Insured Cannot Amend Complaint To Add Bad Faith Claim Where Coverage Issue Is "Debatable"

Applying Minnesota law, the United States District Court for the District of Minnesota has denied an insured's motion to amend its coverage litigation complaint to add a claim for bad faith, holding that coverage under the policy was "fairly debatable" and that the insured failed to demonstrate that the insurer knew it lacked a reasonable basis to deny the insured's claim. Fishbowl Solutions Inc. v. Hanover Ins. Co., 2022 WL 1037083 (D. Minn. Apr. 6, 2022).

An insured software company was caught in a fraudulent scheme by which a fraudster obtained the email account information of one of the company's accountants. The fraudster intercepted emails sent by customers to the accountant, such that the accountant never saw those messages. Instead, the fraudster replied to the emails, directing customers to pay outstanding invoice amounts to the fraudster's bank account. The insured sought coverage for its losses under its technology E&O policy's coverage grant for cyber