Whether or not two or more claims are interrelated within the meaning of a D&O insurance policy is a recurring issue. The outcome of interrelatedness disputes often reflects the specific facts involved and the relevant policy language. In addition, the applicable law can also be a factor. A recent decision of the Delaware Superior Court reflects all these factors, and the case outcome at least raises the question whether the applicability of New York law to the dispute was determinative. The Court’s opinion, as updated and reissued on January 6, 2025, can be found here.
Background
Prior to filing for bankruptcy, Benefytt Technologies was a health insurance technology business. During the period 2018 and 2019, Benefytt faced seven different lawsuits or other enforcement actions alleging a variety of charges. The two key lawsuits were the Keippel action and the Belin action. There were five other matters (the Daniels, DeFalco, Rector, FTC, and Spiewek actions). At least some of these five other matters were filed during the earlier of two policy periods, both of which are described further below. One of the many questions at issue in this coverage dispute is whether the Keippel or Belin actions related to the five other actions, or any of them.
The Keippel action, a securities class action lawsuit, was filed in February 2019 (during the policy period of Benefytt’s 2018-2019 insurance program). The gist of the complaint is that Benefytt had failed to disclose to investors the details of an alleged scheme involving Benefytt and a health insurance provider, Simple Health. The Keippel action ultimately settled for $11 million. Benefytt incurred $4.2 million in insurance fees.
The Belin action was filed on June 7, 2019 (during the policy period of Benefytt’s 2018-2019 D&O insurance program). The initial complaint alleged RICO violations and related aiding and abetting violations on behalf of consumers who had purchased Benefytt insurance products through Simple Health. After the expiration of the 2018-2019 insurance program, the Belin action complaint was amended to include Benefytt’s chairman, Michael Kosloske, as a defendant. The Belin action ultimately settled for $27.5 million.
During the policy periods 2017-2018 and 2018-2019, Benefytt maintained successive $25 million D&O Insurance programs. Each program consisted of a $10 million layer of primary insurance and three layers of $5 million excess insurance. The programs were essentially identical except that the second layer excess in the two programs were provided by different insurers.
Benefytt submitted the Keippel action to its insurers as a claim. The primary insurer initially accepted coverage of the Keippel claim under the 2018-2019 program, but later changed its position to contend that the Keippel action was interrelated to previously filed lawsuits and therefor that the Keippel action fell within the 2017-2018 coverage period. The primary insurer agreed to cover the Keippel action under the 2018-2019 primary policy while reserving its rights to contest the applicable policy.
Benefytt initiated a declaratory judgment action to sort out the coverage for the various actions. The parties ultimately filed a host of dispositive motions. In the court’s subsequent opinion, it took the court more than six pages just to describe Benefytt’s and the various insurers’ respective positions. Suffice it to say that the parties’ positions were varied.
The Relevant Policy Language
The primary policy provides the following in the event of multiple claims:
More than one Claim involving the same Wrongful Act or Interrelated Wrongful Acts shall be deemed to constitute a single Claim shall be deemed to constitute a single Claim and shall be deemed to have been made at the earliest of the following dates:
- The date on which the earliest Claim involving the same Wrongful Act or Interrelated Wrongful Acts is first made; or
- The date on which the Claim involving the same Wrongful Act or Interrelated Wrongful Act shall be deemed to have been made …
The term “Wrongful Act” is defined as “any actual or alleged act, error, omission, misstatement, misleading statement, neglect or breach of duty.”
The term “Interrelated Wrongful Acts” is defined as “Wrongful Acts which have as a common nexus of any fact, circumstance, situation, event, transaction or series of facts, circumstances, situations, events, or transaction.”
The Court’s Opinion
In an opinion published as revised and corrected on January 6, 2025, Delaware Superior Court Judge Paul R. Wallace ruled that the Keippel action falls within the 2018-2019 policy period and that the Belin claim falls outside the policy period of both of the insurance programs, and also is not interrelated with any other covered claim.
Much of the Court’s analysis is particular to the specific facts and circumstances involved, particularly the various claims made dates and the dates of various claims notices and notices of circumstances. Judge Wallace did make one preliminary determination that, as discussed below, I believe is particularly important – that is, he held, in reliance on a choice of law provision in the primary policy that New York law governed the determination of the coverage issues.
The key issues for the court to decide were the proper policy-period placement for the Keippel and Balin actions, and whether they are interrelated to prior actions.
