Questions whether two sets of circumstances are or are not interrelated are among the most vexing insurance coverage disputes out there. These questions often are even more fraught because of the significant amounts of money that can depend on the answer. All of these considerations were in play in a recent Fourth Circuit decision in which the appellate court concluded in the Under Armour case that because prior shareholder litigation and a later SEC investigation were “logically and causally” related, they represented a single claim triggering only one $100 million insurance tower, rather than a second $100 million tower, as the company had argued. The Court’s January 20, 2026, decision, which highlights the many concerns and considerations that can come into play in these kinds of disputes, can be found here.

Background

Under Armour is an athletic apparel company. It primarily derives its revenue from wholesale sales to clothing retailers. One of its key retailers was Sports Authority. In January 2016, Sports Authority’s business was suffering. Sports Authority ultimately filed for bankruptcy.

As Sports Authority deteriorated, Under Armour, in a series of statements, maintained its upbeat revenue guidance and projections. However, when Sports Authority announced that it was going to liquidate rather than reorganize, Under Armour revised its position, acknowledging it would only receive a portion of the revenue it was due from Sports Authority. Just before Sports Authority’s liquidation announcement, Under Armour’s founder and CEO sold millions of dollars of his Under Armour stock for a significant profit.

Between August 2016 and February 2017, Under Armour received, sequentially, a books and records request, a derivative demand letter, and a securities class action lawsuit. The securities suit alleged that the company had misrepresented the impact on the company’s finances from a variety of factors, including the Sports Authority bankruptcy.

In June 2017, the SEC subpoenaed financial and accounting documents from Under Armour. In March and June 2018, the government subpoenaed additional documents, including those concerning the “shifting of revenue between fiscal quarters or years.” The government subpoenaed additional documents concerning revenue shifting in March and November 2019. In the summer of 2020, the SEC notified Under Armour of its intent to pursue an enforcement action over the alleged shifting of revenue between quarters. The SEC contended the company had pulled revenue expected in later quarters into earlier quarters to make its financial performance look better.

While the SEC investigation proceeded, the securities litigation also was going forward. After a series of procedural developments, including a trip to the Fourth Circuit, and the plaintiffs’ amendment of their complaint to reflect the revenue shifting allegations that were the basis of the SEC investigation, the securities litigation settled for $434 million. The company settled with the SEC for $9 million. Separate derivative litigation ultimately settled as well.

The Insurance Dispute

At relevant times, Under Armour maintained a program of D&O insurance. For each of the February 2016-February 2017 and the February 2017-February 2018 time periods, Under Armour had in place a $100 million D&O insurance programs consisting of a primary layer of $10 million and nine additional excess layers of $10 million each. There were different primary carriers in two towers.

The primary insurers in both towers treated the books and records requests, the derivative demands, and the securities lawsuits as claims first made during the 2016-2017 policy term. Under Armour took the position that because the SEC investigation and enforcement action dealt with allegations concerning the accounting pull forwards, it was a separate claim, and that it fell under the 2017-2018 policy. Insurance coverage litigation ensued, with the 2017-2018 program excess insurers contending that both the shareholder claims and the government investigation were a single claim triggering only the earlier policy period, and with Under Armour contending that the government investigation represented a separate claim triggering the later policy period. The parties filed cross-motions for judgment on the pleadings.

The district court granted Under Armour’s motion, holding that the SEC investigations qualify as claims first made during the later policy period, rejecting the insurers’ argument that the prior shareholder litigation and the later government investigation were a single claim. The insurers appealed.

The Relevant Policy Language

An endorsement to the 2017-2018 policy alters the single claims provision, providing that:

All Claims … that arise out of the same fact, circumstance, situation, event, or Wrongful Act, or facts, circumstances, situations, events, or Wrongful Acts that are logically or causally related shall be deemed one Claim, which shall be deemed to be the first made on the earliest that the first of such Claims is made…

The January 20, 2026, Opinion

On January 20, 2026, Opinion written by Judge A. Marvin Quattlebaum, Jr.  for a unanimous three-judge panel, the Fourth Circuit, applying Maryland Law, reversed the district court, holding that the prior civil litigation and the subsequent government investigation were “logically and causally” related and therefore constituted a “single claim” within the meaning of the policy.

With respect to whether the claims were “logically” related, the Court said, in reliance on dictionary definitions, that “two things are logically related when they are reasonably or rationally connected to or associated with one another.”

The Court then considered the allegations in the two sets of claims. The securities and derivative lawsuits asserted claims about the company’s statements that it would continue to grow notwithstanding the Sport Authority problems. The government investigations, the court said, initially began with these same allegations, but the SEC’s investigation later involved Under Armour’s alleged revenue shifting.

