On January 18, 2017, the First Department emphasized an important lesson in evaluating coverage: policy exclusions may apply based on the facts of the underlying claim, not on the specific causes of action pled.

In Lifelock Inc. v. Certain Underwriters at Lloyd’s, Lifelock Inc. provided anti-identity theft services, and was sued in a series of cases filed in 2008 stemming from allegedly false, misleading, or deceptive advertisements published as early as 2005. Consumer class actions followed on the heels of an FCC enforcement action, and were ultimately consolidated into one action.  Upon receipt of notice of claims, Certain Underwriters at Lloyd’s of London denied coverage citing two exclusions barring coverage for (1) claims that commenced prior to the 2008 retroactive date of the policy, and (2) claims arising from unfair trade practices.  Lifelock did not file a declaratory judgment action challenging the denial of coverage until 2013, when a structured settlement was reached in the consolidated class actions.

Lloyd’s moved to dismiss the action based on the exclusions. In granting the motion, the court applied a “but for” test to the exclusions, and held they applied.  The court found that though each consumer may have signed up for Lifelock’s services at varying points between 2005 and 2008, they did so because of deceptive advertisements that were published prior to 2008.  Further, the allegation of deceptive advertisement underpinned each and every cause of action.  Accordingly, Lloyd’s argued, and the Court ultimately held that the underlying facts, and therefore the claims, fell squarely within both exclusions.

Often, a plaintiff may plead numerous causes of action that, individually, have different elements and require different standards of proof. From a coverage perspective in New York, though, the gravamen of the alleged injury is of critical importance.

Thanks to Chris Soverow for his contribution to this post.