A federal district court in Illinois recently held that a “related wrongful acts” provision did not affect an insurer’s duty to defend even though the “wrongful acts” in question indisputedly “related” to wrongful acts that occurred prior to the policy’s retroactive date. James River Ins. Co. v. Rinella & Rinella, Ltd, C.A No. 1:07-04233 (N.D. Ill. Sept. 10 2008).
The insurer issued to the insured law firm a claims-made and reported professional liability policy that provided coverage for claims made as a result of “wrongful acts” that occurred after the policy’s “retroactive date” and before the end of the policy period. The “Limits of Liability” section of the policy contained a provision stating that “All ‘Claims’ alleging, based upon, arising out of or attributable to the same ‘Wrongful Act’ shall be deemed to be a single ‘Claim’ regardless of whether made against one or more ‘Insured’ and such ‘Claim’ shall be deemed first made on the date the earliest of such ‘Claims’ is made even if such date is before the ‘Policy Period’.”
The underlying lawsuit against the insured indisputably alleged related wrongful acts that occurred both before and after the retroactive date of the policy. The insurer argued that it therefore had no duty to defend because all of the alleged wrongful acts related back to the initial wrongful act, which occurred prior to the policy’s retroactive date.
The court rejected the argument, noting that the underlying complaint alleged multiple “wrongful acts,” two of which occurred after the retroactive date. The court then ruled that the policy’s “related wrongful acts” provision did not limit the duty to defend by excluding “related wrongful acts,” but instead merely established the limits of liability under other sections of the policy. Therefore, because the underlying complaint alleged some “wrongful acts” that were potentially covered by the policy, the insurer had a duty to defend.