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Multiple Causes of Action Does Not Equal Multiple Claims

August 8, 2017

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Though a claimant might allege multiple causes of action, where those causes arise out of the same incident it generally will be considered one claim.
In <a href="">Westport Ins. Corp. v. Peter G. Mylonas</a><em>, </em>the underlying plaintiff sued Mylonas for professional malpractice.  The plaintiff alleged he retained Mylonas to form his corporation and provide related advice, but that Mylonas negligently transferred stock without shareholder consent, causing the plaintiff to lose his entire business.  The complaint contained causes of action sounding in negligence, breach of fiduciary duties, and breach of contract.
Westport Insurance Company issued a professional liability insurance policy and provided Mylonas’ defense in the underlying action.  The policy limited coverage to $500,000 per claim, and to $1,000,000 in the aggregate.  Defense costs counted towards the limits.  Westport initiated the coverage action to confirm that the underlying suit constituted a single claim.  Westport incurred defense costs of $420,000, and the verdict reached against Mylonas was $525,000.
The Court of Appeals found that where “claim” is defined as “a demand made upon any insured for loss…including, but not limited to, service of suit” and that “two or more “claims arising out of a single wrongful act …shall be a single claim,” there was no ambiguity but that the single lawsuit constituted a single claim, thus limiting Westport’s coverage obligations to $500,000.  The Court was clear that no amount of artful pleading to include multiple causes of action could create additional ‘claims,’ and also warned insureds that there would be no advantage to filing multiple suits in an effort to skirt the articulated rule because where the suits are “related” they still constitute a single claim.
This ruling is significant because it provides clarity with respect to an oft-litigated issue, and it provides a practical warning against those that would attempt to shoehorn multiple claims in search of higher coverage limits out of a single wrongful action or loss.
Thanks to Vivian Turetsky for her contribution to this post.


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