4th Circ. D&O Ruling Shows Why Textual Policy Args Are Best

Law360
February 19, 2026

In litigated claims, courts can lose their footing when it comes to determining the number of claims or occurrences at issue. The stakes are high. If there are multiple claims or occurrences, it could multiply available limits, maximizing the insured's recovery. Or, conversely, it could multiply the number of per-claim deductibles the insured must satisfy, limiting recovery. If there is a single claim, it can compress exposure into a single limit or dictate that the insured need only satisfy a single deductible.

A Jan. 20 decision from the U.S. Court of Appeals for the Fourth Circuit involving Under Armour's investor litigation is a welcome reminder that no matter the amount in controversy or the complexity of the disputed factual issues, an insurance coverage analysis begins and ends with the text of the policy at issue. Rather than tailoring outcomes to maximize coverage, the court laced its analysis to the policy's plain language — particularly the "interrelated wrongful acts" provision — ensuring the same rules apply to limits and deductibles alike. It is a reminder to both insurers and policyholders to "protect this house" by anchoring arguments in the contract's language, not in outcome-oriented impulses.

Navigators Insurance Co. v. Under Armour Inc. involved a dispute over a directors and officers liability policy's related claims provision. D&O policies typically include a per-claim limit of liability and an aggregate limit for all claims. A related claims provision combines multiple claims into a single policy period when their underlying factual allegations overlap. Most D&O policies also have interrelated wrongful acts provisions that define a related claim.

Together, these provisions create the framework for determining whether directors and officers can seek separate coverage for investigations or lawsuits spanning multiple years, or whether the claims relate back to the same facts and fall under the single coverage policy and limits in effect at that time.

Given their significance, related claims provisions frequently cause disputes. Sometimes, an insured seeks to escape a cap limiting liability by arguing that multiple claims are unrelated (and vice versa for the insurer); other times, an insurer argues that multiple claims are unrelated to apply multiple deductibles (and vice versa for the insured).

Further muddying these waters, jurisdictions have created their own distinct tests to measure relatedness, regardless of policy-specific language. For example, in the 2009 decision in Quanta Lines v. Investors Capital Corp., the U.S. District Court for the Southern District of New York looked at whether claims have a "sufficient factual nexus" to determine relatedness.[1] And, with last year's decision in In re: Alexion Pharmacies Inc., the Delaware Supreme Court recently replaced its "fundamentally identical" standard[2] with a "meaningful linkage" test.[3]

Because "cases are constantly adopting different legal theories depending on the potential outcomes," developing a coherent theory on these issues "is somewhat like the proverbial task of nailing jello to a wall," as termed by Tung Yin in a California Law Review article.[4] Policyholders and insurers alike face incentives to take unprincipled, short-sighted positions to achieve their desired outcome in a specific case. This temptation, if indulged, risks haunting a party when its desired ends change. Similarly, case reporters are full of seemingly inconsistent applications of relatedness, with outcomes often depending on factors such as the jurisdiction where the dispute is pending, the type of insurance coverage at issue, common law adaptations of various policy provisions, the perceived subjective expectations of the parties, and, no doubt, outcome-oriented sympathies. What is coverage counsel to do?

With that context, the Fourth Circuit's Under Armour decision feels like a breath of fresh air.[5] There, the popular athletic apparel company faced investor suits and a subsequent U.S. Securities and Exchange Commission enforcement action alleging a series of misstatements about its finances.[6]

Under Armour was insured under successive D&O policies, with each providing an aggregate liability limit totaling $100 million per claim.[7] The policies deemed all claims that "arise out of the same or related facts, circumstances, or Wrongful Act" and that are "logically or causally related" to be a single claim for limits and retention purposes.[8]

Motivated by a desire not to be capped at a single set of policy limits, Under Armour argued that the shareholder litigation and government enforcement actions were separate claims, entitling it to a fresh $100 million for each.[9] The insurers maintained the alleged misstatements shared a common thread — interrelated wrongful acts concerning the same financial performance — and were therefore one claim subject to a single $100 million cap.[10]

Reversing the U.S. District Court for the District of Maryland, the Fourth Circuit sided with the policy text and the insurer, finding that because the suits were tied together by logically and causally related conduct, the related claims provision compressed them into a single claim.[11]

By adhering to a textual approach to policy interpretation, the court did not have to perform a jurisdictional survey or compare the merits of judge-created tests divorced from the policy's text. It did not need to characterize differing rules of various jurisdictions, nor did it have to speculate about the parties' subjective intentions or reasonable expectations. Instead, the court's analysis began exactly where it ought to — with the plain text of the policy — and did not stray beyond the text when other interpretation methods were not required.

