{"id":894573,"date":"2018-07-19T13:32:36","date_gmt":"2018-07-19T19:32:36","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=894573"},"modified":"2018-07-19T13:32:36","modified_gmt":"2018-07-19T19:32:36","slug":"federal-court-says-subpoena-claim-triggering-insurance-coverage","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/federal-court-says-subpoena-claim-triggering-insurance-coverage\/","title":{"rendered":"Federal Court Says Subpoena Is a \u201cClaim\u201d Triggering Insurance Coverage"},"content":{"rendered":"

Jared Zola | Policyholder Informer<\/a> | July 12, 2018<\/p>\n

An issue frequently raised in coverage disputes involving claims-made liability insurance policies is determining whether certain pre-lawsuit events or disputes constitute a \u201cclaim\u201d sufficient to trigger coverage.<\/p>\n

Unlike occurrence-based liability policies that respond in the policy year or years during which the coverage-triggering event occurred (e.g., the years in which a person sustained injury in an asbestos bodily injury claim), a claims-made liability insurance policy is triggered upon the insured\u2019s receipt of a claim. Upon an insured providing notice of a claim, its insurers may dispute whether the notice-triggering event constitutes a \u201cclaim\u201d at all.<\/span><\/p>\n

Given variations in policy \u201cclaim\u201d definitions and the lack of defined terms in some instances, the point at which a dispute ripens into a \u201cclaim\u201d that triggers coverage is frequently disputed. A recent Illinois federal district court decision rejected the insurer\u2019s motions to dismiss and held that a Department of Justice (\u201cDOJ\u201d) subpoena was a \u201cclaim\u201d when, as was the case there, the insured sought coverage for defense costs incurred responding to the subpoena.<\/p>\n

While issued in the context of a motion to dismiss and not on the merits, the decision deftly rebukes the insurer\u2019s assertions that a government subpoena fails to assert a \u201cclaim\u201d against the insured for \u201cwrongful acts\u201d triggering coverage.<\/p>\n

Astellas US Holding, Inc. v. Starr Indemnity and Liability Company<\/em><\/strong><\/p>\n

In a May 30, 2018\u00a0decision, an Illinois federal district court refused to dismiss three insurers from insured Astellas US Holding, Inc.\u2019s suit seeking coverage for the costs it incurred responding to a U.S. Department of Justice subpoena.<\/p>\n

The DOJ issued a subpoena to Astellas demanding certain documents relating to the DOJ\u2019s industrywide investigation of pharmaceutical companies for alleged federal healthcare offenses. The subpoena directed Astellas to appear before government officials and produce documents about Astellas\u2019 payments to charitable organizations that provided financial assistance to patients taking its drugs. It advised Astellas that failure to comply exposed it to liability in judicial enforcement proceedings and punishment for disobedience.<\/p>\n

Astellas incurred defense costs responding to the subpoena that exceeded the self-insured retention stated in its primary D&O insurance policy. The primary insurer refused to provide coverage\u2014as did several excess insurers\u2014and a coverage lawsuit followed. The insurer filed a motion to dismiss Astellas\u2019 complaint asserting, amongst other purported grounds for dismissal, that (1) the subpoena did not rise to the level of a \u201cclaim\u201d that triggers coverage, and (2) the subpoena did not allege a \u201cwrongful act.\u201d<\/p>\n

The insurance policy defined a \u201cclaim,\u201d in pertinent part, to include a \u201cwritten demand for non-monetary relief.\u201d It also defined \u201cwrongful act\u201d to include \u201cany actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission or act by the Company.\u201d<\/p>\n

The insurer asserted that the production of documents in response to a subpoena does not rise to the level of a \u201cdemand for relief.\u201d In its motion papers, the insurer sought to define \u201crelief\u201d as \u201clegal remedy or redress,\u201d or as \u201cthe redress or benefit, especially equitable in nature (such as an injunction or specific performance), that a party asks of a court.\u201d Of course, these so-called definitions that the insurer sought to impose on its insured do not appear in the insurance policy.<\/p>\n

