MEMORANDUM OPINION AND ORDER

JEFF KAPLAN, United States Magistrate Judge

This case is before the court on cross-motions for summary judgment. The primary issue is whether Defendant Northland Insurance Company has a duty to defend Plaintiffs Tri Core Incorporated and Ronnie G. Redfearn in a lawsuit pending in New Jersey federal court. For the reasons stated herein, defendants' motion for summary judgment is granted and plaintiffs' motion is denied.

I.

Ronnie G. Redfearn ("Redfearn") and his company, Tri Core Incorporated ("TCI"), provide insurance services and tax and investment advice to small businesses concerning employee benefit plans. (Plf. App. at 5). From December 1, 2000 through December 1, 2001, Redfearn and TCI were insured under a claims-made professional liability errors and omissions policy issued by Northland Insurance Company ("Northland") through its agent, Rockwood Programs, Inc. ("Rockwood"). (Plf. Orig. Pet. at 3, ¶ V(B)). The policy provides coverage for, inter alia, "all amounts in excess of the applicable deductible and up to the limit of liability specified in the Declarations or Certificate of Insurance which the insured becomes legally obligated to pay as damages . . . caused by a wrongful act arising out of the providing of professional services by the insured . . ." (Def. App. at 2, § I(A)). "Wrongful act" is defined as "[a]ny actual or alleged act, error or omission committed solely in the performance of, or failure to perform, professional services . . ." ( Id. at 8, § III(5)). However:

The wrongful act as described above must happen on or after the policy effective date, or the retroactive date, if any, and the claim must be first made against the insured and reported to us before the end of the policy term stated on the Declarations or Certificate of Insurance, or any applicable Extended Reporting Period. Wrongful acts committed prior to the effective date of this policy are covered, but only if:

(1) Such wrongful acts took place while the insured was covered by claims-made professional liability errors and omissions coverage which has been proved to our satisfaction to be continuously in force from the date of the alleged wrongful act until the insured's inception date of coverage under this policy; and

(2) The insured had no knowledge of a claim or suit arising out of such wrongful acts as of the insured's inception date of coverage under this policy.

( Id. at 2, § I(B); see also id. at 5, § I(A) (B)).

A "claim" is made under the policy upon receipt by the insured of a written demand for money or professional services, "including the service of suit or receipt of notification of arbitration which alleges a wrongful act by the insured or any other person for whose wrongful acts the insured is legally responsible." ( Id. at 6, ¶ III(D)). In a related provision, the policy excludes coverage for:

Any claim or suit for damages in any way related to any litigation which commenced prior to the Effective Date of this policy, including but not limited to, state or federal court, federal, state, or local agency or any form of alternate dispute resolution.

( Id. at 9, § IV(D)). A "related claim" is defined as "all claims involving the same wrongful act or wrongful acts which are logically or causally connected by reason of any common fact, circumstance, situation, transaction, event or decision." ( Id. at 8, § III(O)). Northland agreed to defend any claim or suit brought against TCI or Redfearn "seeking damages on account of a wrongful act" covered by the policy. ( Id. at 6, § II(A)).

On December 29, 2000, TCI, Redfearn, and others were sued in New Jersey federal court for violations of the ERISA and RICO statutes, violations of the New Jersey Racketeering Act and Consumer Fraud Act, and common law fraud, negligent misrepresentation, breach of contract, and breach of the duty of good faith and fair dealing. National Security Systems, Inc., et al. v. Iola, et al., No. 00-6293 (" National Security Systems litigation") (Def. App., Exh. 2). The lawsuit involves an employee benefit plan sponsored by TCI, known as the EPIC Welfare Benefit Plan and Trust, sold to five New Jersey companies and their principals. According to the plaintiffs who filed the National Security Systems lawsuit:

[Defendants made] false and misleading representations that induced plaintiffs to agree to purchase certain group life insurance policies and participate in the EPIC Welfare Plan and Trust (the "EPIC Plan"), which defendants represented was tax qualified and otherwise appropriate as a vehicle for the individual plaintiffs to save for their retirements. The EPIC Plan was challenged by the Internal Revenue Service in 1997 and 1998 and was disqualified for favorable tax treatment, resulting in the loss of significant benefits to plaintiffs and adverse tax consequences. Since the IRS challenged the EPIC Plan, Plaintiffs have discovered that Defendants knowingly and intentionally misrepresented numerous material facts and omitted to disclose material information which Defendants had a duty to disclose, including specific facts relating to the background and qualifications of defendants, the structure and operation of the EPIC Plan, the nature and compensation of various defendants, and the projected benefits available under the Plan.

