Arizona Property & Casualty Ins. Guar. Fund v. Helme
153 Ariz. 129 (1987)
In Helme, the Arizona Supreme Court held that a claim that two physicians were negligent in failing to look at X-rays in connection with consultation and surgery on separate days alleged two occurrences, rather than a single occurrence, under the professional liability policy at issue.
Strictly speaking, the court did not hold that the “related acts” language was ambiguous. However, the court stated that “If we were compelled to equate ‘related’ with ‘logically connected,’ we would be compelled to find the policy provision ambiguous, and for that reason to find in favor of the claimant.” Thus, the court in Helme would find the term to be ambiguous under its commonly understood definition; but to avoid finding ambiguity, the court revised the definition of “related” to exclude “logically connected,” restricting it to only those acts that are “causally connected.”
In implementing this revised definition, the Helme court first looked at the clause at issue, noting that “The policy defines ‘occurrence’ as ‘any incident, act or omission, or series of related incidents, acts or omissions resulting in injury. . . .’” The court then observed that this definition employs a causal test (acts or omissions “resulting in injury”), but modifies it by using the phrase “series of related” acts or omissions. As the court interpreted the policy, a “series of related causes” of an injury merge to constitute only one “occurrence.”
Applying this interpretation to the facts, the Helme court concluded:
It follows that [the insurer’s] use of the word “related” in the phrase “series of related acts” was meant to exclude causally related acts from the rule that multiple causative acts constitute multiple occurrences. Therefore, we hold that the proper construction of [the insurer’s] definition is that even though there have been multiple causative acts, there will be a single “occurrence” if the acts are causally related to each other as well as to the final result.
St. Paul Fire & Marine Insurance Co. v. Chong
787 F. Supp. 183, 186–87 (D. Kansas 1992)
Chong is another often-cited case, which found that “related wrongful acts” is ambiguous. In Chong, the insurer filed a declaratory action to determine the limits of an attorney’s professional-liability policy. The issue was whether the phrase “series of related wrongful acts” was ambiguous, thus entitling each of three clients to recover the each-claim limit. Whereas the Helme court dealt with ambiguity in defining “occurrence,” the Chong court found “related acts” ambiguous in the context of dealing with limits of liability.
The policy provisions in Chong read, in relevant part, as follows:
Limits of Coverage
The limits shown in the Coverage Summary and the information contained in this section fix the most we’ll pay regardless of the number of:
- protected persons;
- claims made or suits brought; or
- persons or organizations making claims or bringing suits.
Each wrongful act limit. This is the most we’ll pay for all claims that result from a single wrongful act or a series of related wrongful acts.
The Chong court found that the phrase “series of related wrongful acts” is ambiguous, and thus that the “each wrongful act” limit was applicable. The court stated that “the use of the term ‘related,’ which itself has no accepted legal definition, allows the entire phrase to be construed in many different ways.” Accordingly, the court determined that “related” as used in the policy at issue should be defined solely in terms of causation. The court further found that the phrase “series of related wrongful acts” refers only to “multiple, causally connected” negligent acts or omissions. Applying this definition, the court found that there were multiple discrete omissions and actions on the part of the lawyer, which resulted in discrete losses to each of the three clients. Thus, the each-claim limit was appropriate.
Cases Finding No Ambiguity
Gregory v. Home Ins. Co.
876 F.2d 602, 605–06 (7th Cir. 1989)
Gregory involved a declaratory-judgment action to determine the applicable limits of a professional-liability policy. The underlying claims arose from an attorney’s alleged error in an opinion letter concerning tax consequences of buying videotapes pursuant to a videotape offering, and his alleged error concerning whether the videotape promotion was a security. The court found these acts to be sufficiently related to be considered a single claim under the policy.
The policy in Gregory stated, in relevant part, as follows:
Claim, whenever used in this policy, means a demand received by the insured for money or services including the service of suit or institution of arbitration proceedings against the insured.
The “Limits of Liability” section contained the following language (emphasis added):
Multiple Insureds, Claims and Claimants: The inclusion herein of more than one insured or the making of claims or the bringing of suits by more than one person or organization shall not operate to increase the Company’s limit of liability. Two or more claims arising out of a single act, error, omission or personal injury or a series of related acts, errors, omissions or personal injuries shall be treated as a single claim.
The insured, relying on Helme, argued that this policy language created a “glaring ambiguity” because the word “claim” was defined in the policy as “a demand received by the insured for money or services,” yet for purposes of determining the “each claim” policy limit, the word “claim” can mean several claims.
The Gregory court rejected the insured’s argument finding “clarity rather than ambiguity” in the “related acts” wording. Significantly, the court explained why the insured’s reliance on Helme was misplaced:
Our reading of Helme convinces us that the Arizona Supreme Court intended “causally connected” to have a more narrow meaning than did [the trial court]; it appears Helme requires a causal connection in the sense that one error caused the other, not that the opportunity to commit the errors arose out of the same cause. Nevertheless, we agree with [the trial court’s] conclusion that the different aspects of [the attorney’s] work in the videotape offering (the tax and securities advice he gave to [the client], and his drafting of the promissory note, production service agreement and opinion letter embodying that advice) were all “related” in any meaningful sense of the term.
Accordingly, the court applied the per-claim limit of liability.
Continental Casualty Co. v. Wendt
205 F.3d 1258 (11th Cir. 2000)
In Wendt, the court concluded that an attorney’s conduct underlying the subject declaratory action was “related to” conduct underlying an earlier suit on which the insurer had paid policy limits. Therefore, the action was not covered by the policy.