Because the subpoena only sought information and did not make a request of the court, the insurer concluded that it did not fit within the plain meaning of a demand for relief. It asserted that the threatened enforcement proceedings are discrete from the informational investigation.<\/p>\n

The court rejected the insurer\u2019s position. The court refused to conclude that the subpoena merely requested, as opposed to demanded, information. It reasoned that courts have the power to compel parties to give testimony or to produce documents as demanded in the subpoena. Accordingly, the court held that the subpoena demanded a form of non-monetary relief and that the subpoena was not distinct from the potential enforcement proceedings\u2014\u201cit defined the scope of the judicial enforcement.\u201d<\/p>\n

The insurer also argued that Astellas\u2019 interpretation would lead to an absurd result because the insurance policy is only meant to protect insureds from potential liability due to allegations of wrongdoing, which the subpoena lacked.<\/p>\n

The court disagreed with the insurer\u2019s characterization of the subpoena. It held that the insurance policy\u2019s broad definition of a \u201cclaim\u201d indicated that the policy was designed to cover something like the subpoena\u2014which is a demand for relief in response to an accusation of wrongdoing. Accordingly, the court held that the \u201cresult\u201d in this insistence\u2014that the insurer may have to cover Astellas\u2019 defense costs incurred responding to the subpoena\u2014\u201cis not absurd, it is precisely what the policy intended.\u201d<\/p>\n

Conclusion<\/strong><\/p>\n

Inherent in coverage cases addressing whether subpoenas constitute \u201cclaims\u201d is the recognition that insurers frequently argue both sides of this issue in an effort to avoid their coverage obligations to the insureds. If an insured provides notice of a pre-lawsuit event, its insurer frequently contends that the event does not constitute a \u201cclaim.\u201d However, if an insured determined that the same pre-lawsuit event did not yet rise to the level of a \u201cclaim\u201d under the policy and later gives notice of a lawsuit arising from the same factual nexus, for example, its insurer frequently contends that coverage does not exist for the subsequent lawsuit because the insured should have provided notice of the earlier event; a \u201cclaim.\u201d<\/p>\n

If insurers truly want to preclude coverage for costs incurred responding to government subpoenas, there is an easy solution\u2014explicitly and unambiguously exclude coverage for such defense costs. Unwilling to risk losing market share by excluding this valuable coverage, insurers do not use exclusionary language and then seek to impose onerous interpretations not found in the insurance policy.<\/p>\n

Perhaps recognizing this tactic, the\u00a0Astellas<\/em>\u00a0case is an example of courts across the country accepting the insured\u2019s business judgment of what event constitutes a \u201cclaim\u201d to maximize coverage. The insureds involved in everyday business disagreements and disputes are better positioned than an insurer in determining when such a matter rises to the level of a \u201cclaim\u201d for which the insured will seek coverage.<\/p>\n","protected":false},"excerpt":{"rendered":"

Jared Zola | Policyholder Informer | July 12, 2018 An issue frequently raised in coverage disputes involving claims-made liability insurance policies is determining whether certain pre-lawsuit events or disputes constitute a \u201cclaim\u201d sufficient to trigger coverage. Unlike occurrence-based liability policies that respond in the policy year or years during which the coverage-triggering event occurred (e.g.,… Continue reading Federal Court Says Subpoena Is a \u201cClaim\u201d Triggering Insurance Coverage<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9914],"tags":[9895,23,8882,10529],"class_list":["post-894573","post","type-post","status-publish","format-standard","hentry","category-insurance-coverage","tag-advise-consult","tag-insurance-coverage","tag-insurance-triggers","tag-subpoenas","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nFederal Court Says Subpoena Is a \u201cClaim\u201d Triggering Insurance Coverage - 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