Nat'l Sur. Corp.. v. Immunex Corp..
| Decision Date | 29 August 2011 |
| Docket Number | No. 64712–1–I.,64712–1–I. |
| Citation | 162 Wash.App. 762,256 P.3d 439 |
| Court | Washington Court of Appeals |
| Parties | NATIONAL SURETY CORPORATION, Respondent/Cross Appellant,v.IMMUNEX CORPORATION, Appellant/Cross Respondent. |
OPINION TEXT STARTS HERE
James Richard Murray, Dickstein Shapiro LLP, Washington, DC, Cameron H. Faber, Dickstein Shapiro LLP, Linda D. Kornfeld, Damon A. Thayer, Jenner & Block LLP, Los Angeles, CA, for Appellant/Cross–Respondent.Jerret E. Sale, Deborah Lynn Carstens, Matthew J. Sekits, Bullivant Houser Bailey PC, Catherine Wright Smith, Smith Goodfriend PS, Seattle, WA, Ronald J. Clark, Bullivant Houser Bailey PC, Portland, OR, for Respondent/Cross–Appellant.APPELWICK, J.
[162 Wash.App. 766] ¶ 1 Immunex challenges the trial court ruling that National Surety does not have a duty to defend in several lawsuits challenging Immunex's use of an inflated average wholesale price. National Surety cross appeals the trial court's order that it compensate Immunex for defense costs until the time of the court's ruling on the duty to defend unless it can show prejudice at trial. We affirm.
¶ 2 Immunex 1 Corporation and many other drug manufacturers were sued in at least 23 complaints (AWP litigation) alleging several claims relating to Immunex artificially inflating its average wholesale price (AWP). The claims included RICO (Racketeer Influence and Corrupt Organizations Act, 18 U.S.C. §§ 1961– 1968) claims, state unfair trade and protection statutes violations, civil conspiracy, fraud, and breach of contract.
¶ 3 To summarize the underlying litigation, physicians and other providers of drugs are reimbursed by Medicare and other third party payors based on the AWP of the drug. Manufacturers periodically report the AWP of drugs to publishers, who then list that price. Immunex and other drug manufacturers allegedly engaged in a scheme to fraudulently manipulate the AWP of their drugs. As part of this scheme, the claims allege that Immunex reported inflated AWPs which materially misrepresented the actual prices paid to Immunex for prescription drugs by drug providers such as hospitals, pharmacies, and physicians. As a result, drug providers were reimbursed significantly more money than they paid for Immunex manufactured drugs. Also, the claims allege Immunex advertised the difference or “spread” in prices as a reason why those in the distribution chain should sell its drugs, thus increasing its share of the generic drug market. The plaintiffs in the AWP cases include consumers, third party payors, government entities, and consumer rights groups.
¶ 4 National Surety Corporation insured Immunex under an umbrella and excess liability insurance policy. The policy periods at issue are from September 1, 1998 to September 1, 2002. On August 21, 2001, Immunex informed National Surety that potential claims had arisen against Immunex, specifically a qui tam investigation 2 by the United States Department of Health and Human Services, as well as government investigations initiated by several states. Immunex also notified National Surety that the federal investigation related to a 1995 lawsuit. But, Immunex stated that it could not release information about the investigations because the government required a signed confidentiality agreement. National Surety acknowledged receipt of that notice on October 17, 2001. National Surety asked Immunex to send copies of the suit papers to determine coverage when available. On February 14, 2003, Immunex sent a status report, updating National Surety on the status of the investigations but not notifying National Surety of the AWP lawsuits or forwarding documentation related to those lawsuits. The first AWP litigation complaint was filed on November 27, 2001.
¶ 5 On October 3, 2006, Immunex tendered defense of the AWP suits to National Surety and sought payment for the defense expenditures it had incurred. On October 30, 2006, National Surety responded, disclaiming the duty to defend based on failure to provide suit papers and requesting the necessary documentation. On December 12, 2006, Immunex sent copies of complaints, motions, and orders for some AWP cases.
¶ 6 The parties continued to discuss coverage. In March 2008, National Surety denied coverage but agreed under a reservation of rights to provide a defense with the right to obtain reimbursement of the amounts paid if it was determined by a court that there was no coverage or no duty to defend. Immunex alleges that National Surety has not paid any defense costs incurred in the AWP litigation.
