Related claims in liability insurance:

Liability Insurance  –

In respect of claims made liability insurances such as Directors & Officers (D&O) or Professional Indemnity (PI) there will be provisions concerning related claims or circumstances.
Explore the claims in liability insurance, delving into provisions that aggregate events, prevent multiple claims, and ensure coverage clarity across policies like Directors & Officers (D&O) or Professional Indemnity (PI)

A typical clause is as below:

“If notice of an insured event  or circumstance is notified as required by this policy, then any subsequent insured event or circumstance, that constitutes a single claim with that insured event  or circumstance, shall be deemed to have been first made at the same time that the claim was first made, other insured event first arose or notice of circumstance was first given and reported to the Insurer on the date the required notices were first provided.”

In the above clause, single claim is defined as below:

“Single claim means any one or more insured events to the extent that such insured events   arise out of, are based upon, or are attributable to continuous, repeated or related acts or omissions (including wrongful acts) whether or not committed by more than one insured and regardless of whether directed to or affecting one or more person or entity or involving the same or different claimants or insureds  or legal causes of action.”

Why are these provisions required?

This clause helps the insurer to aggregate events that are connected to each other substantially rather than being claimed separately. Otherwise the policy will be subject to multiple claims from related events.

It is also possible that events may be spread over the years, falling in multiple policies raising the question of under which policy the coverage exists and consequently what coverage and limit would apply. Policy limits, deductibles and coverage can change every year upon renewal.

By clarifying that the aggregated event or single claim would be reckoned to have happened, at the time the first of the occurrence happened and/or reported, the above confusion can be avoided.

The clause puts emphasis on the subject matter of dispute or action. Since the policies concerned are multiple insured policies, which insured has committed the act or against whom the action has been initiated or who it is affecting is not material. Otherwise, multiple claims from the same cause of action involving different insureds can become different claims.

The term “related” is also not straightforward and various interpretations exist:

One interpretation is that the events should be identical in all respects for them to be related. This means the claim should arise out of the same subject and that facts, circumstances, events should be exactly similar.

Another interpretation is that the events should be meaningfully linked to each other. The relatedness should not be tangential or superficial which the insurer is drawing to take advantage of the provision.

The legal standard applied for “relatedness” will depend on the jurisdiction.