The policy provided in pertinent part, as follows (emphasis added):
I. Coverage Agreements
B. The wrongful act, [as insured above], must happen before the end of the policy term stated on the Declarations and claim therefore must first be made against you and reported to us during that policy term.
Any claim or claims arising out of the same or related wrongful acts shall be considered first made during the policy term in which the earliest claim arising out of such wrongful acts was made.
Section III (a), entitled Limits of Liability, states that: the limit of liability stated for “each claim” is the maximum we will pay for all claims and claim expenses arising out of, or in connection with, the same or related wrongful acts.
The insured argued that “related wrongful acts” was susceptible to more than one meaning and thus must be interpreted against the insurer and in favor of the insured.
The insurer moved for summary judgment, arguing that the phrase “same or related” acts was unambiguous. The court sided with the insurer, relying heavily on the decision in Gregory:
I believe that the most persuasive of [the authorities outside the Eleventh Circuit] is the Seventh Circuit decision in Gregory. The words “relate” or “related” are commonly understood terms in everyday usage. They are defined in [Webster's Third New International Dictionary, 1981] as meaning a “logical or causal connection between” two events. There is no ambiguity unless one is created through the device of simply ignoring one half of the definition. This is essentially the flaw in the reasoning of the Arizona court in Helme, supra, as recognized in Gregory.
The plain meaning of the word “relate” is “to show or establish a logical or causal connection between.” Applying the common meaning of the word to the facts of this case, the court finds that [the attorney’s] acts, which formed the basis for the [earlier] suit, “relate” or have a “logical connection” in any “meaningful sense of the word” to those which form the basis of the third party complaint filed against him by Wendt in 1997.
Bay Cities Paving & Grading v. Lawyers' Mutual Ins. Co.
855 P.2d 1263 (Cal. 1993)
Like Wendt and Gregory, Bay Cities holds that the phrase “related acts” is unambiguous.
In Bay Cities, the attorney for a contractor who was owed money on a construction project failed to serve a stop notice on the construction project’s construction lenders, and then failed to timely file a complaint to foreclose a mechanic’s lien. Coverage was limited to $250,000 per claim, and provided for an annual aggregate of $750,000. The contractor contended it was asserting two separate claims within the meaning of the policy, for a total of $500,000. The insurer argued that only one claim was asserted.
The policy provided that “Two or more claims arising out of a single act, error or omission or a series of related acts, errors or omissions shall be treated as a single claim.” (emphasis added).
The California Supreme Court sided with the insurer, ruling as follows:
The narrow issue before us is one of first impression. Does the policy’s $250,000 per claim limit apply to the attorney’s two omissions? We hold the limitation applies for two independent reasons: (1) The contractor’s suit against its former attorney is a single claim within the meaning of the insurance policy’s definition of “claim.” (2) Even if the contractor’s action could be viewed as comprising two claims within the policy definition, those claims must be treated as a single claim under the policy’s provision limiting coverage for claims arising out of a series of related acts, errors, or omissions.
In so ruling, the court aligned itself with Gregory, and put itself in opposition to Helme, as follows (emphasis added):
We agree with the court in Gregory, supra, 876 F.2d 602 (login required), that the term “related” as it is commonly understood and used encompasses both logical and causal connections. Restricting the word to only causal connections improperly limits the word to less than its general meaning. “Related” is a broad word, but it is not therefore a necessarily ambiguous word. We hold that, as used in this policy and in these circumstances, “related” is not ambiguous and is not limited only to causally related acts.
More Recent Case Law: Is There a Trend?
No trend in the case law is discernible. To the contrary, recent decisions confirm that the existing split in authority seems to be continuing. One example is Dormitory Authority of New York v. Continental Casualty Co., No. 12-civ-281, 2013 WL 840633, (S.D.N.Y. March 5, 2013).
In Dormitory Authority, the issue before the court was whether the Ice Control Issue (a claim related to excessive ice and snow accumulation), which the parties agreed was not raised in a May 30, 2002, letter setting forth a demand for damages, arises from or is related to the Steel Girt Tolerance Issue (a design error relating to steel tolerances for the metal wall system that formed the exterior wall of the building), which was raised in the letter. If not, the Ice Control Issue would not be timely noticed and thus not covered under the policy.
Significant to this article, the court surveyed case law addressing whether the phrase “related to” was ambiguous or unambiguous. The court acknowledged the historical conflict in the case law, citing eight decisions—five holding that the phrase was unambiguous, including Wendt and Gregory, and three holding that the phrase was ambiguous. The court then found that the phrase “related to” was unambiguous, ascribing to it the Webster’s Dictionary definition of “connected by reason of an established or discoverable relation.”
The court found that the “design errors are different in the critical and dispositive ways [discussed in detail in the opinion],” and thus the Ice Control and Steel Girt Tolerance issues were “unrelated” for coverage purposes.
The split in the case law interpreting “related to” language in professional-liability policies continues to the present. In evaluating coverage for professional-liability claims, insurers and policyholders should determine at the earliest stage whether the relevant jurisdiction has ruled that the phrase “related to” is ambiguous. Once that determination is made, insurers and policyholders can more accurately evaluate and argue coverage issues, including disputes about available policy limits, and whether multiple claims or suits fall within the policy period triggering a duty to defend the insured under the policy.
Keywords: professional liability litigation, professional liability policies; related acts
Kenneth L. Baker is counsel with Wilson Elser in Orlando, Florida, and Carl J. Pernicone is a partner of Wilson Elser in New York, New York.