The United States District Court for the Western District of Washington has held that a liability insurer has no duty to defend its insured against a putative class action because the lawsuit involved “Related Wrongful Acts” and therefore constituted a single claim first made prior to the inception of the policy.  Navigators Specialty Ins. Co. v. Double Down Interactive, LLC, 2019 WL 3387458 (W.D. Wash, July 26, 2019).

The insured operates an interactive website where users can play casino-like gambling games.  In 2018, a putative class of individuals sued the insured for unjust enrichment and violations of state gambling and consumer protection statutes.  When the suit was filed, the insured had in place a claims-made liability insurance policy, which covered claims made between June 2018 and June 2023 (the Runoff Policy).

After the insurer denied coverage for the suit in its entirety, three principal issues remained in the ensuing coverage action.  First, the insurer argued that it had no duty to defend the class action under the Runoff Policy because the interrelated claims provision applied.  The insurer contended that the provision deemed the lawsuit to be a claim first made when an earlier class action was filed against the insured in 2015, before the inception of the Runoff Policy.  The insured responded that the two claims were unrelated because the plaintiffs in each lawsuit were different, the claims were temporally distinct, and were subject to different state laws.  In finding for the insurer, the court noted that the “facts that arose to each complaint were nearly indistinguishable and the complaints themselves [were] facially identical in many areas.”  As a result, the court held that the actions were interrelated, and thus considered a single claim first made before the inception of the Runoff Policy.

Next, the insurer asserted that it had no coverage obligation because the Runoff Policy included an endorsement that bars coverage for a claim “in any way related to any Wrongful Act committed or allegedly committed on or after June 1, 2017.”  While the insured conceded that the alleged wrongful acts occurred both before and during the Runoff Policy period, it argued that the endorsement was ambiguous, and that the ambiguity should be resolved in its favor.  The court disagreed and held that the wrongful acts alleged to have occurred before June 1, 2017 are “in connection with” and “in any way related” to the wrongful acts alleged to have occurred after that date because they arise from the same conduct.

Finally, the court held that the Runoff Policy’s professional services exclusion, which precludes coverage for a claim based on the performance by any Insured of professional services for others for a fee, did not apply.  The court held that a professional service must be something that requires “skill” that is “predominately mental or intellectual.”  Here, the court found that while designing and coding the game might be a professional service, the act of playing the game was not.