(Article from Insurance Law Alert, January 2016)
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The Fourth Circuit ruled that a liability insurer had no duty to defend or indemnify an underlying lawsuit because, based on the policy’s “interrelated wrongful acts” provision, the original claim against the policyholder was made prior to the inception of the policy. W.C. & A.N. Miller Dev. Co. v. Cont’l Cas. Co., 2015 WL 9487938 (4th Cir. Dec. 30, 2015).
In 2006, several entities and employees affiliated with Miller Development were sued over a contract dispute. In 2010, Miller obtained liability insurance from Continental Casualty. Shortly thereafter, Miller was sued in a fraudulent conveyance action, seeking recovery on the judgment entered in the 2006 lawsuit. Miller tendered the suit to Continental, which refused to defend based on an “interrelated wrongful acts” provision. A Maryland federal district court agreed, finding that the 2010 lawsuit alleged interrelated wrongful conduct with the allegations in the 2006 lawsuit and thus that a “claim” was originally made prior to the inception of the 2010 policy. The Fourth Circuit affirmed.
The policy provided that “[m]ore than one Claim involving the same Wrongful Act or Interrelated Wrongful Acts shall be considered as one Claim which shall be deemed made on . . . the date on which the earliest such Claim was first made.” The policy further specified that “interrelated wrongful acts” are any acts which are “logically or causally connected by reason of any common fact, circumstance, situation, transaction or event.” Noting the “expansive” definition of “interrelated wrongful acts,” the court concluded that the conduct alleged in the 2006 and 2010 lawsuits shared a “common nexus of fact.” In particular, the court noted that both suits arose out of the same land development project, the same operative contract, common circumstances and “a multitude of common facts.” The court therefore held that the claims alleged interrelated wrongful acts that must be deemed “first made” in 2006, outside the scope of Continental’s policy period.