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ARTICLE · 10 DECEMBER 2025

Contractual Liability Exclusion Defeats Garnishment Proceeding Against Insurer

Wiley Rein
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The United States District Court for the Eastern District of Pennsylvania, applying Pennsylvania law, has held that an insurer was not liable as garnishee in a claimant's proceeding to collect a default judgment against an insured law firm.

United StatesInsurance
Ysabelle G. Reyes
Ysabelle G. Reyes

The United States District Court for the Eastern District of Pennsylvania, applying Pennsylvania law, has held that an insurer was not liable as garnishee in a claimant's proceeding to collect a default judgment against an insured law firm because the contractual liability exclusion barred coverage for the underlying action for breach of a settlement agreement. Zaftr Inc. v. Kirk, 2025 WL 3025675 (E.D. Pa. Oct. 29, 2025).

A company filed suit against an insured law firm for its failure to comply with escrow agreements regarding the return of the company's funds in a Bitcoin purchase transaction. The company and the firm executed a settlement agreement under which the firm's professional liability insurer would pay a third of the settlement amount, with the remainder to be paid by the firm in installments. After the firm failed to make the final two payments, the company filed suit against the firm and its insurer for breach of the settlement agreement. The firm

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