Astellas U.S. Holding, Inc. v. Starr Indem. & Liab. Co.
| Decision Date | 23 September 2021 |
| Docket Number | 17-cv-08220 |
| Citation | 566 F.Supp.3d 879 |
| Parties | ASTELLAS US HOLDING, INC. and Astellas Pharma US, Inc., Plaintiffs, v. STARR INDEMNITY & LIABILITY COMPANY, Beazley Insurance Company, Inc., and Federal Insurance Company, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Jeremy P. Cole, Mark P. Rotatori, Taylor M. Grode, Jones Day, Chicago, IL, Mark J. Andreini, Jones Day, Cleveland, OH, Melissa Saldana, Pro Hac Vice, Jones Day, Dallas, TX, Peter D. Laun, Jones Day, Pittsburgh, PA, for Plaintiff Astellas US Holding, Inc.
Janet Ruth Davis, Stephanie Alix Nashban, Cozen O'Connor, Chicago, IL, for Defendant Federal Insurance Company.
Franklin U. Valderrama, United States District Judge Plaintiffs Astellas US Holding, Inc. (AUSH) and Astellas Pharma US, Inc. (Astellas) (collectively, Plaintiffs), filed suit against Starr Indemnity & Liability Company (Starr), Beazley Insurance Company, Inc. (Beazley),1 and Federal Insurance Company (Federal) (collectively, the Insurers) alleging breach of contract and seeking compensatory damages for the Insurers’ alleged breaches of their duties under insurance policies they issued to Plaintiffs, which provide broad coverage for defense costs, judgments, and settlements arising from alleged wrongful acts committed by Astellas. R. 77, SAC.2 Plaintiffs seek damages they suffered due to the Insurers’ refusals to reimburse them for defense costs (i.e., covered defense and investigation costs), as well as for a settlement payment that Plaintiffs paid to resolve a claim asserted against Astellas by the United States Department of Justice (DOJ) for alleged federal health care offenses committed by Astellas. SAC ¶ 2. Plaintiffs also seek a declaratory judgment that Federal must pay the full amount of its $10 million limit of liability. Id. ¶¶ 18, 61. Before the Court are Astellas’ and Federal's cross-motions for summary judgment.3 R. 114, Pl.’s Mot. Summ. J.; R. 129, Def.’s Cross-Mot. Summ. J.4 For the reasons discussed below, Astella's Motion for Summary Judgment is granted and Federal's Cross-Motion for Summary Judgment is denied.5 The Court finds that the Settlement Payment constitutes a Loss under the Federal Policy, and public policy does not bar coverage.
The following facts are undisputed unless otherwise specified. In deciding cross-motions for summary judgment, the Court views the facts in the light most favorable to the respective non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Hanners v. Trent , 674 F.3d 683, 691 (7th Cir. 2012). So, when the Court evaluates Astellas’ motion for summary judgment, Federal gets the benefit of reasonable inferences; conversely, when evaluating Federal's motion, the Court gives Astellas the benefit of the doubt. On summary judgment, the Court assumes the truth of the facts presented by the parties, but does not vouch for them. Arroyo v. Volvo Grp. N. Am., LLC , 805 F.3d 278, 281 (7th Cir. 2015).
Astellas is a pharmaceutical company, of which AUSH owns 100% of the voting stock. Def.’s Resp. PSOF ¶¶ 1–2, 4.6 Federal is an insurance company, which issued an excess policy, No. 822-5816 (the Federal Policy), to Astellas for the period of April 1, 2015 to April 1, 2016 (the Policy Period7 ). Id. ¶¶ 5, 7, 52–53.
The Federal Policy provides a $10 million limit of liability in excess of the $10 million in underlying coverage issued by five separate insurers, and a $500,000.00 self-insured retention (totaling $10.5 million and defined as Federal's Underlying Limit ). Def.’s Resp. PSOF ¶¶ 56–57. Paragraph 1 of the Federal Policy, as amended by Endorsement No. 1, provides, in relevant part, as follows:
[Federal] shall provide the Insureds with insurance during the Policy Period excess of the Underlying Limit . Coverage hereunder shall attach only after the ... Insureds ... shall have paid in legal currency the full amount of the Underlying Limit for such Policy Period . Coverage shall then apply in conformance with the terms and conditions of the Primary Policy , except as otherwise provided herein.
Id. ¶ 52 (citing R. 115-1, Silversten Decl., Exh. B, Federal Policy at A-67).
The Primary Policy provides coverage for claims brought against Astellas. Insuring Agreement 1.C. of the Primary Policy states:
The Insurer shall pay on behalf of the Company the Loss arising from a Claim first made during the Policy Period ... against the Company for any Wrongful Act , and reported to the Insurer in accordance with the terms of this policy.
