limits in play, in practice the insurance company may
have no true exposure, because its defense and indemnity obligations are unlikely ever to be triggered by
any of the claims due to their low individual severity.
Thus, asserting the existence of multiple SIRs, where
the insurance company faces no multiple-limits exposure, may allow the insurance company to admit that
coverage exists while avoiding any actual obligation to
defend or indemnify the policyholder.
Another key consideration is the extent to which the
claims can be distinguished on the basis of factual
differences. E&O policies are typically triggered by a
“claim” against the policyholder, often defined as a written demand for money or a lawsuit seeking damages
arising out of a “wrongful act.” In the event of multiple
claims, such policies often have interrelated acts clauses
deeming multiple claims arising out of the same wrongful act or “interrelated” wrongful acts as a single omnibus claim. A lthough the exact language differs from
policy to policy, the definition of “interrelated wrongful
acts” (sometimes called “related wrongful acts”) often
refers to logically or causally related wrongful acts or a
series of same, similar or related wrongful acts. When
an insurance company perceives an advantage in asserting that the policyholder must satisfy multiple SIRs,
it will be motivated to emphasize the factual and legal
differences between the claims, such that they are not
“related” or “similar” for purposes of the aggregation
clause. (Not surprisingly, insurance companies have
been known to make the exact opposite argument —
i.e., that differences between the claims are insubstantial
— when the parties are litigating the applicable limit of
insurance as opposed to the number of SIRs.)
There is a minefield of cases around the country deciding multiple SIR and multiple policy limits issues,
with conflicting results. For example, in Continential
Casualty Co. v. Wendt (11th Cir. 2000) 205 F.3d 1258,
the 11th Circuit Court of Appeals concluded that an
investment advisor’s various misrepresentations about
an investment to a series of clients were “related,” and
thus constituted a single wrongful act subject to a single
SIR and limit, because they were part of a course of
conduct “aimed at a single particular goal.” Id. at 1264.
However, in St. Paul Fire & Marine Ins. Co. v. Chong
(D. Kan. 1992) 787 F.Supp. 183, the district court found
that a defense attorney who negligently advised three
defendants in a single criminal matter to enter a guilty
plea had committed three separate wrongful acts for
purposes of coverage. Although his representation of
“
Never give up.
Insurance companies
sometimes take advantage
of the policyholder that is
unaccustomed to litigating
coverage issues...
”
the three individuals involved “highly similar factual
situations,” the court was persuaded they were not
“related” because the attorney had a “separate duty to
each client” and rendered “separate services” to each of
them. Id. at 188.
Other courts have approached this issue with an
eye toward public policy. In American Commerce
Ins. Brokers v. Minnesota Mutual Fire & Casualty
Co. (Minn. 1996) 551 N.W.2d 224, American Commerce, an insurance agency, sought coverage under
an employee dishonesty policy in connection with
a bookkeeper who embezzled more than $190,000
from the company in 155 separate acts over the
course of a year. She embezzled the money using two different methods — pocketing insurance
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VOLUME 12 | ISSUE 1
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