interrelated wrongful acts

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One of the perennial D&O insurance coverage issues is the question of whether two or more claims are or are not interrelated. Under the operation of provisions typically found in most D&O insurance policies, if two or more claims are interrelated within the meaning of the policy, they are deemed to be a single claim first made when the first of the claims was filed. This seemingly technical determination can have important implications for the determination of which of the two potentially related insurance programs applies to a claim.

These recurring issues arose in connection with a dispute over which of two potentially applicable D&O insurance programs apply to the securities class action lawsuit filed against Alexion Pharmaceuticals. Insurers in the different towers argued over whether an earlier SEC subpoena, issued to Alexion during an earlier policy period, was related to the later securities suit, which was filed during a later period. In an interesting February 15, 2024, opinion (here), Delaware Superior Court Judge Paul R. Wallace, applying Delaware law, held that, despite some overlap, the subpoena and the securities suit were not related.Continue Reading Prior SEC Subpoena and Later Securities Suit Held Not to Be Related

One of the perennial D&O insurance coverage issues has to do with whether a later claim made during the policy period is interrelated with an earlier claim made prior to the policy period, and whether the later claim therefore is deemed under the policy to have been made prior to the policy periods. These issues were front and center in a recent coverage dispute in which the door manufacturer Jeld-Wen argued that earlier antitrust liability actions were not interrelated with the later securities class actions. In an interesting November 18, 2022 opinion by Western District of North Carolina Judge Max O. Cogburn, Jr., applying North Carolina law, held that the antitrust and securities actions were interrelated; that the securities claim was deemed first made prior to the policy period of the excess insurer’s policy; and therefore that the settlement of the securities claim was not covered by the policy at issue. A copy of Judge Cogburn’s opinion can be found here.
Continue Reading Prior Antitrust Action Held Interrelated with Later Securities Suit

In a January 23, 2018 unpublished decision (here), the Eleventh Circuit held that a D&O insurance policy’s prior acts exclusion does not preclude coverage where the subsequent claim against insured persons is “independent” from the alleged wrongful acts that occurred prior to the policy period. The appellate court’s opinion, in which it affirmed a district court’s ruling rejecting a D&O insurer’s argument that the exclusion precluded coverage for the FDIC’s claim against the former directors and officers of a failed bank, underscores the necessity for a link between the prior wrongful acts and the subsequent claim in order for the exclusion to preclude coverage for the claim. The Carlton Fields law firm’s February 26, 2018 memo about the decision can be found here.
Continue Reading Prior Acts Exclusion Does Not Preclude Coverage Where Subsequent Claim Independent from Alleged Prior Acts

caliIn an interesting September 30, 2015 opinion, Southern District of California Cynthia Bashant, applying California law, held that a series of HIPAA-related subpoenas that the U.S. Department of Justice served on Millennium Laboratories were not interrelated with prior qui tam lawsuits that had been filed against the company, and held further that coverage under Millennium’s D&O insurance policy for the company’s costs of responding to the subpoenas was not limited by the policy’s $100,000 sublimit for Regulatory Claims. A copy of Judge Bashant’s opinion can be found here.
Continue Reading D&O Insurance: HIPAA Supoenas, Interrelatedness, and Regulatory Claim Sublimits

eigthOn July 16, 2014, the Eighth Circuit, applying New York law, concluded that because a financial services firm’s professional liability insurance policy was ambiguous on the question whether the policy’s timely notice requirements apply to later claims related to a timely original claim, the policy provides coverage for the later claims. The district court had …

prOn July 9, 2014, in yet another in the ever growing line of cases examining whether or not separate D&O claims involving interrelated wrongful acts, District of Puerto Rico Judge Gustavo Gelpi, applying Puerto Rico law, held that the FDIC’s claims against the former directors and officers of the failed Westernbank did not involve …

idaho2In a March 20, 2014 decision involving interpretation of the interrelated wrongful acts provision and of the contractual liability exclusion in a bank professional liability insurance policy, District of Idaho Magistrate Judge Ronald E. Bush entered summary judgment on behalf of the policyholder, ruling that the underlying dispute was covered under the policy’s lender liability …