For good measure, the court turned to a dictionary to confirm that "two things are logically related when they are reasonably or rationally connected to or associated with one another."[12] Armed with this definition, the court concluded that the two actions over the same misrepresentations were "logically or causally related" per the policy's plain text, even though they were two actions spanning separate policy periods.[13] Easy-peasy.

Contrast the Fourth Circuit's approach with the district court from which the appeal arose. Although the lower court's opinion began by stating a court should "analyze the plain language of [an insurance] contract," it veered from that North Star.[14]

Instead, the fact that "a relationship between two claims ... might be so attenuated or unusual that an objectively reasonable insured could not have expected they would be treated as a single claim" moved the trial court.[15] The Fourth Circuit corrected the district court's error, explaining that proper contract construction concerns the objective meaning of the words. Notably absent was any mention of the insured's subjective expectation of coverage.

The Fourth Circuit's analysis in Under Armour is a welcome reminder that unnecessarily resorting to interpretive methods beyond the contract's text undermines parties' ability to negotiate the terms of their relationships using the language of their choosing. While it is proper for counsel to analogize cases the best they can with the authorities available when the policy language does not, on its face, resolve a dispute, there can be no true and definitive jurisdictional standards applicable to the interpretation of different provisions used in different contracts covering different risks, because not all policies contain the same language.

Bright-line rules are sometimes appropriate with respect to uniform static legal obligations. But such distinctions are inappropriate where the scope of the underlying obligation is policy specific — it simply is not an apples-to-apples comparison.

In a single case, a party may have short-term, microeconomic interests that may motivate its desired construction of a policy based on interpretation tools beyond the text of a policy. But the long-term consistency and predictability of policy interpretations based on the policy text without regard for more subjective interpretation methodologies provide greater macroeconomic benefits to parties.

A policy-based analysis like the one the court employed in Under Armour is the best means toward those ends. Indeed, greater certainty and predictability come from maintaining fidelity to textual interpretation and contribute to better outcomes for both policyholders and insurers.

When courts stray from the plain text of a policy and instead resort to tasseography to conjure the parties' subjective notions, they invite increased litigation and uncertainty by encouraging disputes over matters extrinsic to the contractual promises actually agreed to. Everybody loses. By contrast, when courts stick to analysis rooted in policy language, they promote certainty and reduce litigation. Everybody wins.

We are not so naive as to believe that coverage disputes can always be resolved by "myopically focus[ing] on a word here or a phrase there."[16] Words are symbols for ideas, and any meaning derived from symbols requires interpretation. There are, however, myriad objective tools to ascertain an instrument's meaning by examining "a word in the context of a sentence, a sentence in the context of a paragraph, and a paragraph in the context of the entire agreement," in the words of the Virginia Supreme Court's 2019 decision in Erie Insurance Exchange v. EPC MD 15 LLC.[17]

The Fourth Circuit's decision provides a commendable application of the objective tools at its disposal for interpreting a policy provision, without unnecessarily turning to subjective interpretive methods. The court denied Under Armour's rehearing request on Feb. 18.

Under Armour reminds us of where insurance coverage disputes should always begin and end: with the plain language of the policy itself.

For relatedness provisions and per-claim disputes, the language of the policy at issue — not the creativity of a legal argument or comparisons between dissimilar policies — should dictate the outcome. Plain-text policy interpretation protects party autonomy and improves predictability. In those regards, the analytical approach employed by the Fourth Circuit in Under Armour benefits courts, practitioners, insurers and insureds alike.

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[1] Quanta Lines Ins. Co. v. Investors Capital Corp., 2009 WL 4884096, at *14 (S.D.N.Y. Dec. 17, 2009) (applying New York law)
[2] E.g., Pfizer Inc. v. Arch Ins. Co., 2019 WL 3306043, at *9 (Del. Super. July 23, 2019).
[3] See In re Alexion Pharms., Inc. Ins. Appeals, 339 A.3d 694, 703 (Del. 2025).
[4] Tung Yin, Nailing Jello to A Wall: A Uniform Approach for Adjudicating Insurance Coverage Disputes in Products Liability Cases with Delayed Manifestation Injuries and Damages, 83 Cal. L. Rev. 1243, 1246 (1995).
[5] 2026 WL 137123 (4th Cir. Jan. 20, 2026).
[6] Id. at *1.
[7] Id. at *4.
[8] Id. at *5.
[9] Id. at *6.
[10] Id. at *5.
[11] Id. at *8–9.
[12] Id. at *8.
[13] Id. at *9.
[14] Endurance Am. Ins. Co. v. Under Armour, Inc., 2024 WL 1640565, at *8 (D. Md. Apr. 15, 2024).
[15] Id.
[16] Erie Ins. Exch. v. EPC MD 15, LLC, 822 S.E.2d 351, 355 (Va. 2019).
[17] Id.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

This article was originally published by Law360.