Federal Judge Concludes Restitution May Be Covered Under Commonly Used Professional Liability Policy Language

A federal judge in Minnesota recently held that "restitution" paid to settle a class action lawsuit was covered under the terms of a professional liability policy.  The court in U.S. Bank National Ass'n et al. v. Indian Harbor Ins. Co. et al. rejected the argument frequently used by directors and officers ("D&O") insurance carriers that restitution, typically defined as the return of money or property to its rightful owner, is "uninsurable" as a matter of law and thus not covered under their policies.  Finding no support for this argument under the pertinent state law and concluding that the policy language implied that the parties had agreed restitution would be covered, unless the policyholder was ordered to pay it as part of a final judgment, the court ruled that the settlement was covered under the terms of the policy.  The decision is a significant development as the policy language at the center of the case is commonly used in standard D&O policies.