The court said that although the revenue shifting “was not precisely the same conduct” as the public comments, it is “logically related.” The accounting manipulation is “reasonably and rationally connected to the optimistic public statements about Under Armour’s financial condition.” The effect of both “was to maintain the appearance of financial strength.” By “pulling revenue forward” the company “bolstered the earlier quarter’s revenues, creating the illusion of continued growth.” This, the court said, “permitted Under Armour officials to plausibly make misleading public statements.” The Court also cited the SEC’s statements in which the agency said that “without the pull forwards the company would have missed its projected revenue growth.”

The court’s analysis of the “causally related” criterion is the same. First the court said, using dictionary definitions, that two things are causally related “when they are connected or associated by cause or by cause and effect.” The court reference the SEC’s statements that “to get out in front of the negative financial impact that could follow from missing its 20% growth forecast,” the company “pulled forward its order, which allowed it to continue forecasting its 20% target publicly.” The company’s actions were “part of a single scheme” and “stemmed from a single goal,” which was “to convince its shareholders and the public that it was achieving 20% growth in spite of the trouble with Sport Authority.”

For these reasons, the appellate court said, Under Armour’s pull forward accounting actions and its alleged misleading public statements “under the plain meaning of the policy” are “logically and causally related.”

Discussion

Relatedness coverage disputes often depend on a complex interplay between underlying factual allegations and the relevant policy language. That was certainly the case here; the outcome of this dispute turned on the court’s perception of the factual relationship between the underlying allegations in the prior shareholder litigation and the subsequent SEC investigation, as well as the court’s interpretation and application of the policy’s “logically and causally related” language.

There are other factors that often come into play and that can add to the complexity of these kinds of disputes. One is that the positions the carriers take in these disputes is not always the same; depending on which tower an insurer is in and how the court’s determination might affect the insurer’s interest, an insurer may argue that two sets of circumstances are or are not interrelated. Just to use one example, in a circumstance involving many smaller claims, an insurer may try to argue that the claims are not interrelated, so that multiple self-insured retentions apply.

The fact that insurers’ interests in any given case may depend on the insurers’ relative interest – and therefore may determine what position the insurers may take with respect to relatedness — is one of the reasons that the outcome of these kinds of disputes are all over the map.

There is another fact that may come into play here, and that is the state whose law is to be applied in interpreting the relevant contractual language. As Geoffrey Fehling of the Hunton Andrew Kurth law firm pointed out in his LinkedIn post discussing the Fourth Circuit’s opinion in the Under Armour case (here), related claims issues can sometimes turn depending on the law applicable to the dispute.

Maryland law, which the appellate court applied here, takes a “textualist” approach, which was evident in the court’s analytical process, in which it leaned heavily on dictionary definitions of the policy terms. As Fehling points out, other courts, for example, Delaware, take a different approach, looking in relatedness disputes for a “meaningful linkage” between circumstance, with further application of Delaware’s guiding principles to interpret policies “broadly” in order to “find coverage,” in contrast to Maryland’s more neutral approach.

Readers interested in Delaware’s “meaningfully linked” approach will want to review my discussion of the Delaware Supreme Court’s February 2025 decision Alexion Pharmaceuticals case, here, as well as the Delaware Superior Court’s January 8, 2026 opinion in the Forte Biosciences case, here.

While I think many readers understand that relatedness disputes can be complex, there is one last but important consideration that should not be overlooked, and that is the fact that, as was the case here, a lot of money can depend on the outcome of relatedness analyses. $100 million hung in the balance here. Well, actually, it was $90 million, as the appellees were the nine excess insurers who each had $10 million limits in play. According to the Fourth Circuit, the primary insurer in the 2017-2018 tower had separately settled with Under Armour, so the full $100 million was not in play, “only” $90 million. But the point is that a lot of money is often riding on the outcome of relatedness disputes.  

I cannot, in conclusion, offer any sort of flashlight through the seeming darkness of the incredibly varied relatedness case law. All I can do is offer up some more philosophical observations about relatedness disputes, drawn from an earlier blog post on this topic:

“Relatedness” is not self-defining. It is, in fact, a concept that recedes away from you the harder you try to think about it. At a certain level of generalization, everything in the universe is related, all joined together in the all-powerful and all-knowing mind of almighty God. Yet from another perspective, nothing is related, as all of creation consists of nothing more than chaotic, swirling bits of matter randomly spinning away within the cosmic void.

And even if we are more practical and less theoretical, what is the type of relationship that determines relatedness – is it temporal or spatial relationship? Is it causal or logical relationship? Must events involve the same actors acting with the same purpose and intent and using the same methodology for the events to be related – and if the actors, purposes and methodology don’t have to be identical, how much may they vary without eliminating the link of relationship between different events? ….

As should be apparent, these issues arise frequently, and over t he years, many courts addressed the “relatedness” question. However, anyone expecting to find clarity from the various cases will be disappointed. Taken collectively, the cases illustrate nothing so much as how elusive these issues can be.