Prior Acts Exclusion Bars Coverage for Suits Alleging Wrongful Conduct Spanning Prior Acts Date
A Maryland intermediate appellate court has affirmed summary judgment in favor of an insurer, holding that a Prior Acts Exclusion applied to bar coverage for two antitrust lawsuits where the suits alleged that the insured conspired to raise prices beginning as early as 2002 and the Prior Acts Exclusion barred coverage for “Interrelated Wrongful Acts, committed, attempted, or allegedly committed or attempted in whole or in part prior to May 15, 2007.” Cristal USA Inc. v. XL Specialty Ins. Co., 2017 WL 727795 (Md. Ct. Spec. App. Feb. 24, 2017). The court also held that a coverage determination by the primary insurer does not bind an excess follow-form insurer, and that the excess insurer had no duty to defend the action.
The insured, a producer of titanium dioxide, purchased a Private Company Directors, Officers and Employees Liability Policy covering the period from May 16, 2009 to May 16, 2010 and an excess policy for the same period that followed form. In 2010, two antitrust class actions were filed against the insured alleging that the insured conspired to artificially raise the price of titanium dioxide beginning as early as March 2002. The insured sought coverage under its primary and excess policies. The primary insurer initially denied coverage under the Prior Acts Exclusion, but then changed its position and provided its full limit. The excess insurer denied coverage, citing the Prior Acts Exclusion, which bars coverage “for Loss on account of any Claim made against any Insured based upon, arising out of or attributable to Wrongful acts, including Interrelated Wrongful Acts, committed, attempted or allegedly committed or attempted in whole or in part prior to May 15, 2007 for [insured’s parent company] and its Subsidiaries.” The insured brought a declaratory judgment action against the excess insurer. The trial court granted summary judgment in favor of the excess insurer, and the insured appealed.
On appeal, the insured argued that the lower court had incorrectly interpreted the Prior Acts Exclusion and that the excess insurer had a duty to defend the underlying action. More specifically, the insured contended that the May 15, 2007 date, which was the date that the insured’s parent company had acquired the insured, only applied to acts “for the benefit of” the parent company and its subsidiaries. The court rejected this argument, holding that the exclusion “can only reasonably be interpreted to exclude coverage for wrongful acts committed by [the parent company] and its subsidiaries, including Appellant, prior to May 15, 2007.”
The court also held that “a follow form insurer is not automatically bound by the coverage determinations of the primary policy insurer.” Finally, the court noted that “Interrelated Wrongful Acts” language had not been analyzed by any Maryland court in the exclusion context. Nonetheless the court held that the exclusion barred coverage because the complaints alleged Wrongful Acts that occurred as early as 2002, and that even if they also alleged acts occurring after May 15, 2007, “the ‘in whole or in part’ and Interrelated Wrongful Acts language contained in the exclusion precludes coverage for the entire action where it is clear that all of the actions alleged are related to the same conspiracy claim.”