Zurich, Evanston face lawsuit as clients claim denied coverage

Zurich and Evanston Face Lawsuit Over Denied Coverage in Management Liability Dispute

Chicago, August 26, 2025 – Zurich American Insurance Company and its subsidiary, Evanston Insurance Company, are facing a lawsuit filed by policyholders who allege the insurers wrongfully denied coverage under management and professional liability policies. The complaint, lodged on August 25, 2025, accuses the companies of failing to defend and indemnify clients in an ongoing underlying lawsuit, raising significant questions about insurer obligations in the commercial insurance sector.

Details of the Lawsuit

According to the complaint, the plaintiffs, including Garrison Management, notified Zurich of a claim on April 27, 2023, related to a lawsuit alleging a “Wrongful Act” as defined by their Evanston policy. The policy covers damages and claim expenses arising from negligent acts, errors, or omissions in “Professional Services,” specifically “Direct Mailing Including Campaign” and “Public Affairs.” It also mandates Evanston to pay defense costs and defend potentially covered claims. However, Zurich allegedly ceased communication after initial correspondence and did not provide a coverage position until April 18, 2025, when it denied coverage for Garrison Management under the First Amended Complaint in the underlying lawsuit.

The plaintiffs are seeking:

• Declaratory Relief: A court ruling affirming Zurich and Evanston’s obligation to defend and indemnify.
• Damages and Penalties: Compensation for financial losses, statutory penalties, and attorney fees.
• Judicial Declaration: Confirmation that the insurers must cover the policyholders in the underlying lawsuit.

The allegations remain unproven, and the case’s outcome is pending in court.

Broader Context

This lawsuit is not an isolated incident for Zurich and Evanston. Both insurers have faced similar claims in recent years:

• COVID-19 Business Interruptions: In 2021, Evanston was sued for denying commercial property insurance claims related to business losses from government-mandated closures during the pandemic. The plaintiff argued that Evanston’s blanket denial policy contradicted its obligation to investigate claims thoroughly.
• Other Zurich Lawsuits: Zurich has faced multiple lawsuits over denied coverage, including a 2020 case by America’s Kids LLC, where the retailer alleged wrongful denial of business interruption claims due to COVID-19 shutdowns. Zurich cited policy language excluding losses from civil authority shutdowns without physical damage. In another case, Harvard College sued Zurich in 2021 for refusing to cover $15 million in legal fees from a lawsuit, citing insufficient prior notice.

These cases highlight recurring tensions between policyholders and insurers over coverage interpretations, particularly in high-stakes scenarios like business interruptions or professional liability.

Implications for Indian Businesses

While this lawsuit is U.S.-based, it carries lessons for Indian companies, especially in the context of India’s growing insurance market, projected to reach $222 billion by 2026 (IBEF, 2025). Indian firms in sectors like cinema, tech, and manufacturing, which rely on liability and professional insurance, can draw the following insights:

1. Policy Clarity is Critical:

• The Zurich-Evanston case underscores the importance of clear policy terms. Indian businesses must scrutinize insurance contracts to ensure coverage for specific risks, such as professional errors or business interruptions, aligns with their operations.
• Actionable Tip: Engage insurance advisors to review policies for ambiguities, especially in sectors like India’s entertainment industry, which is set to create 240,000 jobs by 2025 and faces risks like event cancellations or production delays.

1. Timely Communication with Insurers:

• Zurich’s alleged delay in responding to the claim highlights the need for prompt and documented communication. Indian firms should notify insurers immediately upon identifying a potential claim to avoid disputes over timing or notice requirements.
• Actionable Tip: Maintain a digital log of all correspondence with insurers, including claim submissions and follow-ups, to strengthen legal positions if disputes arise.

1. Navigating Denial Risks:

• The lawsuit reflects a broader trend of insurers denying claims based on strict policy interpretations. Indian companies, particularly SMEs, should work with brokers to select insurers with strong track records in claims settlement, as India’s insurance penetration is only 4.2% (IRDAI, 2025).
• Actionable Tip: Research insurer claim settlement ratios, available through IRDAI reports, before purchasing policies. For example, firms in India’s cinema sector, like those involved in Love In Vietnam, should ensure coverage for production-specific risks.

1. Legal Preparedness:

• The plaintiffs’ pursuit of declaratory relief and damages emphasizes the value of legal recourse. Indian businesses should budget for legal support to challenge wrongful denials, especially in high-value sectors like IT or manufacturing.
• Actionable Tip: Partner with law firms experienced in insurance disputes, such as those in Mumbai or Delhi, to prepare for potential litigation.

Industry Impact

The Zurich-Evanston lawsuit could influence how insurers handle professional liability claims, particularly in the U.S., where the commercial insurance market is valued at $1.2 trillion (Statista, 2025). A ruling in favor of the plaintiffs may prompt insurers to adopt more transparent claims processes, while a defense victory could embolden stricter coverage interpretations. For India, where the commercial insurance sector is growing at 15% annually (IBEF, 2025), this case highlights the need for robust policy frameworks to protect businesses from unexpected coverage denials.

Current Status

As a newly filed complaint, the allegations are unproven, and Zurich and Evanston have yet to file a formal response. The case is being closely watched by insurance professionals globally, given its potential to set precedents for coverage disputes. Indian businesses can stay informed through updates from Insurance Business America or local sources like The Economic Times.

Sources: Insurance Business America (Web ID: 0), ClassAction.org (Web ID: 1), Insurance Business America (Web ID: 2, 5), IBEF (2025), IRDAI (2025), Statista (2025)