A federal court in Virginia broadly applied the phrase “arising out of” to conclude that claim arose before a policy retroactive date and was thus subject to a sub-limit of coverage. Minnesota Lawyers Mutual, Insurance Co. v. Protostorm, LLC, et al., 2016 WL 3447892 (E.D. Va. June 22, 2016).

A law firm’s client sued the firm for legal malpractice for alleged errors in the firm’s preparation of various patent applications. After a jury trial, the client was awarded damages. The firm’s professional liability insurer conceded that its policy covered the judgment, but filed a declaratory judgment action to determine whether its indemnity obligation was capped at the sub-limit for claims “arising out of” acts, errors or omissions that occurred prior to a retroactive date in the policy.

The court relied on a recent decision of the Virginia Supreme Court that concluded that the phrase “arising out of” had a very broad meaning and required only a causal connection between a particular fact and the elements of a cause of action, citing Doctors Co. v. Women’s Healthcare Associates, Inc., 740 S.E. 2d 523, 527 (Va. 2013). It identified the elements of the underlying malpractice claim and then looked to determine whether any post-retroactive date act, error or omission was necessary to establish those elements. Based on the facts available to the jury, the court concluded that all of the elements necessary for the accrual of the malpractice action were present beforehand. The court granted summary judgment in favor of the insurer enforcing the sub-limit.