Insurer’s “Premonitions” Accurate in Claim Involving Psychic Group: No Coverage for Second Suit Alleging Same Wrongful Acts as Suit Filed Prior to Policy Inception

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In Zodiac Group, Inc. v. Axis Surplus Ins. Co., _____ Fed. Appx. _____, 2013 WL 5718439 (11th Cir. (Fla.) Oct. 22, 2013), the United States Court of Appeals for the Eleventh Circuit considered whether facts alleged in an underlying complaint filed in federal court, constituted the “Same Wrongful Act” under a professional liability policy as facts that were alleged in a prior complaint filed in Florida state court.  The Eleventh Circuit determined that the federal court complaint was based on the Same Wrongful Acts as the state court complaint, and thus there was no coverage under the policy because the state court complaint was filed prior to the inception of the policy.

The Zodiac Group was insured under consecutive, annual claims-made professional liability policies issued by Axis Surplus Insurance Company, beginning with the policy period October 1, 2008 to October 1, 2009.  In November 2001, the Zodiac Group entered into an agreement wherein Linda Georgian, a renowned psychic and co-host of the Psychic Friends Network, agreed to endorse the Zodiac Group’s services.  The endorsement agreement ended in March 2007.  In April 2008, Georgian sued the Zodiac group in Florida state court, alleging that the Zodiac Group improperly used Georgian’s name and likeness to imply that Georgian continued to endorse its services despite the termination of the endorsement agreement.  The state court suit was dismissed in November of 2009 for lack of prosecution.  Georgian then sued the Zodiac Group and its owners in federal court in January 2010.  Georgian’s federal court complaint contained allegations similar to those in her state court complaint.

Zodiac Group tendered the federal court complaint to Axis for coverage and defense, but Axis declined the tender on the basis that the claims in the complaint were “first made” before the October 2008 policy incepted.  The Eleventh Circuit agreed with Axis and rejected the Zodiac Group’s argument that the federal court complaint alleged separate wrongful acts because it named new defendants.  Instead, the court concluded that, because the policy language treated all wrongful acts related by common facts, circumstances, transactions, events, and/or decisions as one “Wrongful Act” without limitation with respect to the actor, the prior state court complaint and the later federal court complaint alleged the same single Wrongful Act, and the claim was first made at the time of the state court complaint, prior to inception of the first policy.