Bedivere Ins. Co. v. Blue Cross & Blue Shield of Kan., Inc.

• Decision Date: 30 September 2020
• Docket Number: Case No. 18-2371-DDC-JPO
• Citation: 491 F.Supp.3d 929
• 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

491 F.Supp.3d 929

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.

Case No. 18-2371-DDC-JPO

United States District Court, D. Kansas.

Signed September 30, 2020

Brent N. Coverdale, James D. Griffin, Scharnhorst Ast Kennard Griffin, PC, Kansas City, MO, Jared Kyle LeBeau, Pro Hac Vice, Richard Randal Crispen, Pro Hac Vice, Sheppard Mullin Richter & Hampton LLP, San Diego, CA, Justine M. Casey, Pro Hac Vice, Sheppard, Mullin, Richter & Hampton LLP, Costa Mesa, CA, for Plaintiff.

Barry L. Pickens, Spencer Fane LLP, Overland Park, KS, Caitlin O. Young, Pro Hac Vice, Dan J. Hofmeister, Jr., Pro Hac Vice, Kevin D. Tessier, Pro Hac Vice, Reed Smith, LLP, Chicago, IL, Douglas M. Weems, Spencer Fane LLP, Kansas City, MO, Andrew M. Weiner, Pro Hac Vice, Reed Smith, LLP, Washington, DC, for Defendant Blue Cross Blue Shield of Kansas, Inc.

Amanda D. Proctor, Pro Hac Vice, Carlton Fields, PA, Atlanta, GA, Christopher M. Harper, John Lavelle Mullen, Franke Schultz & Mullen, PC, Kansas City, MO, Heidi Hudson Raschke, Pro Hac Vice, Carlton Fields Jordon Burt, P.A., Tampa, FL, Steven J. Brodie, Pro Hac Vice, Carlton Fields, P.A., Miami, FL, for Defendant Allied World Surplus Lines Insurance Company.

MEMORANDUM AND ORDER

Daniel D. Crabtree, United States District Judge Before the court is defendant Blue Cross and Blue Shield of Kansas, Inc.’s ("BCBSKS") Motion for Reconsideration, or in the Alternative, to Certify Questions (Doc. 57). Plaintiff Bedivere Insurance Company f/d/b/a OneBeacon Insurance Company ("OneBeacon") has responded (Doc. 62). And BCBSKS has replied (Doc. 63). For reasons explained below the court grants, in part, BCBSKS's Motion for Reconsideration but denies BCBSKS's Motion to Certify Questions.

I. Procedural History

OneBeacon filed this lawsuit against defendants BCBSKS and Allied World Surplus Lines Insurance Company f/k/a Darwin Select Insurance Company¹ ("Allied World") on July 17, 2018. Doc. 1. OneBeacon seeks a variety of declaratory relief against BCBSKS and Allied World under 28 U.S.C. § 2201. Id. ; see also Doc. 55 (First Amended Complaint seeking declaratory and monetary relief). On August 30, 2018, BCBSKS moved to dismiss all six Counts asserted against it in the original Complaint. Doc. 17. Allied World moved to dismiss the single Count against it 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-DDC-JPO (the "Related Case"), which also is pending before this court.² For a period, the case was stayed while the parties mediated their claims in both lawsuits. Doc. 39 at 3. Meditation was unsuccessful. Doc. 43. And, on September 30, 2019, the court entered a Memorandum and Order ("September 2019 Order") denying BCBSKS's and Allied World's Motions to Dismiss. Doc. 52.

That Order also granted OneBeacon leave to file a First Amended Complaint. Id. And OneBeacon filed its First Amended Complaint on October 14, 2019. Doc. 55.

BCBSKS now asks the court to reconsider one portion of the September 2019 Order—the court's denial of BCBSKS's motion to dismiss Count I. Doc. 57 at 2. The court briefly summarizes the facts relevant to the claim in that count, below.

II. Factual Background

The court takes the following facts from OneBeacon's Complaint (Doc. 1) and attached supporting documents and views them in the light most favorable to OneBeacon—the same standard it applied when considering BCBSKS's Motion to Dismiss. 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. 1 at 1–2 (Compl. ¶¶ 2–3). BCBSKS requested reimbursement of defense expenses and indemnity 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, which have been "consolidated for pretrial discovery proceedings in the Northern District of Alabama." Id. at 2 (Compl. ¶¶ 3–5). 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.³ Id. (Compl. ¶ 6). BCBSKS also seeks reimbursement of its defense expenses under the OneBeacon Policy. Id. at 3 (Compl. ¶¶ 9–10).⁴

Count I against BCBSKS and Allied World requests a judicial declaration that BCBSKS must exhaust "all primary insurance" before the OneBeacon Policy is triggered, including coverage from Allied World under the Allied World D&O Policy. Doc. 1 at 21–22 (Compl. ¶¶ 70–78); see also Doc. 55 at 28–29 (Am. Compl. ¶¶ 84–91) (seeking a declaratory judgment that "the OneBeacon Policy is excess and that BCBS-KS must properly exhaust all other insurance and indemnity to which it is entitled before the OneBeacon Policy is triggered").

The OneBeacon Policy contains several provisions relevant to Count I's request for declaratory relief.⁵ 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]^{[6 ]} 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 (emphasis in original). The OneBeacon Policy defines "Underlying Insurance " as the Allied World E&O Policy. Id. at 3, 11. As OneBeacon acknowledges, the OneBeacon Policy makes no reference to Allied World's 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, the Allied World E&O Policy issued to BCBSKS, from which the OneBeacon Policy follows form, contains a provision entitled "Other Insurance; Other Indemnification ." That provision provides, "This Policy"—meaning Allied World's E&O 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. 1-1 at 24.

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 insurance pursuant to which any other insurer has a duty to defend a Claim for which this Policy may be obligated to pay Loss . This Policy shall not be subject to the terms and conditions of any other insurance policy.

Doc. 1-2 at 45–46.

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. 1-1 at 52 (insuring agreement). "Loss " includes "Defense Expenses and any monetary amount which an Insured is legally obligated to pay as a result of a Claim " but does not include punitive or exemplary or multiplied damages for Claims for Antitrust Activity . Id. at 7. 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 ." Id. at 26.

The Allied World D&O Policy generally provides coverage during the policy period for, among other coverage, Loss arising from a Claim (i) against any Insured Person or the Company for a Wrongful Act or (ii) against the Insureds for Antitrust Activities ....