Eleventh Circuit Finds Claims-Made Policy’s “Correlating Claims” Provision Substantially Similar to “Related Claims” Provisions

In Datamaxx Applied Technologies Inc. v. Brown & Brown Inc., the Eleventh Circuit Court of Appeals affirmed the district court’s grant of summary judgment to the insurer, finding no merit in the insured’s argument that the analysis for construing a “correlating claims” provision differed substantially from the analysis in construing a “related claims” provision. In doing so, the Eleventh Circuit found that the insurer owed no duty to indemnify the insured for a claim that correlated with an earlier claim reported to a previous insurer and outside of the insurer’s policy period.

The underlying claim concerned a development and license agreement between the insured and a software provider to jointly develop, market, and sell an enhanced version of the insured’s already existing product using a code invented by the software provider. The agreement provided for the enhanced product to be marketed under a new, shared name. But when the insured cut out the software provider altogether by incorporating and using the code for an enhanced product under its own name — and not the agreed-upon shared name — the software provider filed suit. The insured tendered the claim to its insurer at the time, and the parties settled, releasing the then-insurer from any future related claims.

A few years later and unbeknownst to the software provider, the insured tried again, this time developing and marketing a different product that essentially mirrored the functionality of the initially infringing product while incorporating the software provider’s code without involving the software provider, leading the software provider to file another suit. When the insured tendered the claim this time, it had a new insurer. The insurer denied coverage on the grounds that the new suit correlated with the previously settled claim, which was brought prior to its policy period.

The claims-made policy stated that “all claims that correlate with an act will be deemed to have been made at the time the first of such claims is deemed to have been made” and that coverage does not apply to loss “in connection with any claim that correlates with an act, if such act also correlates with any claim deemed to have been made before the” policy period. Neither party argued that the word “correlate” was ambiguous. Instead, the insured argued that the policy language was exclusionary and improperly conflated with a typical related claims provision. The Eleventh Circuit found that the language was not exclusionary and was instead a prerequisite to coverage. And while the Eleventh Circuit acknowledged that the policy language was not the exact same as a related claims provision, as “correlates” is narrower than “relates,” the analysis remained the same in that the terms must still be interpreted according to their plain language. As such, because the dictionary provides that correlation only required a showing that acts and claims “tend to vary, be associated, or occur together in a way not expected on the basis of chance alone,” the court found that the claims correlate to each other. The insurer therefore had no duty to indemnify the insured because the claim correlated with a claim first made prior to the insurer’s policy period.