Applying Tennessee law, a federal appellate court has held that pre-policy demands and later-made claims were related notwithstanding the fact that the demands and claims may have relied on different legal theories.  Direct Gen. Ins. Co. v. Indian Harbor Ins. Co., 2016 WL 5437062 (11th Cir. Sept. 29, 2016).

The insured, a Tennessee insurer that issues automobile policies in Florida providing personal injury protection, sought coverage under its primary and excess liability insurance policies for numerous demands and lawsuits regarding the insured’s payment of personal injury protection benefits under a Florida statute.  Pursuant to that statute, the insured reimbursed medical providers using a “fee schedule method” of calculation.  During the relevant policy period, the insured provided notice of a class action complaint alleging that the insured underpaid personal injury protection benefits, which subsequently was amended to assert that the insured’s use of the “fee schedule method” was unlawful.  Several years later, the insured provided notice of 70,000 additional claims that it asserted related to the claims first made during the earlier policy period.  The insured also identified additional demands it received prior to the inception of the relevant policy, but the insured asserted that the pre-policy demands were not “claims” for “wrongful acts.”  The insured argued that the pre-policy demands were not related to the later claims because they did not assert that the insured improperly used the “fee schedule method” to calculate benefits.

The policies issued by the excess carriers provided coverage on a “claims-made” basis.  The policies defined “Related Claims” as “all Claims for Wrongful Acts based on or directly or indirectly arising out of or resulting from the same or related . . . series of facts, circumstances, situations, transactions or events.”  The excess carriers took the position that all of the claims and pre-policy demands were related such that they constituted a single claim made prior to the inception of the excess policies.

In affirming the lower court’s decision granting the excess carriers’ motion for summary judgment, the appellate court rejected the insured’s theory that the pre-policy demands did not rely on the same legal theory as the claims made during the policy period and, therefore were not related.  Rather, the appellate court explained that the policy’s definition of “Related Claims” did not require the same legal theory and pointed to other direct links between the pre-policy demands and the claims made during the policy period in support of its decision, including that the same claimant that asserted a pre-policy demand later filed suit during the policy period.

The appellate court also disagreed with the insured’s argument that relating the pre-policy demands with the later-made claims rendered the definition of “Related Claims” limitless and coverage illusory because the insured itself applied the definition to relate 70,000 claims.