Despite Acceptance of Coverage by Primary Insurer, Excess Policy Bars Coverage for Claim Deemed Related Back to Prior Policy Period

Applying North Carolina law, a federal district court has held that an excess insurer had no duty to indemnify for a 2020 securities class action that related back to various antitrust lawsuits filed prior to the applicable policy period. Travelers Cas. & Surety Co. of Am. v. Jeld-Wen Holding, Inc., 2022 WL 17095207 (W.D.N.C. Nov. 21, 2022). The court also held that the excess carrier’s prior claims provision barred coverage even though the primary carrier had accepted coverage under the same policy period.

The insured, a product manufacturer, was sued by various customers following its acquisition of a competitor in 2012. The three lawsuits, filed in 2016, 2018, and 2019, alleged that the insured conspired with its only remaining competitor to raise prices. In 2020, the insured’s shareholders brought securities litigation, alleging that the insured and multiple directors had misrepresented the source of its success in public filings by withholding information about its anticompetitive behavior. The insureds provided notice of the antitrust lawsuits to its D&O insurers in 2019 and the securities litigation in 2020.

The excess insurer issued an excess claims-made-and-reported D&O policy to the manufacturer for a 2019-2020 policy period. The excess policy barred coverage for “any Claim made, or deemed first made, before the Policy Period” and provided that any claims asserting “Interrelated Wrongful Acts” or “the same or related facts, circumstances, or situations” constituted “a single Claim first made on the earliest date that . . . any of such Claims commenced, even if that date is before the Policy Period.” The rest of the tower was comprised of insurers that had issued policies for both the 2018-2019 and 2019-2020 policy periods. Those insurers accepted coverage for the securities litigation under the 2019-2020 policies. The excess insurer denied coverage under its 2019-2020 policy based on the prior claims provision, and the insured brought suit.

On cross-motions for summary judgment, the insured asserted that the prior claims provision did not apply to the securities litigation because it was not “interrelated” to the previous antitrust lawsuits. The court rejected this argument, finding that the claims: 1) all involved “interrelated wrongful acts,” i.e. the insured’s conspiracy and attempts to hide such conspiracy from its customers and shareholders; and 2) involved the same officers who participated in and attempted to cover up the conspiracy.  

The court also rejected the insured’s argument that the excess carrier was obligated to provide coverage because the rest of the tower had done so, explaining that the other primary and excess carriers were also on the risk during the previous 2018-2019 policy period and therefore had the same coverage obligation regardless of which policy period applied to the securities litigation. The court held that those insurers, unlike the excess insurer, had “no incentive” to argue that one policy period applied over the other.

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