Insured’s Claims Barred by Res Judicata

October 13, 2017

Applying Maryland law, a federal district court has held that the doctrine of res judicata barred an insured’s claims for coverage under a particular policy, where the insured’s previous efforts to bring those claims in a different proceeding and concerning a different policy failed.  The Humane Society of the United States v. Nat’l Union Fire Ins. Co. of Pittsburgh, 2017 WL 4467490 (D. Md. Oct. 6, 2017).

In 2007, an affiliate of the named insured, an animal rights advocacy organization, was sued.  Three years later, the named insured was brought into the action and sought a defense from its liability insurer under the then-in-effect 2009-2010 policy.  The insurer disputed coverage and in the litigation that followed, the court held that coverage was not available because the claim related back to the 2007 action, such that it was not made during the 2009-2010 policy period.  The insured then sought leave to amend its complaint against the insurer to assert a claim for coverage under an earlier policy in effect for 2007-2008.  The court denied the motion as untimely.

The insured then filed a new action, in another court, asserting claims for coverage against the insurer under the 2007-2008 policy.  The insurer moved to dismiss the claims, arguing that they were barred by res judicata.  The court agreed.

Applying the “transactional approach” articulated in Gonsalves v. Bingel, 5 A.3d 768 (Md. Ct. Spec. App. 2010), the district court found that the insured’s claims “stem[med] from the same occurrence,” i.e., the 2007 underlying litigation and resulting defense expenses.  The court also found that the judgment in the prior coverage litigation against the insured with respect to the 2009-2010 policy satisfied the requirement of a “final judgment on the merits” as to the availability of coverage under the earlier policy.  Accordingly, the court held that the insured’s claims were barred by res judicata, noting that the insured could have properly challenged the prior court’s decision through appeal.

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