The Ninth Circuit Court of Appeals has ruled that two separate class-action lawsuits, filed during different policy periods by different plaintiffs in different forums (as well as under two different legal theories), are Interrelated Wrongful Acts and subject to one policy limit. WFS Financial, Inc. v. Progressive Casualty Insurance Company, Inc., No. 05-55854 (9th Cir. April 16, 2007).
The Insured, WFS, is an automobile financing company. The dispute with its insurer, Progressive, arose after WFS was named as a defendant in two class action lawsuits, both alleging that WFS discriminated against minority applicants by allowing independent automobile dealers to mark up interest rates based on subjective criteria. The two class actions were filed at different times, so WFS noticed them under two different policies, which were successive claims-made policies issued by Progressive to WFS.
The first class action was filed in federal court during the first policy period. The second class action was filed in state court during the second policy period. Both policies included a limitation on liability stating that “[c]laims based upon or arising out of the same Wrongful Act or Interrelated Wrongful Acts committed by one of more of the Insured Persons shall be considered a single Claim and only one Retention and Limit of Liability shall be applicable.” The court reasoned that the common basis for the suits was WFS’s alleged practice of permitting independent dealers to mark up WFS loans. Further, the harm alleged in the both class-action suits was causally related to the same claims. The two suits, therefore, did not present such an attenuated or unusual relationship to one another that a reasonable insured would not have expected the claims to be treated as a single claim under the policies, and the court held that they were interrelated wrongful acts and subject to one limit.
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