The Fourth Circuit recently upheld a liability insurer’s denial of coverage where its insured sought coverage for a lawsuit alleging wrongful conduct that was interrelated with conduct alleged in a separate lawsuit filed before the subject policy’s policy period. W.C. and A.N. Miller Development Co. v. Continental Cas. Co., 2015 WL 9487938 (4th Cir. Dec. 30, 2015); opinion amended and superseded by, 2016 WL 682974 (4th Cir. Feb. 19, 2016).
The insured was sued for breach of contract, and a judgment was entered against it. It was later sued in a fraudulent conveyance action which sought to recover the judgment entered in the lawsuit, alleging that the insured had taken actions to render itself and related companies judgment proof. The insured sought a defense from its then current insurer. The insurer denied the claim on the grounds that the fraudulent conveyance lawsuit alleged wrongful conduct that was “interrelated” with the conduct alleged in the earlier lawsuit, citing a policy provision that provided, “[m]ore than one claim involving the same Wrongful Act or Interrelated Wrongful Acts shall be considered as one Claim which shall be deemed made on ... the date on which the earliest such Claim was first made ....”
Litigation ensued, with the insured arguing that the two lawsuits alleged merely a common motive and thus their similarities were not substantial enough to establish the interrelatedness of the two lawsuits. The Fourth Circuit found that the two lawsuits shared a common nexus of fact in that they alleged a “scheme involving the same claimant, the same fee commission, the same contract, and the same real estate transaction” and therefore held that the lawsuits involved Interrelated Wrongful Acts and were thus a single claim first made in the earlier lawsuit prior to the subject policy’s period.