Eleventh Circuit Holds that Claims Pre-Date Policy, Sidesteps Rescission Issue

The United States Court of Appeals for the Eleventh Circuit, applying Florida law, has held that an insurer did not need to cover underlying litigation instituted against its insured during the policy period because related pre-suit demands constituted “claims” made before the policy incepted. Certain Underwriters at Lloyds, London v. Anchor Ins. Holdings, Inc., 2024 WL 4836693 (11th Cir. Nov. 20, 2024). The appellate court did not reach the question of whether the insurer had a right to rescind the policy, which was the basis for the trial court’s ruling.

In October 2018, the insured holding company applied for a directors and officers insurance policy. The application required the company to report any pending “claim[s],” and knowledge of any act, error, or omission that could give rise to a claim. After the policy issued, the insurer sued the company for rescission of the policy based on the company’s purported failure to report in its application certain pre-suit demands (and acts that could give rise to a claim). The trial court determined that the company had actual knowledge of potential claims against it; that the insurer was therefore deprived of a meaningful opportunity to underwrite its exposure; and that the insurer had the right to rescind the policy.

On appeal, although the appellate court also held in favor of the insurer, it did not address the rescission issue. Instead, it highlighted the “claims-made” nature of the policy, meaning that the policy afforded coverage only if a claim was first made against an insured during the policy period. The court concluded that the pre-suit demands constituted claims, and because those claims “came long before the beginning of the policy period,” the insurer did not need to provide coverage for the underlying litigation. Because it ruled on different grounds than the trial court, the appellate court remanded the case for further proceedings consistent with its opinion.