¶ 7 Also in March 2008, National Surety filed this action, seeking a declaratory judgment that National Surety owed no duties to Immunex under the policy. In June 2008, the trial court granted Immunex's motion for a stay to prevent National Surety's declaratory action from proceeding until the underlying litigation had been resolved. The stay was apparently granted before the parties conducted any discovery. On December 16, 2008, the stay was lifted solely to permit the parties to present motions on the issue of National Surety's duty to defend.
¶ 8 Both parties presented motions for partial summary judgment on the issue of National Surety's duty to defend Immunex in the AWP litigation. On April 15, 2009, the trial court granted National Surety's motion for summary judgment, determining that National Surety had no duty to defend.
¶ 9 After stipulating to again lifting the stay, National Surety filed a motion for summary judgment regarding indemnity,3 an alternative motion for summary judgment regarding late notice, and a motion for summary judgment regarding the payment of defense costs in July 2009. Immunex also filed a motion for partial summary judgment regarding the payment of defense fees and costs. The trial court denied National Surety's motion regarding payment of defense fees and costs and granted Immunex's motion regarding same, finding that that unless National Surety could prove prejudice from late notice at trial, it could be obligated to pay defense costs until the date the court confirmed the claims were not covered. The trial court denied National Surety's motion to reconsider. The trial court then entered partial final judgment pursuant to CR 54(b) in order to permit this appeal to proceed.
¶ 10 Immunex appeals. National Surety cross appeals.
¶ 11 Immunex alleges that the trial court erred when it granted summary judgment to National Surety on the basis that National Surety had no duty to defend Immunex in the AWP litigation. Immunex contends that National Surety owed a duty to defend Immunex against the AWP litigation under the “discrimination” provision of the policy.
¶ 12 A motion for summary judgment presents a question of law reviewed de novo. Osborn v. Mason County, 157 Wash.2d 18, 22, 134 P.3d 197 (2006). A trial court grants summary judgment if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. CR 56(c).
¶ 13 Pursuant to the “personal injury” coverage within the policy at issue as modified by the endorsement,4 National Surety was required to provide coverage for “Personal and Advertising injury that is caused by an offense arising out of [Immunex's] business but only if the offense was committed during our Policy Period.” 5 The policy defined “Personal and Advertising injury” as “injury, including consequential Bodily Injury, arising out of one or more of the following offenses[, including] Discrimination.” Neither the policy nor the endorsement defined “offense” or “discrimination.”
[162 Wash.App. 771] ¶ 14 The trial court found:
“Discrimination” means more than a distinction or difference. The AWP complaints do not allege damages caused by discrimination. The complaints claim that Immunex, with or without the complicity of providers, gave false pricing information to those who paid the providers for drugs.
The trial court granted partial summary judgment in favor of National Surety, concluding that National Surety did not have a duty to defend Immunex in the AWP litigation.
¶ 15 Immunex alleges that a “predominant theme” of the underlying AWP litigation is discrimination, taking three forms: discrimination in pricing between AWP plaintiffs and providers, discrimination in pricing among providers, and a disparate impact on older Americans. National Surety contends that the policy was not triggered because no AWP plaintiff alleged “discrimination” claims and each complaint sought recovery based solely on fraudulent overstatement of AWPs. Interpretation of an insurance policy is a question of law reviewed de novo. Woo v. Fireman's Fund Ins. Co., 161 Wash.2d 43, 52, 164 P.3d 454 (2007).
¶ 16 The criteria for interpreting insurance policies in Washington are well settled. We construe insurance policies as contracts. Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wash.2d 654, 665, 15 P.3d 115 (2000). We consider the policy as a whole, and we give it a “ ‘fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance.’ ” Id. at 666, 15 P.3d 115 (quoting Am. Nat'l Fire Ins. Co. v. B & L Trucking & Const. Co., 134 Wash.2d 413, 427–28, 951 P.2d 250 (1998)). Most importantly, if the policy language is clear and unambiguous, we must enforce it as written; we may not modify it or create ambiguity where none exists. Quadrant Corp. v. Am. States Ins. Co., 154 Wash.2d 165, 171, 110 P.3d 733 (2005). A clause is only considered ambiguous if it is susceptible to two or more reasonable interpretations. Id. If an ambiguity exists, the clause is construed in favor of the insured. Id. at 172, 110 P.3d 733. However, “the expectations of the insured cannot override the plain language of the contract.” Id.
[162 Wash.App. 772] ¶ 17 The trial court found, “The AWP complaints do not allege damages caused by discrimination.” 6 Immunex argues that...
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