Coverage Barred by Related Claim Made Prior to Policy Period

The United States District Court for the Eastern District of Louisiana has held that no coverage exists under a professional liability policy because the lawsuit for which the insureds sought coverage was based on the same or related wrongful acts as a lawsuit made before the policy period. As a result, the lawsuit constituted a related claim made before the policy’s inception. Henry v. Maxum Indem. Co., 2022 WL 16758298 (E.D. La. Nov. 8, 2022).

The insureds, attorneys prosecuting subsistence claims against BP, were sued before the policy period by clients alleging that the attorneys solicited thousands of claimants and subsequently failed to properly and timely file their claims, thus causing the claimants to lose the opportunity to be compensated for their losses. Another lawsuit was filed against the insureds during the policy period alleging that the insureds submitted false and incorrect claim forms on behalf of claimants, resulting in the denial of the claims. Unlike the earlier claimants, the latter claimants alleged that their claims were fully submitted and reached the review stage, but were denied.

The insurer denied coverage under a professional liability policy for the second lawsuit because the lawsuit was related to the first lawsuit made before the policy period. The policy contained a related claims provision providing that, “[a]ll Claims based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving the same Wrongful Act or related Wrongful Acts shall be considered a single Claim to have been made at the time the earliest such Claim was made.”

The court agreed with the insurer. First, the court rejected the insureds’ argument that the policy’s “related claims” provision was ambiguous, citing the Fifth Circuit’s previous holding that “[t]he purpose of this provision appears obvious.” Second, the court rejected the argument that the claims were unrelated because the claimants alleged that their claims had been submitted but were denied in the post-review process, noting that both lawsuits alleged acts and omissions at the time the claims were filed. Third, the court found persuasive that the same expert had been retained by the claimants in both actions and provided identical opinions about the alleged breaches by the insureds. Finally, the court held that its decision not to consolidate the matters was “irrelevant” to coverage under the policy.