George K. Baum & Company v. Twin City Fire Insurance Co.

RILEY, Chief Judge.

George K. Baum & Company (Baum) sold or underwrote various municipal bonds, representing the interest on the bonds was tax exempt. The IRS later determined the bonds were not tax exempt. Baum timely notified its insurer, Twin City Fire Insurance Company (Twin City), of the potential for related civil liability, and Twin City agreed the IRS investigation was a claim under the policy. Years later, several lawsuits (derivatives litigation) were filed, and Baum waited almost two years to notify Twin City.

Twin City initially disclaimed coverage on the theory that the derivatives…