Introduction ¹

As the saying goes, we cannot choose the family to whom we are related. But courts across the country regularly grapple with choosing whether multiple lawsuits and other insurance claims are indeed related, including most recently the federal District Court of Hawaii in the case of Great American Insurance Company v. Discovery Harbour Community Association, 2025 U.S. Dist., LEXIS 26654 (D. Haw. Feb. 3, 2025).

Why are provisions defining related claims or related wrongful acts important to the scope of insurance coverage? Policies that provide executive protection coverage, such as Directors & Officers Liability or other professional liability policies, are generally written on a claims-made basis. The event triggering an insurer’s obligations is the claim first made and reported against an insured during the policy period, not the timing of the act at issue. Claims-made policies effectively provide retroactive coverage for wrongful acts taking place before the policy period. On the other hand, occurrence policies cover an event that takes place during the policy period, triggering the insurer’s obligation. Occurrences do not necessarily produce claims or lawsuits right away. Thus, for a claims-made policy, the “relatedness” provisions can impact the number of claims at issue, when such claims are deemed made, and whether one or more separate policy limits or retentions apply.

Discovery Harbour

The Discovery Harbour case, decided in February 2025, involved an insurance coverage dispute between an insurer, Great American, and its policyholder, Discovery Harbour Community Association. Great American filed a motion for judgment on the pleadings, seeking a declaratory judgment that two underlying state court lawsuits against the Association were related and subject to a single policy limit. The Association opposed the motion, arguing that the two lawsuits were distinct and unrelated. 

Great American had issued two separate claims-made Non-Profit Organization Executive Protection Insurance Policies, which provided coverage only for claims initiated during the respective policy periods. The policies defined “related” claims as those involving the same wrongful acts or “Related Wrongful Acts,” i.e., acts “logically or causally connected by any common fact, circumstance, situation, transaction, casualty, event or decision.” Thus, the earlier policy applied to both if the lawsuits were related. If the lawsuits were unrelated, two separate policies could apply for the two separate policy periods. 

The two state court lawsuits were filed by South Point Investment Group, LLC (“SPIG”) against the Association in the same court, and challenged the existence of the Association and disputed the legitimacy of its governing documents — one filed in 2016, and one in 2018. Both lawsuits also involved five parcels of land owned by SPIG within the Discovery Harbour subdivision.

The 2016 lawsuit sought declaratory relief regarding the Association and its members, whereas the 2018 lawsuit sought tort damages for misrepresentations made to third parties, allegedly intended to interfere with SPIG’s property rights. In addition, the 2018 lawsuit added insured individuals as defendants for the first time (none were named in the 2016 lawsuit).

In seeking coverage under two separate policy years, the Association argued that the lawsuit had been litigated independently for many years. The Association also argued that the evidence in the lawsuits was not temporally related, because the 2016 lawsuit related to Association formation issues in the ‘70s and ‘80s, whereas the 2018 lawsuit alleged misrepresentations only during the three years before the 2018 lawsuit was filed. The Association further argued that its answer in the coverage litigation generally denied much of Great American’s relatedness allegations and, taken as true, provided factual challenges to the relatedness allegations. The Association also argued that the 2018 lawsuit added insured individuals as defendants, none of whom were named in the 2016 lawsuit.

However, the court viewed established case law evaluating whether two or more claims are related as hinging more on the similarities of the allegations, not their differences. Although the timeframes of the two lawsuits differed, the court viewed them as “temporally and factually connected” because they both arose from the Association’s legal authority and formation, and involved the same plaintiff (SPIG) and the same defendant (Association). The disputes also centered on the same five parcels of land owned by SPIG and related to the Association’s covenants. The fact that the two lawsuits were litigated independently was inconsequential, and the lawsuits were viewed as related despite seeking different remedies. The court rejected the insured’s argument that the lawsuits shared only “superficial similarities,” finding at least a dozen identical allegations of wrongful acts and stating that “the existence of one common wrongful act is sufficient to establish relatedness.”

The court found that Great American's motion should be granted because the lawsuits were related and therefore constituted a single claim subject only to the earlier policy and its single policy limit, despite the second lawsuit adding new insured persons not named in the prior lawsuit and new causes of action not previously alleged in the prior lawsuit.

Comparison and Comment 

Policies contain varying “relatedness” language, whether applicable to related claims or related wrongful acts, and the courts have applied different tests to interpret that language, generally requiring a strictly fact-based analysis. For example, the seminal case of Bay Cities Paving & Grading, Inc. v. Lawyers’ Mut. Ins. Co., 855 P.2d 1263 (Cal. 1993) involved an attorney’s failure to foreclose a mechanics lien and serve a stop notice on a construction project’s lenders. Despite what appeared to be different types of claims against various parties, the court found the claims were related in a number of ways. They arose out of the same transaction, were committed by the same attorney, and resulted in the same injury.

In contrast, in Vito v. RSUI Indem. Co., 435 F. Supp. 3d 660 (E.D. Pa. 2020), a shareholder derivative suit was filed in 2018 against the insured, Unequal Technologies, and its CEO. The insurer denied coverage, contending that the shareholder derivative lawsuit was interrelated with a February 2015 shareholder demand and a June 2016 shareholder derivative lawsuit (which was a prior demand and suit by a different plaintiff, but also alleged that the CEO disregarded corporate formalities and engaged in self-dealing). The policy broadly defined related claims as all claims “based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving the same or related facts, circumstances, situations, transactions or events, or the same or related series of facts, circumstances, situations, transactions or events.” However, the Judge denied the insurer’s arguments that the lawsuits were related, noting that the parties were different, the relief sought was different, and the latter suit “goes beyond” the earlier suit and had one but not all related causes of action.

In the case of ADI Worldlink, LLC v. RSUI Indem. Co., 2017 WL 4112112 (E.D. Tex. Sept. 18, 2017), the policy provided a similar “relatedness” standard for all claims, based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving the same or related facts, circumstances.” The court considered multiple arbitration claims by employees claiming they were “exempt” and entitled to overtime pay, and thus involved different claimants, but the same wrongful conduct and the same injury. The court found the proceedings were related, and because the insured gave late notice of the first claim, it was not entitled to coverage for the subsequent related claims.

Including the latest decision in Discovery Harbour, it is clear that “relatedness” determinations hinge on the exact policy language and facts, and considerations may include but are not limited to the same or different parties, the same or different acts or omissions, and the same or different injury or damages. 

^{1 James K. Thurston and Thomas M. Spitaletto cochair Wilson Elser’s D&O/E&O Insurance Subcommittee. James successfully briefed and argued the recent case of Great American Insurance Company v. Discovery Harbour Community Association, 2025 U.S. Dist. LEXIS 26654 (D. Haw. Feb. 3, 2025), as discussed herein.}