No Coverage for Claim That “Correlates” to Claim Made Before Policy Period

The United States Court of Appeals for the Eleventh Circuit has held that, under Florida law, no coverage was available under a claims-made policy for a claim that “correlates” to a claim made before the policy period. Datamaxx Applied Techs., Inc. v. Brown & Brown, Inc., 2022 WL 3597311 (11th Cir. Aug. 23, 2022).

The insured, a software provider, entered into a development and licensing agreement with another software provider in which one would provide its proprietary technology to create a jointly developed “enhanced product” that the other would then promote to its customers. In 2014, one provider sued the insured, alleging that the insured provider had unilaterally used the jointly developed code to bring a competing product to market. The providers settled, and the insured tendered the claim to its insurer who partially reimbursed the insured provider and was subsequently released from any future related claims.

The software providers continued to do business with each other under the same development and licensing agreement until, five years later, the software provider alleged that the insured provider had launched a separate, new competing product in breach of their development and licensing agreement. The insured noticed the claim to its new insurer, who denied coverage based on a policy provision providing that “[t]his coverage does not apply to … any claim that correlates with an act, if such act also correlates with any claim deemed to have been made before the beginning of this policy period.” In the ensuing coverage litigation, the district court granted the insurer’s motion for summary judgment. The insured appealed.

The Eleventh Circuit upheld the district court’s decision. In examining the “correlation” provision, the court noted that “correlate” is not ambiguous and is not synonymous with “related,” as the insured had argued. Relying on the dictionary definition of the word, the court held that establishing correlation requires showing that the claims “tend to vary, be associated, or occur together in a way not expected on the basis of chance alone.” Ultimately, the court found the 2014 and 2018 claims “correlated” because the insured breached the same development and licensing agreement in a similar way – namely, by attempting for the second time to circumvent the agreement and bring a competing product to market.