Cohen v. Lovitt & Touche, Inc., 308 P.3d 1196

Cohen, Zuckerman, and CR Operating, L.L.C. are directors/officers who retained Lovitt as insurance consultant from 2005–2007 and purchased two D&O policies.
A 2007 class action against Canyon Ranch (Wood action) settled for about $16 million, with Cohen and Zuckerman personally liable due to the tip statute; they paid the settlement costs because the company was insolvent.
Cohen and Zuckerman sought reimbursement under their D&O policies; insurers refused, claiming exclusions or that Wood settlement costs were uninsurable as a matter of law.
Trial court granted summary judgment for Lovitt, holding restitutionary payments were uninsurable as a matter of public policy; rulings on negligence/breach of contract followed accordingly; remaining negligent misrepresentation claim was left for later.
On appeal, Cohen and Zuckerman challenge the summary judgment; the court reverses and remands, applying public policy balancing to determine insurability of restitutionary losses.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are restitutionary payments insurable losses under Arizona law?	Cohen/Zuckerman contend restitutionary losses can be insured with appropriate contract terms.	Lovitt/insurers argue restitutionary losses are inherently uninsurable as a matter of public policy.	Reversed; restitutionary payments may be insurable; remand for further fact-finding.
Should Arizona apply a public policy balancing test to determine insurability of restitutionary payments?	Ocotillo-like balancing weighs private contracting freedom against public policy concerns.	Public policy precludes insuring restitutionary losses as a categorical rule.	Court adopts balancing approach; public policy factors may not categorically preclude insurability.
Did the trial court properly apply public policy factors to conclude uninsurability?	There was no strong public policy to bar insurability given lack of Willful misconduct and ability to tailor policy language.	Public policy against insuring such losses justified denial.	No; factors favor enforcement of potential coverage; remand to consider policy language and specifics.

1800 Ocotillo, LLC v. WLB Group, Inc., 219 Ariz. 200 (Ariz. 2008) (contractual freedom with public policy balancing framework)
Unified Western Grocers, Inc. v. Twin City Fire Ins. Co., 457 F.3d 1106 (9th Cir. 2006) (restoration of restitutionary payments may be uninsurable)
Level 3 Communications, Inc. v. Fed. Insurance Co., 272 F.3d 908 (7th Cir. 2001) (restitutionary payments barred as uninsurable)
Bank of the West v. Superior Court, 833 P.2d 545 (Cal. 1992) (categorical bar: cannot insure against money/property wrongfully acquired)
Reliance Group Holdings, Inc. v. National Union Fire Ins. Co. of Pittsburgh, 594 N.Y.S.2d 20 (N.Y. App. Div. 1993) (policy against insuring restitutionary losses independent of conduct)
Nortex Oil & Gas Corp. v. Harbor Insurance Co., 456 S.W.2d 489 (Tex. Civ. App. 1970) (insurability of restitutionary losses limited)
Cent. Dauphin Sch. Dist. v. American Casualty Co., 426 A.2d 94 (Pa. 1981) (restoration of funds cannot be insured if unlawful acquisition)