Legal Opinions - U.S. District Court, Maryland: August 25, 2008

Daily Record, The (Baltimore), Aug 25, 2008

Furthermore, extrinsic evidence clarified that the purpose of the subpoena and Texas Demand was to investigate potential violations of the Maryland Consumer Protection Act.

In conducting the deposition of Michael Croxon, President of Amerix, Phil Ziperman, Assistant Attorney General in the Maryland Consumer Protection Division, stated, "[t]his is an attorney general's investigation," and "[i]t's an investigation of the Amerix Corporation for potential violations of Maryland law, including the Consumer Protection Act."

A series of oral and written communications between counsel for Amerix and Mr. Ziperman also made clear that the subpoena was issued because "the Office of the Attorney General is concerned that certain business practices criticized by the United States Senate in the March 2004 report ... are still being practiced by Amerix."

Finally, nothing in the Policy defined "filed" to mean that the documents must contain a case or file number. The extent and specificity of the subpoena and Texas Demand indicated that the documents were issued to serve the function of an investigative order.

Therefore, the subpoena and the related Texas Demand were, or at the very least were equivalent to, the filing of an investigative order or similar document. Accordingly, the Maryland Administrative Subpoena and the Texas Civil Investigative Demand constituted a Claim for Wrongful Acts against Amerix as defined by the 06-07 E & O Policy.

COMMENTARY: Under Maryland law, the burden rests with the insurer to establish the applicability of a particular exclusion from coverage. Warfield-Dorsey, 66 F. Supp.2d at 685. ACE noted that Section V.A. of the 06-07 E & O Policy provided that "all Claims arising out of the same Wrongful Act or all Interrelated Wrongful Acts of the insureds shall be deemed to be one claim"

Wrongful acts are interrelated under the Policy if they "have as a common nexus any fact, circumstance, situation, event, transaction, cause or series of related facts, circumstances, situations, events, transactions or causes."

In general, courts have found claims to be interrelated when they have a common nexus of facts and arose out of the same occurrence of wrongful acts. See, e.g., Zunenshine v. Executive Risk Indemnity, Inc., No. 97 Civ. 5525 (MBM), 1998 WL 483475 at *5 (S.D.N.Y Aug. 17, 1998), aff'd, 182 F.2d 902, 1999 WL 464988 (2d Cir. 1999).

ACE argued that the Multi-State Claim arose from the same conduct at issue in the Jones action. See Jones v. Genus Credit Management Corp., et al. (JFM-04-136).

The Jones action was initiated on March 29, 2004, by four private citizens, individually and on behalf of others similarly situated. The Jones plaintiffs alleged violations of the Fair Debt Collection Practices Act, the Credit Repair Organizations Act, the Racketeer Influenced and Corrupt Organizations Act, the Telemarketing and Consumer Fraud and Abuse Act, the Maryland Consumer Protection Act (as well as similar statutes in other states), the Maryland Debt Management Services Act (as well as similar statutes in other states), common law breach of fiduciary duty, common law fraud and common law unjust enrichment.