EL PASO APPELLATE COURT AFFIRMS SUMMARY JUDGMENT IN INSURER’S FAVOR BASED ON “INTERRELATED ACTS” CLAUSE OF CLAIMS-MADE POLICY

El Paso Court of Appeals held last Thursday that even though a 2005 suit for which an insured demanded defense and indemnity was brought during the relevant coverage period, the insured was not entitled to coverage because the dispute arose four years earlier, an earlier lawsuit was filed, and the two cases were based on “interrelated acts.”  In Reeves County v. Houston Casualty Company, No. 08-09-00256-CV,

2011 WL 4062479 (Tex. App.—El Paso Sept. 14, 2011), Plaintiffs Reeves County and Sheriff Arnulfo Gomez were insured by Houston Casualty under a non-profit organization liability policy with coverage dates between December 2004 and December 2005.  In 2005, Reeves County and Gomez were sued by a bail bondsman for alleged civil rights violations, and presented the case to Houston Casualty for defense and indemnity.  Houston Casualty refused on the basis that the suit arose out of a 2001 dispute and was a continuation of litigation that pre-dated the policy and fell under the policy of another carrier.

The relevant policy provision stated that multiple claims arising out of the same act or interrelated acts would be deemed to have been asserted when the first such claim was made.  The claim against Reeves County and Gomez was brought by a set of plaintiffs who had also sued Reeves County and Gomez in 2001, a suit that the parties settled in 2002.  In the 2005 suit, the plaintiffs alleged that despite the 2002 settlement Gomez had continued a campaign of harassment of the plaintiffs and favoritism towards one of the plaintiffs’ competitors.  The court of appeals held the 2005 case bore more than a “slight or attenuated connection” with the previous suit and, as such, the acts alleged in each were interrelated.  This rendered the 2005 suit subject to the above policy exclusion, and the court affirmed the trial court judgment in Houston Casualty’s favor.  The Court did not reach Houston Casualty’s argument that the policy did not cover jail or detention facility operations or activities.