No Coverage for Lawsuit Alleging Same Circumstances Asserted in Email Received Prior to Policy Period

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The United States District Court for the Central District of California, applying Georgia law, has held that a claims-made policy did not provide coverage for an underlying lawsuit where the allegations in that lawsuit were first made in an email received by the insured prior to the start of the policy period. Peachstate Health Mgmt. v. Chubb Ins. Co., 2020 WL 8184143 (C.D. Cal. Nov. 24, 2020).

The insured operated a clinical laboratory and entered into a marketing services agreement with another company. Before the start of the relevant policy period, the marketing company’s president emailed the lab company to renegotiate the terms of the agreement and to complain of sexual assault, harassment, retaliation, and other misconduct allegedly committed by the lab company’s president. The claimant later filed a lawsuit against the insured and its president, asserting causes of action for assault and battery, sexual harassment, and retaliation. The insured sought coverage under its D&O policy, but the insurer declined coverage on the grounds that the email and the lawsuit were “related claims” first made at the time of the initial email, which was received by the insured before the policy incepted.

In the subsequent coverage action, the insured company argued that the email was neither a “claim” nor a “related claim” with the lawsuit because the email reflected negotiations between the two companies relating to their contact. The court disagreed. First, the court highlighted that the email stated that the allegations “need[ed] to be settled” in the “high seven figures” and thus constituted a written demand for relief (and a “claim” under the policy). Second, the court concluded that the email and the lawsuit were “related claims” under the policy because they arose from “related facts, circumstances or Wrongful Acts”—i.e., the allegations of sexual assault, harassment, and retaliation in the email were related to the claims for sexual assault, battery, and retaliation in the lawsuit. Because the insured received the email before the start of the policy period, the court concluded that the policy afforded no coverage for the related lawsuit.

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