A Civil Contempt Proceeding Is Part of the Same “Claim” as the Underlying Civil Action from Which It Arises

Applying Washington law, a federal district court has held that a civil contempt proceeding is not a separate and distinct “claim” from the civil action from which it arises.  Great Am. Ins. Co. v. Sea Shepherd Conservation Soc’y, 2014 WL 2170297 (W.D. Wash. May 23, 2014).

In December 2011, a research group filed suit against the insured environmental nonprofit organization, seeking to enjoin the nonprofit from attacking whaling research vessels.  After the trial court rejected the research group’s request for a preliminary injunction, the insured nonprofit moved forward with its annual “whale defense campaign” to prevent the research group from capturing whales in the Southern Ocean.  In December 2012, after the campaign had begun, the United States Court of Appeals for the Ninth Circuit issued a sua sponte injunction barring the nonprofit from physically attacking or approaching any whaling vessels operated by the research group, pending an appeal of the trial court’s ruling.  Allegedly, the “whale defense campaign” proceeded notwithstanding the injunction, resulting in several purported violations of the Ninth Circuit’s order.  As a result, the research group filed a motion for contempt against the insured nonprofit and certain of its directors on February 13, 2013.  That same day, the nonprofit sought coverage for the contempt proceeding from its insurer—the first time the nonprofit provided notice to the insurer of the research group’s lawsuit.

In the coverage litigation that followed, the nonprofit’s insurer asserted that the contempt proceeding, together with the underlying litigation, constituted a single “claim” that was first made in December 2011 but not reported until February 13, 2013, meaning that there was no coverage for the matter under either the 2011-2012 policy or the 2012-2013 policy, both of which were issued by the insurer on a claims-made-and-reported basis.  The court agreed.

First, the court held that the 2011-2012 policy did not afford coverage for the underlying litigation or the associated contempt proceeding.  The court declined to decide whether the policy was properly construed as a claims-made or claims-made-and-reported policy because, in either event, the insured did not report the litigation or the contempt proceeding until February 2013, “well beyond” the 2011-2012 policy’s notice deadline.  The court also rejected the nonprofit’s argument that an insurer must show prejudice in order to deny coverage under a claims-made policy.

Addressing coverage under the 2012-2013 policy, the court held that the underlying litigation and the contempt proceeding constituted a single “claim” that was first made in December 2011, prior to the inception of the policy period.  The court noted that the policy’s definition of “claim” includes a “civil proceeding, including any appeals therefrom.”  According to the court, the contempt proceeding was “indisputedly part of an ‘appeal’ from” the underlying litigation.  The court also reasoned that federal courts construe a civil contempt proceeding to be a continuance of the underlying litigation rather than a separate civil proceeding, even where the contempt proceeding involves new allegations and new contemnors, and even where the contempt proceeding is governed by a separate scheduling order.

Finally, the court held that, even if the contempt proceeding were properly considered a separate “claim,” it would nonetheless be treated as a single claim with the underlying litigation because both proceedings involve “the same Wrongful Act or Related Wrongful Acts,” within the meaning of the 2012-2013 policy’s related claims provision.  The court reasoned that the underlying litigation and the contempt proceeding were causally connected because, but for the initiation of the underlying litigation, there would have been no basis for the contempt proceeding.  Thus, the court held that the 2012-2013 policy did not afford coverage for the contempt proceeding because, together with the underlying litigation, it constituted a single claim that was first made prior to the inception of the 2012-2013 policy.

Wiley Executive Summary

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