Bedivere Ins. Co. v. Blue Cross Blue Shield Ass'n

Decision Date21 September 2020
Docket NumberCase No. 18-2371-DDC-JPO
PartiesBEDIVERE INSURANCE COMPANY f/d/b/a ONEBEACON INSURANCE COMPANY, Plaintiff, v. BLUE CROSS BLUE SHIELD ASSOCIATION, et al., Defendants.
CourtU.S. District Court — District of Kansas
MEMORANDUM AND ORDER

Plaintiff Bedivere Insurance Company f/d/b/a OneBeacon Insurance Company ("OneBeacon") seeks various declaratory and monetary relief against defendants Blue Cross and Blue Shield of Kansas, Inc. ("BCBSKS"), Allied World Surplus Lines Insurance Company f/k/a Darwin Select Insurance Company ("Allied World"), and Blue Cross Blue Shield Association ("BCBSA") under 28 U.S.C. § 2201. Doc. 55. This matter comes before the court on BCBSA's Motion to Dismiss. Docs. 83, 84. OneBeacon opposes the motion. Doc. 90. And BCBSA has replied. Doc. 91. For reasons explained below, the court grants BCBSA's motion.

I. Factual Background

The court takes the following facts from OneBeacon's First Amended Complaint (Doc. 55) and attached supporting documents and views them, as it must, in the light most favorable to OneBeacon. S.E.C. v. Shields, 744 F.3d 633, 640 (10th Cir. 2014) (explaining that the court must "accept as true all well-pleaded factual allegations in the complaint and view them in the light most favorable to the [plaintiff]" (citation and internal quotation marks omitted)); Hall v. Associated Int'l Ins. Co., 494 F. App'x 902, 904 (10th Cir. 2012) (explaining that a court may also consider "attached exhibits[] and documents incorporated into the complaint by reference").

BCBSKS purchased three insurance policies: (1) a primary Managed Care Organization Errors and Omissions Liability Policy from Allied World, with a $10 million coverage limit ("Allied World E&O Policy"); (2) a primary Healthcare Organizations Directors and Officers Liability Policy from Allied World, with a $15 million coverage limit ("Allied World D&O Policy"); and (3) a Managed Care Errors and Omissions Excess Indemnity Policy from OneBeacon ("OneBeacon Policy"). Doc. 55 at 1-2 (Am. Compl. ¶¶ 2-3). BCBSKS also entered into License Agreements with BCBSA (the "License Agreements"). Id. (Am. Compl. ¶ 4); see also Docs. 55-5 & 55-6 (License Agreements).

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 BCBSA which have been "consolidated for pretrial discovery proceedings in the Northern District of Alabama." Doc. 55 at 2, 25 (Am. Compl. ¶¶ 5-6, 72). BCBSKS requested reimbursement of defense expenses and indemnity under both Allied World policies. Id. at 2 (Am. Compl. ¶ 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. at 2, 25 (Am. Compl. ¶¶ 7, 73-74).1

BCBSKS also seeks coverage under its excess OneBeacon Policy in connection with the Antitrust Litigation. Id. at 3 (Am. Compl. ¶¶ 12-13). The Allied World E&O Policy has beenexhausted and OneBeacon has started to reimburse BCBSKS for defense expenses under the OneBeacon Policy, which follows the form of the Allied World E&O Policy. Id. at 3, 26 (Am. Compl. ¶¶ 12, 79-80); Doc. 55-3 at 10. OneBeacon seeks a judicial declaration about the OneBeacon Policy and whether it must provide coverage under it before BCBSKS exhausts the Allied World Primary D&O Policy. Doc. 55 at 3 (Am. Compl. ¶ 13). OneBeacon contends that its coverage is not triggered under the OneBeacon Policy terms until BCBSKS exhausts the Allied World Primary D&O Policy. Id. at 28 (Am. Compl. ¶ 85). It also seeks other declarations about BCBSKS's and OneBeacon's rights and obligations under the OneBeacon Policy, and OneBeacon's subrogation rights against BCBSA and Allied World. Id. at 3-4, 6, 26-28 (Am. Compl. ¶¶ 14-19, 27-28, 80-83).