Def.’s Resp. PSOF ¶ 58 (citing Primary Policy at A-23).
The Primary Policy defines Company as including "any Subsidiary of the Parent Company ." Def.’s Resp. PSOF ¶ 59 (citing Primary Policy at A-12). Parent Company is defined as AUSH. Id. ¶ 60 (citing Primary Policy at A-7). The term Subsidiary is defined, in relevant part, as "any privately-held for-profit entity ... of which the Parent Company has Management Control ... before the inception of the Policy Period ." Id. ¶ 61 (citing Primary Policy at A-26). "Management Control " means, among other things, "owning interests representing more than 50% of the voting, appointment or designation power for the selection of a majority of: the board of directors of a corporation." Id. ¶ 62 (citing Primary Policy at A-13).
The term Claim includes, in relevant part, a "written request to toll or waive the applicable statute of limitations relating to a potential Claim against an Insured for a Wrongful Act ." Def.’s Resp. PSOF ¶ 63 (citing Primary Policy at A-24). The term Wrongful Act is defined, in relevant part, as "any actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission or act by the Company." Id. ¶ 64 (citing Primary Policy at A-27).
Finally, the term Loss is defined to include: "damages, settlements or judgments." Def.’s Resp. PSOF ¶ 65 (citing Primary Policy at A-25). It also includes the "multiplied portion of any multiple damage awards ... but only to the extent that such damages ... are insurable under the applicable law most favorable to the insurability of such damages." Id. (citing Primary Policy at A-25, A-45). Loss is defined to exclude "matters which may be deemed uninsurable under applicable law" and "fines and penalties, except as provided for in" the previous sentence. Pl.’s Resp. DSOAF ¶ 1 (citing Primary Policy at A-25). The Primary Policy also explicitly excludes coverage for any Loss in connection with any Claim :
(Final Adjudication Exclusions). Def.’s Resp. PSOF ¶ 68 (citing Primary Policy at A-50).
Section 5 of the General Terms & Conditions Section of the Primary Policy, Notice of Claim, provides, in relevant part:
[I]f during the Policy Period ... an Insured becomes aware of any circumstances which may reasonably be expected to give rise to a Claim being made against an Insured, the Insured may provide written notice to the Insurer's authorized agent of such circumstances.... If a Claim is subsequently made against such Insured and reported to the Insurer arising out of, based upon or attributable to the previously noticed circumstances, such Claim shall be considered first made at the time notice of such circumstances was provided to the Insurer.
Def.’s Resp. PSOF ¶ 66 (citing Primary Policy at A-16).
In September 2012, Astellas launched Xtandi, a drug used to treat men with metastatic castration-resistant prostate cancer
(mCRPC). Def.’s Resp. PSOF ¶ 19. Xtandi differs from other treatments of mCRPC because it works by blocking androgen receptors and is thus classified as an "androgen receptor inhibitor" (ARI). Id. ¶ 21. John Liu (Liu), Astella's Executive Director, Reimbursement & Market Access Strategy, led Astella's efforts to ensure that patients could afford Xtandi, including contributing to charity patient assistance programs that provide financial support to patients undergoing cancer treatment. Def.’s Resp. PSOAF ¶¶ 1, 3.
In September 2012 and January 2013, respectively, Astellas began making charitable contributions to patient assistance mCRPC Funds (the mCRPC Funds) run by two separate Charity Patient Assistant Programs (PAPs), the Patient Access Network Foundation (PANF) and the Chronic Disease Fund (CDF) (collectively, the Charity PAPs). Def.’s Resp. PSOF ¶ 22; Def.’s Resp. PSOAF ¶¶ 4–5. In May 2013, Liu received a press release announcing that PANF had opened a fund for mCRPC patients who were prescribed products with the radioisotope "mechanism of action" (MOA), which caused him to speak to various people at the Charity PAPs about the possibility of setting up another MOA fund, specifically for patients being treat with the ARI for mCRPC (the ARI Funds). Id. ¶¶ 7–8. Such funds would include patients who had been prescribed Xtandi and ARI drugs used to treat mCRPC, but would not generally apply to other mCRPC treatments or drugs. Def.’s Resp. PSOF ¶ 24. Astellas, PANF, and CDF each undertook their own independent legal and medical analysis of the ARI Funds. Def.’s Resp. PSOAF ¶ 10. Before Astellas contributed to the ARI Funds, Liu sought approval from Astellas’ in-house legal department, who obtained legal advice from...
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