March 10, 2022 – For corporations and their management liability insurers, a pair of recent rulings from a Delaware court provide a new perspective on a recurring theme. Directors and Officers (D&O) insurance policies generally include provisions that state that where a claim alleges a wrongful act related to a prior claim, the two cases will be treated as a single claim that will be deemed to have been made for the first time in the past. time when the The first of such claims was first made.
The “related claims” provisions can be a minefield for both policyholders and insurers and, depending on the context, an insurer may invoke the related claims provision to prohibit coverage of a claim related to a claim for which the insured had notice before the policy. period started. An insurer may also link a claim to a prior policy period in which the policy’s liability limits have already been exhausted. On the other hand, an insured may claim that a claim is related to a previous claim to avoid paying multiple withholdings or deductibles.
It follows that, depending on which side of the argument one is on, the standard that a court will apply in analyzing the relationship may be a crucial factor. This is especially so because the policy language defining related claims and related torts is often very broad and confusing, using terms such as “arising from,” “based on,” or “attributable to.”