Insurance: Companies squabble over who must defend underlying lawsuit

Where two insurance companies argued who must defend a lawsuit filed by a testing laboratory, the court resolved the dispute.

Background

Avertest LLC, also known as Averhealth, is a company that conducts laboratory testing of biological samples, including hair and urine, for the presence of, among other substances, illegal drugs like methamphetamine and cocaine. Columbia Casualty Company provided professional liability insurance coverage for Averhealth on a claims-made basis between Dec. 17, 2013, and May 1, 2022. Navigators Specialty Insurance Company provided professional liability insurance coverage for Averhealth on a claims-made basis from May 1, 2022, to May 1, 2023.

In February 2021, Justin Gonzalez and Darrell E. Tullock Jr. sued Averhealth. . Columbia paid for Averhealth’s defense in the Gonzalez litigation, which was ultimately settled on an individual basis. The Gonzalez action was dismissed on Feb. 23, 2022, without ever being certified as a class action.

On August 22, 2022, nearly four months after the Navigators policy went into effect, plaintiffs represented by the same lawyers who had filed the Gonzalez complaint sued Averhealth. Columbia and Navigators contest who should provide coverage for the Folger suit. Pending before the court are cross motions for summary judgment.

Related claim

On a macro level, the Gonzalez and Foulger complaints contain several similarities but also have significant differences. The allegations are not sufficiently similar to constitute related claims under the Navigators and Columbia policies. Because of all these factual and legal differences, the Gonzalez and Foulger lawsuits are not the same or related claims, which means that the Foulger litigation qualifies as a claim covered by the Navigators policy.

Exclusion

            Navigators argues that it is not obligated to defend Averhealth against

Foulger because of an exclusion the Navigators policy, which excludes coverage for “any Claim that was reported to, or covered under, another program of insurance prior to this policy.” Navigators bases this argument on Averhealth’s reporting a potential new claim “to [Columbia] under a prior insurance program.”

This argument fails for several reasons, not least of which is that the Gonzalez and Foulger lawsuits did not constitute the same claim. Because the court has concluded that the Foulger claim is not sufficiently related to the Gonzalez claim, this exclusion does not provide a basis for excusing Navigators from its obligation to defend Averhealth against the Foulger lawsuit.

Notice

Count Three seeks a declaratory judgment that Columbia is legally obligated to reimburse Navigators for amounts Navigators has spent and will spend defending Averhealth against Foulger. Resolution of Count Three requires deciding whether Foulger is covered by the Columbia policy.

Columbia argues that it has no duty to defend Averhealth because the Foulger claim was not made until after the Columbia policy period expired. Because the Foulger complaint was filed nearly four months after the Columbia policy ended, “by definition” the lawsuit did not occur during the “coverage relationship,” which is a condition precedent to Averhealth receiving coverage under the policy.

Moreover, because the court has found that the Foulger complaint did not constitute the same or related claim as the Gonzalez litigation, Columbia has no obligation to provide coverage. Accordingly, the Navigators policy covers the Foulger litigation up to its policy limits, and Columbia has no obligation to defend Averhealth or to reimburse Navigators.

Navigators’ motion for summary judgment denied. Columbia’s and Averhealth’s cross-motions for summary judgment granted.

Navigators Specialty Insurance Company v. Avertest LLC, Case No. 1:24-cv-932, July 18, 2025. EDVA at Alexandria (Brinkema). VLW 025-3-298. 17 pp.