Are Intentional Acts Covered by an E&O Policy?

It should be obvious that intentional acts are not covered under a professional liability (E&O) insurance policy, but it is rare that a court rules on this question.  The intentional acts exclusion in an E&O policy will normally read something like this:

…based upon, arising out of directly or indirectly, or in any way involving
intentional wrongdoing, fraud, dishonesty, criminal or malicious acts by
the Insured

In a recent case summarized by Wiley Rein (see here) a court ruled that intentional acts are not covered.  In the case, a real estate appraiser had purchased an appraisers professional liability insurance policy and was facing lawsuits alleging a scheme to appraise property at higher than the true value.  The insurer provided a defense and was seeking a declaratory action on coverage based on intentional acts, while the appraiser claimed that the acts involved negligence (which would be covered).  The court ruled:

the insurer had no duty to defend or indemnify the appraiser because the factual allegations in all . . . of the underlying complaints would, if found to be true, demonstrate that [the appraiser] acted intentionally, but not that he acted negligently

On the question of defense, the court ruled differently:

an insurer ordinarily is entitled to withdraw from the defense of an insured when it becomes clear that no claim against the insured falls within policy coverage… however… an insurer's withdrawal must be accomplished in an orderly manner, in order to avoid prejudice to the insured and comply with the insurer's duty of good faith.

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