( Id. at 17-18, ¶ 1). Similar claims were made against TCI and Redfearn in two other lawsuits filed in New Jersey state court on February 25, 1999 and June 4, 1999, prior to the effective date of the Northland policy. Alloy Cast Products, Inc., et al. v. James W. Barrett, et al., No. UNN-L-1059-99 (" Alloy Cast litigation") and Finderne Management Company, Inc., et al. v. James W. Barrett, et al., No. SOM-L-851-99 (" Finderne litigation") (Def. App., Exhs. 3 4). By letter dated February 2, 2001, TCI and Redfearn notified their insurance company of the National Security Systems litigation. (Plf. App. at 13). Subsequent correspondence and telephone inquiries regarding the status of this claim went unanswered for several months. ( Id. at 15-23). Finally, on June 25, 2001, Northland denied coverage because "[a] review of the Federal Court Complaint establishes similar claims, which have been made against you and your agency, before the inception of the Northland Insurance Company Policy." ( Id. at 8-10).

TCI and Redfearn then filed this declaratory judgment action to determine the respective rights and duties of the parties under the terms of the insurance policy. Plaintiffs also allege claims under state law for breach of contract, negligence, bad faith insurance practices, and violations of the Texas Insurance Code. Northland has counterclaimed for declaratory relief, attorney's fees, and costs. The case is before the court on cross-motions for summary judgment. The issues have been briefed by the parties and the motions are ripe for determination.

II.

Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is "genuine" if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Thurman v. Sears, Roebuck Co., 952 F.2d 128, 131 (5th Cir.), cert. denied, 113 S.Ct. 136 (1992). A fact is "material" if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matter of Gleasman, 933 F.2d 1277, 1281 (5th Cir. 1991). Cases involving the interpretation of an insurance policy are particularly appropriate for summary disposition. See Principal Health Care of Louisiana v. Lewer Agency, Inc., 38 F.3d 240, 242 (5th Cir. 1994); SnyderGeneral Corp. v. Great American Insurance Co., 928 F. Supp. 674, 677 (N.D. Tex. 1996) (Kaplan, M.J.), aff'd, 133 F.3d 373 (5th Cir. 1998).

The disposition of the pending motions rests on an interpretation of various provisions of the Northland professional liability errors and omissions policy. Under Texas law, the insured has the burden to prove that coverage exists. Wallis v. United Services Automobile Association, 2 S.W.3d 300, 303 (Tex.App.-San Antonio 1999, pet. denied). The insurer must establish that one or more policy exclusions apply. See Federated Mutual Insurance Co. v. Grapevine Excavation, Inc., 197 F.3d 720, 723 (5th Cir. 1999). Once the insurer proves that an exclusion applies, the burden shifts back to the insured to show that the claim falls within an exception to the exclusion. Id. The parties may satisfy their respective burdens by pointing to evidence in the record that creates a genuine issue of material fact for trial. See Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 113 S.Ct. 82 (1992). All the evidence must be viewed in the light most favorable to the party opposing summary judgment. Rosado v. Deters, 5 F.3d 119, 122 (5th Cir. 1993). However, conclusory statements, hearsay, and testimony based merely on conjecture or subjective belief are not competent summary judgment evidence. Topalian, 954 F.2d at 1131.

III.

All parties move for summary judgment on their claims for declaratory relief and plaintiffs' contractual and extra-contractual claims. The court will first address the issues related to coverage and Northland's duty to defend plaintiffs in the National Security Systems litigation.

A.