Judge Wallace first determined that the Keippel action, which was first filed during the policy period of the 2018-2019 program, was not interrelated with any of the previously filed actions. Based on a “side-by-side examination” of the Keippel actions and the prior actions, Judge Wallace said that the Keippel action “does not share a sufficient factual nexus” with the previously filed actions, adding that “mere allegations about a company’s general misconduct that may be related to another action isn’t enough.”
In rejecting the interrelatedness argument with respect to the Keippel claim, Judge Wallace paid particular attention to the word “any “in the interrelatedness definition. He cited New York authority to the effect that “it is immaterial that one claim may involve additional facts or allegations because all that is required is ‘any’ common fact, circumstance, etc.” However, he then commented that “That said, the claims do need ‘numerous logically connected facts and circumstances’ to be interrelated, and that they shouldn’t be deemed interrelated when their relation to each other is “tenuous at best.”
In concluding that the Belin claim was not made during the policy period of either of the two programs, Judge Wallace noted that the initial complaint, which was filed during the policy period of the 2018-2019 program, did not name an insured person as a defendant. While the initial complaint alleged supposed wrongful acts by Kosloske, he was not named as a defendant in the action until the complaint was amended after the 2018-2019 policy had expired, nor was any relief sought from him in the original complaint.
Judge Wallace also held that the Belin complaint was not interrelated with any of the other actions. In reaching this conclusion he noted that the ties between the Belin action and the other complaints were “just too feeble.” The alleged wrongful acts were separated by multiple years and involve different transactions.
There must be, Judge Wallace said “a reasonable limit when interpreting the term ‘any’ as used in the interrelated coverage action.” To say that transactions “that were years apart and are the bases of different class actions and different causes of action are a ‘series of casually or logically connected facts’” as would be required for them to be interrelated “is to say too much.” While there are “general allegations of wrongdoing over a long period of time that indeed share similarities or even complement each other,” the court “cannot say these bestrewn claims rise to the required level of interrelatedness.”
Discussion
As I have discussed at length in prior posts (for example, here), interrelatedness questions are among the most vexing of all insurance coverage issues. Anyone who has tried to sort through the cases has quickly concluded that the cases are all over the map. The problem is that “relatedness” is such an elusive concept – what is that makes any two things “related”? The more you try to think about it, the more it recedes away from you.
In the end, the only way to try to summarize the various cases is to say that they are often a reflection of the specific facts involved, and the specific policy language at issue.
In addition, another thing you can say about the various interrelatedness cases is that the various outcomes must also be understood within the context of the specific law that the court has applied.
And in that regard, I think it is important that in this case Judge Wallace, sitting in a Delaware court, applied New York law, due to the choice of law provision in the primary policy. To be sure, as Geoffrey Fehling of the Hunton Andrews and Kurth law firm noted in his LinkedIn post about this case earlier this week (here), given the uncertainty of related claims analysis under Delaware law, the outcome of this case may well have been the same under Delaware law – but, he also noted, “states have very different bodies of case law influencing the analysis.”
I don’t know either whether the application of New York law alone is sufficient to explain the outcome, but the fact is that, particularly with respect to the issues surrounding the Belin claim, the court’s determinations were consistent with the insurers’ interests and contrary to the policyholder’s interest – a noteworthy development given the general disposition of the Delaware courts in favor of policyholders generally.
There is a lot more that might be said about the court’s various holdings in this case, but the one issue I want to focus on is what the Judge Wallace said about the word “any.” What he said was even though the word “any” on its own lacks limitation, there nevertheless must be a “reasonable limit when interpreting the word ‘any’ as used in the interrelated coverage provision.” So, even though there were “general allegations of wrongdoing over a long period of time that indeed share similarities or even complement each other,” that is not enough. The court he said, “cannot say these bestrewn claims rise to the required level of interrelatedness.” This “reasonable limit” analysis with respect to the work “any” is an interesting one in the larger context of interrelatedness case law.
There is one further thing to keep in mind when it comes to interrelatedness issues. That is, neither insurers nor policyholders always want the same thing from a relatedness determination. For example. sometimes a policyholder will want multiple claims to be found unrelated, so that multiple policy programs can be accessed; other times a policyholder will want to have multiple claims found to be related so that only one retention applies. This variability of interests is yet another reason why the interrelatedness decisions are so hard to map, as different players take different positions in different cases, depending on their interests in a particular case. This observation is also a precaution against trying to label a particular ruling (like, say, this one) as policyholder-friendly or insurer-friendly. There is always the next case.