Hunton Insurance Recovery Blog

A recent decision by the Eastern District of Virginia illustrates the tricky problem of relatedness in claims-made liability insurance policies. When a claim is made that relates to an earlier claim, the second claim is covered under the same insurance policy as the original claim, even if that policy has expired. However, determining when two claims are related is not always straightforward and involves a highly fact-specific analysis. As shown in Navigators Specialty Insurance Company v. Avertest, LLC, sometimes even identical allegations, describing the same allegedly negligent business practice, may not be enough to make claims related. Instead, under typical policy language, what matters is whether the claims arise from the same or related occurrences.

Whether a policyholder’s losses are “direct” or “indirect” can be coverage-determinative. Most financial institution bonds exclude “indirect” or “consequential” losses. A recent decision in Fed. Deposit Ins. Corp. v. Arch Ins. Co., No. CV C14-0545RSL, 2017 WL 5289547 (W.D. Wash. Nov. 13, 2017) addressed the issue of “direct” versus “indirect” losses in a dispute under a financial institution bond issued by Arch Insurance Company (Arch) to Washington Mutual Bank (WaMu). The court held that WaMu’s losses resulting from its purchase of fraudulent loans were “direct” losses, and that WaMu’s sale and contractual obligation to repurchase the fraudulent loans did not convert its losses from direct to indirect.