Under Texas law, the duty to defend is determined solely by reference to the allegations of the complaint and the terms of the insurance policy. Lafarge Corp. v. Hartford Casualty Insurance Co., 61 F.3d 389, 393 (5th Cir. 1995); King v. Dallas Fire Insurance Co., 85 S.W.3d 185, 187 (Tex. 2002); American Alliance Insurance Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 153-54 (Tex.App.-Dallas 1990, writ dism'd); Scottsdale Insurance Co. v. Travis, 68 S.W.3d 72, 75 (Tex.App. — Dallas 2001, reh'g overruled, review denied). The allegations of the underlying complaint must be taken as true. Gulf Chemical Metallurgical Corp. v. Associated Metals Minerals Corp., 1 F.3d 365, 369 (5th Cir. 1993); Continental Savings Ass'n v. United States Fidelity Guaranty Co., 762 F.2d 1239, 1243, (5th Cir.), as amended, 768 F.2d 89 (5th Cir. 1985). The duty to defend "is not affected by facts ascertained before suit, developed in the process of the litigation, or by the ultimate outcome of the suit." American Alliance, 788 S.W.2d at 154; see also Colony Insurance Co. v. H.R.K., Inc., 728 S.W.2d 848, 850 (Tex.App.-Dallas 1987, no writ). Rather, the insurer must provide a defense if the complaint contains at least one claim that is facially within the policy's coverage. Lafarge, 61 F.3d at 393; Rhodes v. Chicago Insurance Co., 719 F.2d 116, 119 (5th Cir. 1983); Travis, 68 S.W.3d at 75.

1.

Northland contends that it has no duty to defend plaintiffs in the National Security Systems litigation because the policy does not cover "wrongful acts" committed prior to December 1, 2000, unless "[t]he insured had no knowledge of a claim or suit arising out of such wrongful acts as of the insured's inception date of coverage . . ." (Def. App. at 2, § I(B)(2)). In addition, Northland points out that the policy excludes coverage for "[a]ny claim or suit for damages in any way related to any litigation which commenced prior to the Effective Date of this policy . . ." ( Id. at 9, § IV(D)). A "related claim" is defined as "all claims involving the same wrongful act or wrongful acts which are logically or causally connected by reason of any common fact, circumstance, situation, transaction, event or decision." ( Id. at 8, § III(O)). Because plaintiffs were accused of making false and misleading representations regarding the EPIC Plan in two other lawsuits filed prior to the effective date of the Northland policy, Northland maintains that it has no duty to defend or indemnity plaintiffs against similar claims alleged in the National Security Systems litigation.

A comparison of the pleadings in the Alloy Cast and Finderne lawsuits with the complaint filed in National Security Systems leads to the inescapable conclusion that all three cases are "related." The Alloy Cast complaint alleges that:

Plaintiffs are New Jersey companies and their principals who bring this action to recover losses based upon false and misleading representations that induced plaintiffs to enter into agreements with defendants to set up and administer supposedly tax qualified and otherwise appropriate retirement plans. Those retirement plans were challenged by the Internal Revenue Service as unlawful and have been disqualified, resulting in the loss of significant benefits to plaintiffs and severe, adverse tax consequences.

(Def. App. at 83, ¶ 1). Similar allegations form the basis of the Finderne litigation. ( Id. at 97, ¶ 1). The retirement plan at issue in Alloy Cast and Finderne is the EPIC Welfare Benefit Plan and Trust — the same plan involved in National Security Systems. ( Id. at 84-85, ¶¶ 12 13; id. at 98-99, ¶¶ 11 12). Not only are the factual allegations and legal theories in all three cases substantially the same, but the Alloy Cast and Finderne plaintiffs are also named as plaintiffs in National Security Systems. In view of these similarities, the court has little difficulty in concluding that the National Security Systems litigation "relates" to the same "wrongful acts" made the basis of the Alloy Cast and Finderne lawsuits.

The court further determines that the claims asserted in National Security Systems arise out of "wrongful acts" committed prior to the effective date of the Northland policy that were known to plaintiffs as of the inception date of coverage. Both the Alloy Cast and Finderne lawsuits had been pending for more than a year at the time the policy took effect. Because those cases involve the same "wrongful acts" as those alleged in National Security Systems, they are not covered by the Northland policy.

2.

