Opinion ID: 524326
Heading Depth: 1
Heading Rank: 2

Heading: were the claims related?

Text: 17 Various claims were made against the insured, GG & S, concerning the videotape offering. The purchasers' claims (originally filed separately but later consolidated into a class) alleged that GG & S committed securities fraud, common law fraud, and RICO violations. These claims were based upon the opinion letter's alleged misstatements of the tax consequences of buying the videotapes. PBC's cross-claim alleged that if the allegations made in claims brought against PBC were true--that the videotapes were in fact securities, and that the tax benefits advertised in the opinion letter were not available to the videotape buyers--GG & S was negligent in the preparation of the opinion letter. 18 The district court first held that the individual claims of the members of the class constituted a single claim under the clause that [t]wo or more claims arising out of a single act, error, [or] omission ... shall be treated as a single claim. It is unclear whether Mr. Gregory objects to this conclusion, but since the individual buyers' claims all arose from the same conduct of Mr. Gilbert, the district court was undoubtedly correct. 19 It is easy to decide that all the class claims arising from Mr. Gilbert's mistaken advice on the investment program's tax advantages are treated as a single claim under Paragraph IV of the policy, and therefore are subject to the $500,000 limit; the more substantial question is whether the class claims and the PBC claim (which arose out of Mr. Gilbert's error with respect to the status of the videotape promotion as a security as well as his error concerning tax advantages) are to be treated as a single claim, so that the $500,000 limit is applicable to all. 20 The district court noted that a policy is not made ambiguous simply because the parties disagree on how it applies to a given situation. It found the policy language to be unambiguous, and that it should be given its plain and ordinary meaning. Judge Dillin went on: 21 Examining the three documents drafted by Gilbert in connection with the 1980 PBC offering--the tax and security opinion letter, the promissory note, and the production service agreement, the Court finds there is no question that these documents and Gilbert's acts in drafting them are related. The opinion letter repeatedly refers to the other two documents, and it is clear the three are interdependent components of a single plan. Moreover, the Court finds that Gilbert's advising PBC of the tax and security law consequences of its offering, specifically his alleged failure to tell PBC that its offering was a security and should be registered, was also a related act, by any plain and ordinary meaning of related. Gilbert's opinion letter is but a written version of his advice that, structured this way, the offering was not a security. 22 The District Court considered the principal case relied on by Mr. Gregory, Arizona Property & Casualty Ins. Guar. Fund v. Helme, 153 Ariz. 129, 735 P.2d 451 (1987), where the Arizona Supreme Court construed the phrase series of related incidents, acts or omissions in a professional liability insurance policy. The court in Helme referred to a dictionary definition of related which defined the word as meaning either causally or logically connected. The court considered the logical connection portion of the definition to be too subjective, and limited the definition to causal connections only. It went on to hold that because there was no causal connection between the negligent acts of two physicians who examined the plaintiff (in the sense that one error did not cause the other), the plaintiff's claims against each physician did not arise out of a series of related acts under the multiple claims provision of the policy. 153 Ariz. at 134-35, 735 P.2d at 456-58. Judge Dillin held that in this case, unlike Helme, the acts giving rise to the claims could be considered causally connected, since they were performed by a single individual, Mr. Gilbert, and involved legal advice and drafting of three documents all of which flowed from his structuring the deal to try to achieve certain tax and security consequences. Since the district court found the underlying acts to be related, it held that the policy limitation on multiple claims applied, and that Home Insurance's liability was limited to the per claim amount of $500,000. 23 Our reading of Helme convinces us that the Arizona Supreme Court intended causally connected to have a more narrow meaning than did Judge Dillin; it appears Helme requires a causal connection in the sense that one error caused the other, not that the opportunity to commit the errors arose out of the same cause. Nevertheless, we agree with Judge Dillin's conclusion that the different aspects of Mr. Gilbert's work in the videotape offering (the tax and securities advice he gave to PBC, and his drafting of the promissory note, production service agreement and opinion letter embodying that advice) were all related in any meaningful sense of the term. 4 24 We agree with the Helme court that the common understanding of the word related covers a very broad range of connections, both causal and logical. 5 However, we don't think the rule requiring insurance policies to be construed against the party who chose the language 6 requires such a drastic restriction of the natural scope of the definition of the word related. Parties are generally free to include language of their choice in contracts, and courts should refrain from rewriting them. E.g., Evans v. National Life Accident Ins. Co., 467 N.E.2d 1216, 1219 (Ind.App.1984). At some point, of course, a logical connection may be too tenuous reasonably to be called a relationship, and the rule of restrictive reading of broad language would come into play. The facts of this case, though, as concisely explained by Judge Dillin, comfortably fit within the commonly accepted definition of the concept. 25 The district court was correct in deciding that under Home Insurance's insurance policy the claim of Producer's Brokerage Co., Inc. was required to be treated in combination with the claims of the Gregory class as a single claim. Accordingly, the $500,000 per claim limit of liability applies for the purpose of the Settlement Agreement between the parties. The judgment of the district court is AFFIRMED.