A recent decision in federal court in Montana provides another example of different standards applied to assessing “related claims” under directors and officers (D&O) liability insurance policies. In this instance, the district court found that two class action lawsuits were related because they involved the same “general course of conduct.” Because the two claims were related, they were treated as a single claim first made in an earlier policy period. As a result, the Montana policyholder lost out on $5 million in potential coverage under a second policy in place when the second claim was asserted.

A typical claims-made liability policy covers claims first made against the policyholder during the policy period. However, if two claims are “related,” they are considered a single claim that was first made at the time of the earlier claim, even if the second claim was made during a subsequent policy period. Most policies use very broad and amorphous “related” claim definitions and provisions, leaving courts to fill in gaps when asked to assess relatedness. Given the material differences in state common law, states have taken very different, and at times seemingly conflicting, approaches, so whether two seemingly similar claims are in fact related often depends on what state's law governs.

Reprinted courtesy of Geoffrey B. Fehling, Hunton Andrews Kurth LLP and Joseph T. Niczky, Hunton Andrews Kurth LLP

Mr. Fehling may be contacted at gfehling@hunton.com
Mr. Nickzky may be contacted at jniczky@hunton.com