Ironshore Speciality Ins. Co. v. Akorn, Inc.
| Decision Date | 11 June 2021 |
| Docket Number | Case No. 17 C 3541 |
| Citation | 543 F.Supp.3d 605 |
| Parties | IRONSHORE SPECIALITY INSURANCE COMPANY, Plaintiff, v. AKORN, INC. and Akorn Sales, Inc., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Ronald P. Schiller, Sharon F. McKee, Pro Hac Vice, Hangley Aronchick Segal Pudlin & Schiller, Philadelphia, PA, Scott Andrew Hanfling, Timothy W. Kelly, Marc J. Pearlman, Kerns, Frost & Pearlman, L.L.C., Bannockburn, IL, for Plaintiff.
Amber Joy Simon, Pro Hac Vice, Lauren E. Tucker McCubbin, Pro Hac Vice, Polsinelli PC, Kansas City, MO, Anthony C. Porcelli, Sohil M. Shah, Polsinelli PC, James R. Figliulo, Peter A. Silverman, Melissa Nicole Eubanks, Figliulo & Silverman P.C., Chicago, IL, for Defendants.
After a Georgia jury returned a verdict of over $20.5 million in compensatory and punitive damages against Akorn, Inc., the company sought to recover part of the judgment—specifically, part of the punitive damages award—from Ironshore Specialty Insurance Company, Akorn's excess liability insurer. Believing that the punitive damages were not covered by its policy, Ironshore filed this declaratory judgment action seeking a determination of its rights and duties to provide coverage to Akorn. Akorn and its subsidiary, Akorn Sales, Inc., have counterclaimed against Ironshore for breach of contract. Both parties have moved for summary judgment. For the reasons stated below, the Court grants Ironshore's motion and denies Akorn's motion.
"Summary judgment is appropriate when the admissible evidence shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Barnes v. City of Centralia , 943 F.3d 826, 830–31 (7th Cir. 2019) (internal quotation marks omitted). Except where otherwise noted, the following facts are not in dispute.
Akorn is a pharmaceutical corporation organized under the law of Louisiana with its principal place of business in Illinois. Akorn Sales is incorporated in Delaware, and its principal place of business is also in Illinois.
At the time the relevant events occurred, Akorn manufactured a prescription drug called methylene blue. As with many medications, using methylene blue is not without risks, including the possibility of adverse interactions. In 2011, the U.S. Food and Drug Administration issued two drug safety alerts for methylene blue. These alerts were preceded by and based on reports of serious central nervous system reactions when methylene blue was given to patients who were also taking serotonergic psychiatric medications. Among the classes of drugs the FDA called serotonergic psychiatric medications were selective norepinephrine
reuptake inhibitors or SNRIs. Effexor XR, generically known as venlafaxine, is an SNRI.
In its first drug alert, the FDA explained that when methylene blue is given to patients taking serotonergic psychiatric medication, some patients developed serotonin syndrome
. Serotonin syndrome is the buildup of high levels of serotonin in the brain. This buildup is toxic, and it can cause mental changes (e.g., confusion or memory problems), muscle problems, and trouble with coordination, among other things. The FDA's alert noted the agency had received reports that patients treated with both methylene blue and serotonergic psychiatric medications had developed several neurological and autonomic symptoms, including coma.
The first FDA alert also warned that some healthcare professionals may not have realized that methylene blue has monoamine oxidase inhibitor (MAOI) properties. In its second drug alert, the FDA specifically noted that most of the adverse events regarding methylene blue occurred when individuals taking serotonergic psychiatric medications were undergoing parathyroid surgery
, "which involved the intravenous administration of methylene blue as a visualizing agent."
Methylene blue is a "grandfathered" drug and is not subject to the FDA's approval process. Moreover, and for the same reason, the FDA has no authority to regulate or mandate labeling for methylene blue. Instead, Akorn had sole authority to decide what information to include in the drug's label. After receiving and reviewing the FDA's first drug alert, Akorn declined to change methylene blue's label to include a warning about the adverse interaction between the drug and serotonergic psychiatric medications or to inform medical professionals that methylene blue has MAOI properties. The decision to keep the label the same was made by Sam Boddapati, Akorn's senior vice president of regulatory affairs.