In an attempt to create coverage where none exits, plaintiffs argue that the Northland policy excludes coverage only for related claims asserted by the same parties in cases pending prior to the effective date. As plaintiffs point out, there are eight parties to the National Security Systems litigation who are not named as parties in either the Alloy Cast or Finderne actions. Plaintiffs therefore maintain that the claims made by these new parties should be covered.

This argument fails for two reasons. First, nowhere in their complaint do plaintiffs seek a judicial declaration of coverage "for the new parties and their claims of which Plaintiffs had no prior knowledge." (Plf. Br. at 5). Rather, this claim was raised for the first time on summary judgment. See Bunting v. State Farm Lloyds, 2000 WL 191672 at *4 (N.D. Tex. Feb. 14, 2000) (Kaplan, M.J.) (refusing to consider claim not alleged as theory of recovery in complaint). Second, the distinction between "prior plaintiffs" and "new parties" is not found anywhere in the policy. As previously discussed, the policy does not cover "wrongful acts" committed prior to December 1, 2000, where the insured "had knowledge of a claim or suit arising out of such wrongful acts as of the insured's inception date of coverage . . ." (Def. App. at 2, § I(B)(2)) (emphases added). Stated differently, it is the nature of the claim, not the identity of the claimant, that controls. It is immaterial whether the claim is made or the suit is filed by a prior plaintiff or new party. Moreover, the policy excludes coverage for " all claims involving the same wrongful act or wrongful acts which are logically or causally connected by reason of any common fact, circumstance, situation, transaction, event or decision." ( Id. at 8, § III(O)) (emphases added). This language further supports Northland's interpretation of the policy. See ComericaBank v. Lexington Insurance Co., 3 F.3d 939, 943-45 (6th Cir. 1993) (applying Michigan law) (bank sued in one capacity before the effective date of claims-made policy, but in a different capacity after inception of the policy, was not entitled to coverage in later-filed action under policy language excluding coverage for "all claims arising from all pending and/or prior litigation").

Plaintiffs further contend that Northland is estopped from denying coverage in this case. Under Texas law, the doctrine of estoppel applies "when an insurer assumes an insured's defense without obtaining a reservation of rights and with knowledge of facts indicating noncoverage." State Farm Lloyds, Inc. v. Williams, 960 S.W.2d 781, 785 (Tex.App.-Dallas 1997, writ dism'd by agr.) (citations omitted). Although plaintiffs disclosed both the Alloy Cast and Finderne lawsuits in their EO Renewal Application, Northland has at all times properly denied coverage and never assumed the defense of the National Security Systems litigation. There simply are no facts giving rise to a claim of estoppel.

For these reasons, the court concludes that Northland has no duty to defend or indemnify plaintiffs against the claims asserted in the National Security Systems litigation. Northland is entitled to summary judgment on its declaratory judgment counterclaim.

B.

Plaintiffs also sue Northland and its agent, Rockwood, for breach of contract, negligence, bad faith insurance practices, and violations of the Texas Insurance Code. Absent coverage or a duty to defend, plaintiffs cannot prove that defendants breached the terms of the insurance policy. See, e.g. 14 L. RUSS, COUCH ON INSURANCE § 202:5 (Supp. 2002) (citing cases). Nor can plaintiffs prevail on their extra-contractual claims.

As a general rule, an insured cannot prove a bad faith claim absent a breach of contract. See Republic Insurance Co. v. Stoker, 903 S.W.2d 338, 341 (Tex. 1995); Toonen v. United Services Automobile Ass'n, 935 S.W.2d 937, 941 (Tex.App.-San Antonio 1996, no writ). The only recognized exception to this rule is if the insurer "commit[s] some act, so extreme, that would cause injury independent of the policy claim," or fails "to timely investigate its insureds' claims." Stoker, 903 S.W.2d at 341; Toonen, 935 S.W.2d at 941-42. Plaintiffs have failed to adduce any evidence of such conduct. As a result, defendants are entitled to summary judgment as to plaintiffs' extra-contractual claims.

CONCLUSION

There are no genuine issues of material fact and defendants are entitled to judgment as a matter of law. Accordingly, defendants' motion for summary judgment is granted and plaintiffs' motion is denied. The court will enter a final judgment in favor of Northland on its counterclaim for declaratory relief and against plaintiffs as to all claims and causes of action.

SO ORDERED.