers off the hook: A professional liability policy did not cover a multimillion-dollar judgment that resulted from a lawsuit.

The dispute arose two years ago. Chubb and Executive Risk had insured Control Group, a management and financial consulting firm, and its accounting subsidiary, Constantin Associates, for several years. In 2018, ECB USA and others sued Constantin in Miami-Dade Circuit Court, alleging wrongdoing in a professional audit.

Constantin in 2019 settled the lawsuit for $4.9 million and assigned insurance rights to the plaintiffs.

But Chubb and its sister company, ERI, denied the claims for a number of reasons. One reason, Chubb argued, was that when Constantin’s and Control Group’s errors and omissions policy was renewed in 2017, the wording had changed and the policy no longer covered audit services done for non-financial firms.

ECB, a Florida corporation, filed suit against Chubb and ERI, alleging breach of contract. The case was moved to federal court.

The policy clause at issue was this: Coverage was for management consulting services and those were defined as “services directed toward expertise in banking finance, accounting, risk and systems analysis, design and implementation, asset recovery and strategy planning for financial institutions.”

The underlying lawsuit against Constantin did not involve a financial institution. Chubb’s lawyers argued that the clause meant that the policy covered only those services done for financial institutions. ECB USA and the other plaintiffs disagreed.

“The plaintiffs’ only argument in opposition comes down to a comma,” the federal judge wrote in the Dec.17 decision.

ECB’s attorneys argued that because the clause did not have a comma before the words, “for financial institutions,” it meant that the policy was not limited only to work performed for financial institutions. The policy surely covered other types of accounting, and audits are generally considered to be part of accounting services, the plaintiffs said.

In other words, the words “financial institutions” at the end of the sentence applied only to the words that immediately came before it, “asset recovery and strategy planning,” not the entire clause, ECB contended.

The judge sided with Chubb on that and most other counts in the litigation.

“The court finds that the phrase ‘for financial institutions’ modifies the entire series, meaning that ‘management consulting services’ is defined as the provision of ‘services directed towards expertise in … accounting … for financial institutions.”

In total, Judge Scola concluded, “a plain reading of the 2017-18 policy establishes that Chubb had no duty to defend or duty to indemnify in connection with the underlying litigation, as the services at issue in the underlying litigation were not provided to a financial institution, as required for coverage.”

Scola noted a 1971 federal court decision that said that “while commas at the end of a series can avoid ambiguity, the use of such commas is discretionary.”

A word nerd or schoolmarm might say that common English usage does not normally place a comma before a final modifier, and that multimillion-dollar matters should not rest on punctuation alone, anyway. Re-wording the entire clause might make it crystal-clear and less open to interpretation, a Florida schoolteacher suggested. Perhaps something like this: “Coverage will apply only to those services provided for financial institutions. These services are limited to those directed toward expertise in banking, finance, accounting, risk and systems analysis, design and implementation, asset recovery, and strategy planning.”

The policy can be seen here, with the clause at issue on page 16.

The Chubb case is somewhat similar to the famous 2018 case, known as “the $10 million comma.” In that class-action federal lawsuit, dairy workers in Maine argued that they were due overtime pay due to the lack of a final or “Oxford” comma in a section of state law.

The law said that overtime rules do not apply to: “The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of:

  1. Agricultural produce;
  2. Meat and fish product; and
  3. Perishable foods.

Note the lack of a comma after the word “shipment,” above.

The dairy owners argued that the drivers were not due overtime because they were engaged in distribution. The workers said that without an extra comma, the law applied only to “packing for shipment or distribution,” not to “distribution” alone.

The U.S. 1st Circuit Court of Appeals found in favor of the workers, costing the dairy an estimated $10 million, according to court records and news reports.

“If that exemption used a serial comma to mark off the last of the activities that it lists, then the exemption would clearly encompass an activity that the drivers perform,” the appeals court wrote in its 2018 opinion. “And, in that event, the drivers would plainly fall within the exemption and thus outside the overtime law’s protection. But, as it happens, there is no serial comma to be found in the exemption’s list of activities, thus leading to this dispute over whether the drivers fall within the exemption from the overtime law or not.”