OneBeacon also contends its coverage is not triggered yet because BCBSA must indemnify BCBSKS, and OneBeacon's coverage is only in excess of that indemnification under the OneBeacon Policy's terms. Doc. 55 at 28-29 (Am. Compl. ¶ 86). OneBeacon alleges that, under the License Agreements, BCBSA has agreed to defend and hold BCBSKS harmless against claims arising from activities like those alleged in the Antitrust Litigation. Doc. 55 at 3, 24, 25 (Am. Compl. ¶¶ 9, 67, 77). But, BCBSKS "has not tendered its defense or sought indemnity from BCBSA" under the License Agreements' terms, nor has BCBSA "paid any defense expenses" on BCBSKS's behalf in connection with the Antitrust Litigation. Id. at 3, 25 (Am. Compl. ¶¶ 10-11, 78). OneBeacon seeks a declaration about its subrogation right under the OneBeacon Policy, and monetary relief against BCBSA "by way of subrogation for defense expenses" that OneBeacon has reimbursed BCBSKS for prematurely. Id. at 6 (Am. Compl. ¶¶ 27-28).

OneBeacon asserts one count against BCBSA—Count IX (Subrogation against BCBSA). Id. at 41-42. To place this subrogation claim in context, the court briefly summarizes the relevant OneBeacon Policy terms, the License Agreements' terms, and the First Amended Complaint's allegations about the Antitrust Litigation that led BCBSKS to request coverage from OneBeacon, and OneBeacon to assert its subrogation claim against BCBSA.

A. The OneBeacon Policy Terms

The OneBeacon Policy contains several provisions relevant to the declarations OneBeacon seeks and its subrogation claim.2 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]3 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. 55-3 at 10 (emphasis in original). The OneBeacon Policy defines "Underlying Insurance" as the Allied World E&O Policy. Id. at 3, 11.

The OneBeacon Policy also states 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." Id. 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 applicablelimit of liability of the Underlying Insurance has been paid by the issuer(s) of the Underlying Insurance." Id. at 11.

Meanwhile, the Allied World E&O Policy issued to BCBSKS, from which the OneBeacon Policy follows form, contains a provision entitled "Other Insurance; Other Indemnification." It provides:

This Policy shall be excess of and shall not contribute with:
(a) any other insurance or plan or program of self-insurance (whether collectible or not), unless such other insurance or self-insurance is specifically stated to be in excess of this Policy; and
(b) any indemnification to which an Insured is entitled from any entity other than another Insured.
This Policy shall not be subject to the terms of any other policy of insurance or plan or program of self-insurance.

Doc. 55-1 at 24.

The Allied World E&O Policy, and the OneBeacon Policy by following form, provide coverage for any "Loss which the Insured is legally obligated to pay as a result of a Claim" made during the policy period. Doc. 55-1 at 52 (insuring agreement). Under the "Conditions" of the Allied World E&O Policy, the Underwriter has no duty to defend any Claims, but "[u]pon written request of the Named Insured, the Underwriter will pay or reimburse, on a current basis, Defense Expenses for which this Policy provides coverage. Except for such Defense Expenses, the Underwriter will pay Loss only on the final disposition of a Claim." Doc. 55-1 at 26.

The OneBeacon Policy also contains a "Subrogation and Recoveries" clause. It provides:

In the event of any payment under this Policy, the Underwriter will be subrogated to all the Insured's rights of recovery against any person or entity, and the Insured shall execute and deliver all instruments and papers and do whatever else is necessary to secure such rights. The Insured shall do nothing that may prejudice the Underwriter's position or potential or actual right of recovery. The obligations of the Insured under this provision shall survive the expiration or termination of this Policy. The expenses of all such recovery proceedings shall be first subtractedfrom the amount of any recovery and the remaining amount so recovered shall be apportioned in the inverse order of payment to the extent of actual payment.

Doc. 55 at 23-24 (Am. Compl. ¶ 66).4 The Allied World E&O Policy, from which the OneBeacon Policy follows form, contains a provision entitled "Subrogation." It states:

In the event of any payment hereunder, the Underwriter shall be subrogated to the extent of any payment to all of the rights of recovery of the Insureds. The Insureds shall execute all papers and do everything necessary to secure such rights, including the execution of any documents necessary to enable the Underwriter effectively to bring suit in their name. The Insureds shall do nothing that may prejudice the Underwriter's position or potential or actual rights of recovery. The obligations of the Insureds under this CONDITION (F) shall survive the cancellation or other termination of this Policy.

Doc. 55-1 at 56-57.

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's coverage is triggered—including coverage from BCBSA under the License Agreements and coverage from Allied World under the Allied World Primary D&O Policy—because the OneBeacon Policy's Other Insurance/Other...

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