In 2013, Ann Pope underwent parathyroid surgery
to remove a growth. Her surgeon used methylene blue as a visualization agent. Akorn manufactured and sold the methylene blue the surgeon used. Unfortunately, Pope had been using a serotonergic psychiatric medication—Effexor XR. In addition, neither her surgeon nor the pharmacist who filled the methylene blue prescription knew about the FDA drug alerts. As a result of the interaction between methylene blue and Effexor XR, either during or post-surgery Pope developed a severe form of serotonin syndrome. She was placed into a medically induced coma and hospitalized for 18 days. In addition to the pain and suffering she experienced, the syndrome left her with permanent disabling injuries, including cognitive impairment.
In 2015, Pope and her husband sued Akorn and Akorn Sales in Georgia state court.1 The Popes were Georgia residents and sued under Georgia law. The theory of the Pope case was that Akorn knowingly and intentionally omitted information about the serious risk of bodily harm to patients who were prescribed both a serotonergic psychiatric medication and methylene blue. In 2017, a jury found Akorn 100 percent liable for Pope's injuries and awarded her over $2.7 million in compensatory damages; her husband was awarded more than $275,000 in compensatory damages for loss of consortium. The jury also awarded the Popes $17.5 million in punitive damages. The awards were affirmed by the Georgia Court of Appeals, and the Georgia Supreme Court declined to review the case. Akorn has since satisfied the Pope judgment.
Akorn's primary insurer was Chubb, but the Chubb policy limited Akorn's coverage to $10 million, inclusive of defense costs. Chubb defended Akorn and paid the balance of its policy after the affirmance. The Ironshore policy promised coverage of up to $15 million in excess of the Chubb policy. Throughout the pendency of the Pope case, Akorn relied on Chubb to evaluate Akorn's possible liability and exposure. According to Akorn, neither it nor Chubb expected the award amount to exceed Chubb's coverage.2 Because of that assumption, Akorn did not give notice of the pending suit to Ironshore until after the verdict was announced. Ironshore acknowledged receipt of Akorn's claim a few days later.
In Akorn's telling, Ironshore never issued a reservation of rights letter or gave notice of any reason it might deny coverage. However, according to Ironshore, after it received notice of the Pope verdict, it acknowledged the Popes’ claim and expressly reserved all its rights. Akorn admits that Ironshore "sent a boiler-plate receipt of the claim" and that Ironshore stated that it had expressly reserved its rights. Akorn's SOF ¶ 65. Akorn denies, however, that this amounted to a proper reservation of rights. In any event, Akorn's defense counsel told the Georgia trial court that there were no issues regarding insurance coverage. Shortly thereafter, Ironshore filed this suit arguing that Akorn's punitive damages are not insurable under Illinois law and, alternatively, that the punitive damages awarded in Pope are not covered by the Ironshore policy.
Though Ironshore's initial complaint was filed in 2017, both parties asked to stay these proceedings while the Pope case was appealed. The Court granted that motion and also granted the parties’ later motion to dismiss the action without prejudice and with leave to reinstate. The case was reopened in 2019.
When courts consider cross-motions for summary judgment, the "ordinary standards" remain in effect. Blow v. Bijora, Inc. , 855 F.3d 793, 797 (7th Cir. 2017). "It is axiomatic that the first step in the summary-judgment process is to ask whether the evidentiary record establishes a genuine issue of material fact for trial." James v. Hale , 959 F.3d 307, 310 (7th Cir. 2020). "A ‘material fact’ is one identified by the substantive law as affecting the outcome of the suit." Hanover Ins. Co. v. N. Bldg. Co. , 751 F.3d 788, 791 (7th Cir. 2014). A genuine dispute as to any material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In considering a motion for summary judgment, courts must view the facts "in the light most favorable to the party opposing the ... motion." Scott v. Harris , 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007).
Generally, the party seeking summary judgment bears the initial responsibility of establishing there is no genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When a movant seeks summary judgment on a claim "as to which it bears the burden of proof, it must lay out the elements of the claim, cite the facts which it believes satisfies these elements, and demonstrate why the record is so one-sided as to rule out the prospect of a finding in favor of the non-movant on the claim." Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund , 778 F.3d 593, 601 (7th Cir. 2015).
The second step in the summary-judgment process is determining whether the moving party is entitled to judgment as a matter of law. See Barnes , 943 F.3d at 830. When a...
To continue reading
Request your trial