Fourth Circuit Broadly Construed “Related Claims” Provision
By David A. Gauntlett*
Introduction
In insurance coverage litigation, one of the most consequential questions a court may face is deceptively simple: how many claims are at issue? The answer can dramatically alter the financial outcome of a dispute between an insurer and a policyholder. When courts determine that multiple claims or occurrences exist, the result may be the application of multiple policy limits, potentially increasing the amount of coverage available to the insured. Conversely, multiple claims may also trigger multiple deductibles or retentions, reducing the net recovery. If a court instead concludes that a dispute involves a single claim, all alleged wrongdoing may be compressed into one policy limit and require only one deductible, which may significantly constrain the insured’s recovery while also limiting the insurer’s exposure.
Given these high stakes, it is unsurprising that disputes over the number of claims frequently arise in complex litigation, particularly in cases involving corporate governance, securities violations, or long-running regulatory investigations. In these situations, multiple lawsuits, investigations, or enforcement actions may arise from the same underlying conduct but unfold across different time periods and policy years. Determining whether those actions constitute separate claims or a single claim can therefore be difficult. A January 20 decision by the U.S. Court of Appeals for the Fourth Circuit recently adopted a “plain language” approach to the issue that failed to account for the insured’s reasonable expectations, the more appropriate standard for adjudicating any limitation on coverage.
Importance of Claim Determination in Coverage Analysis
The determination of how many claims exist within a given dispute is central to the operation of many insurance policies, especially Directors & Officers (“D&O”) liability policies. These policies are designed to protect corporate executives and organizations from financial losses associated with lawsuits alleging mismanagement, breaches of fiduciary duty, or securities law violations. Because these types of claims often arise from complex business decisions and may lead to multiple related lawsuits, D&O policies typically contain specific provisions governing how claims are counted.
Most D&O policies establish both a per-claim limit of liability and an aggregate limit for all claims made during the policy period. The per-claim limit caps the amount the insurer will pay for any single claim, while the aggregate limit caps the total amount payable for all claims combined during the policy term. Determining whether a dispute involves one claim or several can therefore have enormous financial implications.
In addition to these limits, policies often require policyholders to satisfy a retention or deductible for each claim before the insurer’s obligations begin. When multiple claims are deemed to exist, the insured may be responsible for paying multiple deductibles, which can significantly reduce the value of the coverage. On the other hand, if a court treats multiple legal actions as a single claim, the insured may only need to satisfy one retention.
To address these complexities, insurers frequently include “related claims” provisions in D&O policies. These provisions typically state that claims arising out of the same or related facts, circumstances, or wrongful acts will be treated as a single claim. Closely related are “interrelated wrongful acts” provisions, which define when separate allegations of misconduct should be considered part of the same course of conduct.
Together, these provisions create a framework for addressing disputes that span multiple lawsuits or investigations. For example, a company may face a shareholder class action alleging financial misrepresentations, followed by a regulatory investigation or enforcement action based on similar allegations. If these matters are deemed related, they may be treated as a single claim that relates back to the earliest policy period in which the misconduct was alleged. If they are considered unrelated, each action may trigger separate coverage under different policies.
Because these provisions can significantly affect both coverage limits and deductibles, disputes over their interpretation frequently arise in coverage litigation. Insurers and policyholders often advance competing interpretations of the same policy language, each attempting to maximize their respective financial positions.
Challenges in Determining Relatedness
Despite the widespread use of related claims provisions, courts have struggled to develop consistent standards for determining when claims are sufficiently connected to be treated as one. Different jurisdictions have adopted different approaches, and in many cases these approaches have developed independently of the specific language contained in the insurance policy at issue.
Some courts have adopted broad “factual nexus” tests, examining whether claims share a sufficient factual connection to be considered related. Under this approach, claims may be deemed related if they arise from a common set of underlying facts or events, even if they involve different legal theories or parties. Other courts have applied more restrictive standards, such as requiring claims to be “fundamentally identical” before they are treated as a single claim.
