Insurance coverage dispute; Interpretation of the insurance policy contract; “Wrongful act”; Whether the policy was ambiguous; Public policy argument; Soaring Pine Capital Real Estate & Debt Fund II, LLC v Park St Group Realty Servs, LLC

The court held that the trial court was correct that the insurance policy here provided coverage and did not exclude coverage under the facts but was incorrect in finding it was ambiguous, creating a jury question. Further, while the contract arguably produced “an unreasonable result,” it did not violate a law or public policy. After plaintiff ended its agreement to pay employees lifetime retirement health benefits, a former employee successfully sued and plaintiff settled cases by other affected employees. Plaintiff alleged defendant breached the “policy by failing to defend and indemnify plaintiff in the lawsuits by plaintiff’s employees. Plaintiff sought declaratory judgment as well as damages under the policy for the amounts paid out and to be paid out to its employees as a result of plaintiff’s breach of its employment agreement with the employees.” The policy stated that its covers “all sums which the Insured shall become legally obligated to pay as a result of Damages sustained by an employee . . . caused by any Wrongful Act of the Insured, . . . in the Administration of the Insured Employee Benefit Programs as defined herein, . . . .” The policy defined a wrongful act “as ‘any actual or alleged error or misstatement or act of omission or neglect or breach of duty including misfeasance, malfeasance or nonfeasance.’ An act thus may be a ‘wrongful act’ under the policy regardless whether it was intentionally or mistakenly done; the policy covers acts of malfeasance, which necessarily involve intentional misconduct.” As a result, the trial court incorrectly “identified it to be a question for the jury whether plaintiff’s actions were intentional or mistaken. The wrongful act occurred in the administration of plaintiff’s employee benefits program because in terminating the benefits program plaintiff gave explanations to the beneficiaries, interpreted the program, handled records in connection with the program, and terminated the employees under the program. The trial court’s initial conclusion that the policy provides coverage” was correct. It also was correct in finding that no policy exclusion applied. The court rejected defendant’s public policy argument, noting that the “unreasonableness of the result of enforcing the policy does not authorize a court to decline to enforce an otherwise valid contract.” Reversed and remanded for entry of judgment for plaintiff.