(Westlaw) Liberty Mutual Insurance Europe S.E. says it has no duty to indemnify two investment companies for $1.7 million they paid to resolve a tax dispute over a charitable donation of a conservation easement.
Liberty Mutual Insurance Europe S.E. v. Fishtail Creek Investors LLC et al., No. 25-cv-195, complaint filed (S.D. Ga. Aug. 21, 2025).
Fishtail Creek Investors LLC and Fishtail Creek LLC are not entitled to coverage because the companies finalized the IRS settlement without the insurer’s knowledge or consent, according to Liberty’s complaint, filed Aug. 21 in the U.S. District Court for the Southern District of Georgia.
Charitable tax spat
FCI is a private fund that controls Fishtail Creek, a real estate holding vehicle that purchased about 67 acres of land in northeastern Oglethorpe County, Georgia, according to the insurer’s complaint.
Fishtail Creek elected to conserve the property by donating a conservation easement to a qualified charity. Based on the donation, Fishtail Creek then claimed a noncash charitable tax deduction of $20.2 million on its 2018 tax return, the complaint says.
The tax deduction passed through Fishtail Creek to FCI and then to its investors, according to the complaint.
However, the IRS ultimately disallowed the tax deduction. Fishtail Creek disputed the agency’s tax determination, which prompted the IRS to initiate an administrative proceeding, court documents said.
After the IRS offered to settle the tax dispute in July 2024, FCI’s investors voted in favor of accepting the deal, Liberty says.
The defendants sought Liberty’s consent to settle in February 2025, the complaint says.
The insurer refused to sign off on the deal on the grounds that it lacked sufficient information to provide consent, according to the complaint.
When the defendants had sought Liberty’s consent, it was not even aware that the investors had already agreed to the settlement months earlier, Liberty says.
The defendants made the settlement payment without Liberty’s consent, then demanded that the insurer reimburse it for $1.7 million under FCI’s investor liability insurance policy that ran from December 2018 to April 2019, according to court documents.
Declaration sought
Liberty is asking the court to declare that it need not indemnify FCI and Fishtail Creek because the policy indicates that “no settlement may be made, and no payment or obligation assumed, without the insurer’s prior written consent.”
The defendants also are on their own because they failed to notify Liberty of the IRS’s administrative proceeding during their coverage period, according to the complaint.
Additionally, the defendants are not entitled to coverage because they prejudiced Liberty’s subrogation rights by entering into investor settlement agreements that released certain brokers, dealers, financial professionals and other parties involved in the conservation easement strategy from liability, according to the insurer.
Liberty further maintains that the IRS settlement payment does not constitute a “loss” within the policy’s meaning because it is “restitutionary in nature.”
Attorneys from Wilson Elser Moskowitz Edelman & Dicker LLP and Fields Howell LLP represent Liberty.
By Jason Schossler