Bedivere Ins. Co. v. Blue Cross & Blue Shield of Kan., Inc.
| Decision Date | 30 September 2019 |
| Docket Number | Case No. 18-2371-DDC-JPO |
| Parties | BEDIVERE INSURANCE COMPANY f/d/b/a ONEBEACON INSURANCE COMPANY, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF KANSAS, INC. and ALLIED WORLD SURPLUS LINES INSURANCE COMPANY f/k/a DARWIN SELECT INSURANCE COMPANY, Defendants. |
| Court | U.S. District Court — District of Kansas |
Plaintiff Bedivere Insurance Company f/d/b/a OneBeacon Insurance Company ("OneBeacon") seeks various declaratory relief against defendants Blue Cross and Blue Shield of Kansas, Inc. ("BCBSKS") and Allied World Surplus Lines Insurance Company f/k/a Darwin Select Insurance Company1 ("Allied World") under 28 U.S.C. § 2201. This matter comes before the court on OneBeacon's Motion for Leave to File Its First Amended Complaint (Doc. 44), BCBSKS's Motion to Dismiss (Doc. 17), Allied World's Motion to Dismiss (Doc. 20), and OneBeacon's Motion for Leave to File Under Seal (Doc. 47).
OneBeacon seeks leave to file its First Amended Complaint (the "Proposed Complaint") under Fed. R. Civ. P. 15(a)(2). Doc. 44 at 1. BCBSKS opposes the motion. Doc. 50. OneBeacon's memorandum supporting its motion notes that Allied World was unwilling tostipulate to filing the Proposed Complaint, but Allied World has not filed a response to the motion. See Doc. 46 at 3. With respect to the pending Motions to Dismiss, OneBeacon opposes both motions and each defendant has replied. See Docs. 19, 26, 31, 32.
For reasons explained below, the court (1) grants OneBeacon's Motion for Leave to File Its First Amended Complaint (Doc. 44), (2) denies BCBSKS's Motion to Dismiss (Doc. 17), (3) denies Allied World's Motion to Dismiss (Doc. 20), and (4) denies OneBeacon s Motion for Leave to File Under Seal (Doc. 47). The court orders OneBeacon to file its Proposed Complaint within 14 days of the filing of this Order.
OneBeacon filed this lawsuit against BCBSKS and Allied World on July 17, 2018 (Doc. 1). On August 30, 2018, BCBSKS moved to dismiss all Counts against it (Doc. 17). Allied World moved to dismiss the single Count against it under the existing Complaint on September 21, 2018 (Doc. 20). On September 25, 2018, Allied World filed a related lawsuit against BCBSKS seeking declaratory relief, Allied World Specialty Insurance Company v. Blue Cross & Blue Shield of Kansas, Inc., Case No. 18-2515 (the "Related Case"), which is also pending before this court.2 The parties fully briefed the Motions to Dismiss, but agreed that the court should not rule on the motions while the parties mediated their claims in both lawsuits. Doc. 39 at 3. All discovery in this case was stayed as well. Id. And, the deadline to amend the pleadings in this case was "deferred until after mediation." Id. at 4.
OneBeacon had requested the opportunity to file supplemental briefing to "address issues raised in the Related Case that was filed after [OneBeacon filed] its opposition" to BCBSKS's Motion to Dismiss. Doc. 35 at 3. But, Judge O'Hara—noting the extensive briefing already on file—determined that the court should decide whether to permit supplemental briefing after meditation, if unsuccessful, and only after a new motion explaining why supplemental briefing is necessary. Doc. 39 at 3-4. Judge O'Hara also directed the parties to file motions to consolidate this case and the Related Case once the court has resolved the pending Motions to Dismiss. Doc. 39 at 4-5. Meditation was unsuccessful. Doc. 43. OneBeacon now seeks leave to file its Proposed Complaint because, OneBeacon contends, the facts have developed since its original pleading and it desires to update its existing claims, add additional claims, and add an additional defendant. Docs. 44, 46.
The court takes the following facts from OneBeacon's Proposed Complaint (Doc. 44-1)3 and attached supporting documents and views them in the light most favorable to OneBeacon. S.E.C. v. Shields, 744 F.3d 633, 640 (10th Cir. 2014) (); Hall v. Associated Int'l Ins., 494 F. App'x 902, 904 (10th Cir. 2012) ().