More recently, courts have experimented with other formulations, such as asking whether claims share a “meaningful linkage” or logical connection. Although these tests attempt to provide guidance, they often introduce additional complexity because their application may depend heavily on the specific facts of a case.
The result is a patchwork of standards that can produce inconsistent outcomes. Two courts examining similar policy language and similar allegations may reach different conclusions simply because they apply different judicial tests. This lack of uniformity can make it difficult for insurers and policyholders to predict how courts will interpret related claims provisions.
Complicating matters further, the incentives of the parties may shift depending on the context of a particular dispute. An insured may argue that claims are unrelated in order to access multiple policy limits across several policy periods. In a different situation, the same insured may argue that claims are related to avoid paying multiple deductibles. Insurers may likewise advance inconsistent positions depending on whether they seek to limit liability or enforce multiple retentions.
These shifting incentives can lead to outcome-driven arguments that focus less on the policy language and more on achieving a favorable financial result in the specific case at hand. Scholars have observed that the variety of judicial approaches in this area makes it difficult to formulate a coherent theory of relatedness. When courts rely heavily on judge-made tests rather than the language of the policy itself, coverage litigation can become unpredictable and heavily dependent on jurisdictional differences.
Fourth Circuit’s Approach Ignores Better Reasoning Focused on Insured’s Expectations
In Navigators Ins. Co. v. Under Armour, Inc.[1] the case arose from a series of investor lawsuits and a subsequent enforcement action by the U.S. Securities and Exchange Commission. These proceedings alleged that Under Armour made misleading statements about its financial performance and business practices.
At the time of these events, Under Armour was insured under successive D&O policies issued by multiple insurers. Each policy provided an aggregate liability limit of $100 million per claim. The policies also contained a related claims provision stating that all claims arising out of the same or related facts, circumstances, or wrongful acts—and that were logically or causally connected—would be treated as a single claim for purposes of limits and retentions. If the actions were treated as separate claims, the company could potentially access additional layers of coverage across multiple policy periods, thereby increasing the total amount of available insurance.
The Fourth Circuit panel ultimately agreed with the insurers that the claims were related because the lawsuits and enforcement action were all based on the same alleged misrepresentations regarding Under Armour’s financial performance. The court stated that the proper analysis begins with the plain language of the insurance contract. Rather than relying on broader judicial tests or subjective expectations, the court focused on the meaning of the policy’s key terms—particularly the requirement that related claims be “logically or causally related.”
This ignored the evidence to the contrary that the district court found persuasive. Under Armor was successful in the initial trial, highlighting differences in the parties involved, the timing of the proceedings, and the legal mechanisms at work. By rejecting these arguments, the Fourth Circuit deviated from the recent trend of courts embracing policyholder-friendly constructions in D&O cases.[2]
Conclusion
The Fourth Circuit’s decision in the Under Armour litigation illustrates the result any policyholder can anticipate when courts fail to embrace the settled tenets of insurance law that dictate constructions should favor the insured so long as the construction is reasonable. Judges are often quick to accept insurer arguments that focus on simple exclusions and other limiting provisions. By contrast, arguments in favor of coverage rely upon a foundation of coverage case law with which very few judges, even at the appellate level, have any familiarity. This is why it is critical to secure veteran coverage counsel that has experience educating judges in these foreign concepts.
*David A. Gauntlett is a principal of Gauntlett Law and represents policyholders in insurance coverage disputes regarding intellectual property, antitrust, and business tort claims, as well as in the underlying actions. Mr. Gauntlett can be reached at (949) 514-5662 or dag@gauntlettlaw.com. For more information, visit Gauntlett Law at www.gauntlettlaw.com.
[1] Navigators Ins. Co. v. Under Armour, Inc., 165 F.4th 171 (4th Cir. (Md.) 2026).
[2] See David A. Gauntlett, New Case Continues Trend Determining D&O Policies Offer Broad Coverage, https://www.gauntlettlaw.com/blogs/new-case-continues-trend-determining-dampo-policies-offer-broad-coverage (Dec. 12, 2024).