Two federal district courts recently reached different results on the question whether a subpoena received by an insured constitutes a “claim” under an insurance policy. Diamond Glass Companies, Inc. v. Twin City Fire Insurance Company et al, 06-CV-13105 (S.D.N.Y. August 18, 2008) (subpoena is not a claim); ACE American Ins. Co. v. Ascend One Corp, CCB-06-3371 (D.Md. August 25, 2008) (subpoena can constitute a claim).

In Diamond Glass, the insured sought coverage under its D&O policy for costs incurred in responding to FBI search warrants and subpoenas issued to its custodian of records, Vice President for Information Technology, and several current and former employees in conjunction with a grand jury investigation of the company. The policy provided coverage for “Insured Person claims” (a “written demand for monetary or non-monetary relief” made against an insured person” or a “formal civil, criminal, administrative, or regulatory investigation commenced by the service upon or other receipt by an Insured Person of a written notice from an investigating authority specifically identifying such Insured Person as a target individual against whom formal charges may be commenced”) and “Entity claims” (a “written demand for monetary or non-monetary relief commenced by the receipt of such demand”).

The court held that the subpoenas did not present a claim because they neither constituted a "demand for relief" nor targeted an Insured Person. Central to the court’s holding was its observation that “interpreting ‘demand for non-monetary relief’ to include any investigative subpoena would require Defendants to insure Diamond’s costs responding to any subpoena, notwithstanding the absence of any assertion of criminal or civil liability against Diamond or any of its directors and officers. Such a result would be absurd . . . [D&O liability policies] are not means of holdings insureds harmless from costs associated with any participation.” The court also emphasized the specific language of the definition of “Insured Person claim”, concluding that the subpoenas did not trigger coverage because they did not actually target an individual against whom charges may be commenced.

One week later, in Ascend, the US District Court for the District of Maryland reached the opposite result under a duty to defend E&O policy regarding subpoenas issued pursuant to ongoing investigations by the Texas and Maryland Attorneys General into potentially deceptive trade practices. The policy defined claim in relevant part as “a civil, administrative or regulatory investigation against any Insured commenced by the filing of a notice of charges, investigative order or similar document".

After surveying case law from several jurisdictions, the court found that “Subpoenas and Investigative Demands may constitute claims where they are issued by government investigative agencies relating to an investigation of the insured” and also suggested that the seriousness of the government investigation is a relevant consideration. On this basis, the Ascend court held that the subpoenas in question did constitute a claim for wrongful acts because they were issued by the consumer protection divisions of each state’s Attorney General’s office and cited specific provisions of state consumer protection law that the insured may have violated.