BCBSKS purchased three insurance policies: (1) a Primary Managed Care Organization Errors and Omissions Liability Policy issued by Allied World, with a $10 million coverage limit("Allied World E&O Policy"); (2) a Primary Healthcare Organizations Directors and Officers Liability Policy issued by Allied World, with a $15 million coverage limit ("Allied World D&O Policy"); and (3) a Managed Care Errors and Omissions Excess Indemnity Policy issued by OneBeacon ("OneBeacon Policy"). Doc. 44-1 at 1-2 .4 BCBSKS has requested coverage from Allied World under both the Allied World E&O Policy and the Allied World D&O Policy in connection with several antitrust class actions (the "Antitrust Litigation") against BCBSKS and Blue Cross Blue Shield Association ("BCBSA"), which have been "consolidated for pretrial discovery proceedings in the Northern District of Alabama." Id. at 2 .5 BCBSKS requested reimbursement of defense expenses and indemnity under both Allied World policies. Id. at 2 .6 While Allied World, subject to a reservation of rights, agreed to provide coverage under the Allied World E&O Policy, it denied coverage under the Allied World D&O Policy. Id. (Am. Compl. ¶ 7).7 BCBSKS believes it is entitled to coverage under the Allied World D&O Policy and has filed a counterclaim against Allied World for wrongful denial of coverage in the Related Case. Id. at 2-3 .8 The Allied World E&O Policy has been exhausted and OneBeacon has started to reimburse BCBSKS for defense expenses under the OneBeacon Policy. Id. at 3 .9
New allegations in OneBeacon's Proposed Complaint assert that BCBSKS has a Blue Cross License Agreement (the "License Agreement") with BCBSA, under which BCBSA agrees to defend and hold BCBSKS harmless against claims arising from the Antitrust Litigation. Doc. 44-1 at 2-3 . But, BCBSKS "has not tendered its defense or sought indemnity from BCBSA, nor has BCBSA paid any defense expenses on behalf of BCBSKS." Id. at 3 . OneBeacon's Proposed Complaint describes the Antitrust Litigation as alleging that BCBSKS, BCBSA, and other member plans "conspired to leverage their economic power and market dominance to under-compensate healthcare providers for their services and to increase healthcare costs to subscribers by coordinating their operations and limiting their activities through restrictions in their trademark licenses." Id. at 7 .
Proposed Count I against BCBSKS and Allied World requests a judicial declaration that BCBSKS must exhaust "all other insurance and indemnity to which it is entitled" before the OneBeacon Policy is triggered, including coverage from BCBSA under the License Agreement and coverage from Allied World under the Allied World Primary D&O Policy. Doc. 44-1 at 28-29 .10 The OneBeacon Policy contains several provisions relevant to proposed Count I's request for declaratory relief.11 First, the OneBeacon Policy, when outlining its insuring agreement for excess coverage, provides:
The Underwriter shall provide the Insured with insurance excess of the Underlying Insurance set forth in ITEM [5]12 of the Declarations for Claims first made against the Insured during the Policy Period, provided that the Underlying Insurance also applies and has been exhausted by actual payment thereunder, or would apply but for the exhaustion of the applicable limit(s) of liability thereunder.
Doc. 1-3 at 10. The OneBeacon Policy defines "Underlying Insurance" and "Primary Policy" as the Allied World E&O Policy. Id. at 3, 11. As OneBeacon acknowledges, the OneBeacon Policy makes no reference to the Allied World D&O Policy. See id.; Doc. 19 at 11.
The OneBeacon Policy does state, however, that it "will apply in conformance with, and will follow the form of, the terms, conditions, agreements, exclusions, definitions and endorsements of the Underlying Insurance." Doc. 1-3 at 10. It goes on to identify exceptions to conformance with the Allied World E&O Policy, including that OneBeacon, as underwriter, "will not have any obligation to make any payment hereunder unless and until the full amount of the applicable limit of liability of the Underlying Insurance has been paid by the issuer(s) of the Underlying Insurance." Id. at 11. Meanwhile, Allied World's E&O Policy, from which the OneBeacon Policy follows form, contains a provision entitled "Other Insurance; Other Indemnification." It provides:
The Allied World D&O Policy also contains an "Other Insurance" provision, which states, in relevant part:
The insurance provided by this Policy shall apply only as excess over any other valid and collectible insurance, whether such other insurance is stated to be primary, contributory, excess, contingent or otherwise, unless such other insurance is written specifically as excess insurance over the applicable Limit of Liability provided by this Policy. This Policy shall specifically be excess of any other valid and collectible...
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