Clifford A. Zucker v. U.S. Specialty Insurance Company, 2017 U.S. App. LEXIS 8585

BankUnited Financial Corp. (Parent) and its subsidiary BankUnited FSB (Subsidiary) engaged in risky lending pre-2008, were in distressed condition by 2008, and faced regulatory scrutiny.
Parent obtained a D&O policy from U.S. Specialty effective November 10, 2008 that included a Prior Acts Exclusion (excluding claims "arising out of" wrongful acts before that date) and a Prior Notice Exclusion; Parent chose the cheaper policy with the Prior Acts Exclusion.
In Jan. and Mar. 2009 Parent transferred two Treasury tax-refund payments (~$46M total) to the Subsidiary.
The Subsidiary was seized by regulators in May 2009; Parent filed Chapter 11. The bankruptcy committee (later plan administrator Zucker) pursued officers for fraudulent transfers under Florida’s Uniform Fraudulent Transfer Act based on the 2009 transfers.
Zucker settled the fraudulent-transfer claims for $15M, assigned officers’ rights under the U.S. Specialty policy to Zucker, and sued U.S. Specialty for coverage; district court granted summary judgment for insurer based on the Prior Acts Exclusion.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the fraudulent-transfer claims (based on 2009 transfers) are excluded by the Prior Acts Exclusion that bars claims "arising out of" wrongful acts before Nov. 10, 2008	Zucker: The transfers occurred in 2009; insolvency is not itself a wrongful act, so claims do not "arise out of" pre-2008 conduct and thus are covered	U.S. Specialty: The transfers were fraudulent only because Parent was insolvent — insolvency resulted from officers’ pre-Nov. 2008 wrongful acts, so the claims "arose out of" prior misconduct and are excluded	Held for U.S. Specialty: The Florida meaning of "arising out of" is broad; insolvency had a causal connection to pre-2008 wrongful acts, so the fraudulent-transfer claims fall within the Prior Acts Exclusion
Whether the insurer’s construction makes the policy ambiguous or coverage illusory	Zucker: The exclusion swallows coverage, rendering the policy illusory or ambiguous (citing Purrelli)	U.S. Specialty: Exclusion narrows coverage but does not eliminate all post-inception coverage; insured was sophisticated and had option to buy broader policy	Held for U.S. Specialty: Policy terms unambiguous; exclusion does not render coverage illusory because some claims arising solely from post-inception conduct remain covered; insured knowingly chose the cheaper excluded-policy

Taurus Holdings, Inc. v. U.S. Fidelity & Guar. Co., 913 So. 2d 528 (Fla. 2005) (defines "arising out of" broadly for insurance exclusions)
Hernandez v. Protective Cas. Ins. Co., 473 So. 2d 1241 (Fla. 1985) (uses causal-connection analysis showing "arising out of" is broader than proximate causation)
James River Ins. Co. v. Ground Down Eng’g, Inc., 540 F.3d 1270 (11th Cir. 2008) (applies Florida "arising out of" standard to find exclusion coverage when earlier negligent act led to later losses)
Purrelli v. State Farm Fire & Cas. Co., 698 So. 2d 618 (Fla. 2d DCA 1997) (exclusion that directly contradicts an insuring clause can create ambiguity)
Interline Brands, Inc. v. Chartis Specialty Ins. Co., 749 F.3d 962 (11th Cir. 2014) (discusses when broad exclusions may — or may not — render policy coverage illusory)