Phila. Indem. Ins. Co. v. U.S. Olympic Comm., Civil Action No. 19-cv-01231-CMA-KMT

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Writing for the CourtKathleen M. Tafoya, United States Magistrate Judge
Citation418 F.Supp.3d 673
Docket NumberCivil Action No. 19-cv-01231-CMA-KMT
Decision Date25 October 2019

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Civil Action No. 19-cv-01231-CMA-KMT

United States District Court, D. Colorado.

Signed October 25, 2019

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Lelia Kathleen Chaney, Lambdin & Chaney, LLP, Denver, CO, for Plaintiff.

Catherine Cochrane Crane, Holland & Hart LLP, Greenwood Village, CO, Jeffrey Alan Kiburtz, Covington & Burling LLP, Los Angeles, CA, for Defendant.


Kathleen M. Tafoya, United States Magistrate Judge

This matter is before the court on "Defendant United States Olympic Committee's Motion to Stay Proceedings" ("Mot.") [Doc. No. 10] filed May 31, 2019. "Plaintiff's Response to Defendant's Motion to Stay Proceedings" ("Resp.") [Doc. No. 17] was filed June 14, 2019, and "Defendant United States Olympic Committee's Reply in Support of Motion to Stay Proceedings"("Reply") [Doc. No. 21] was filed June 21, 2019. A scheduling conference was noticed for July 9, 2019, but was vacated pending ruling on the instant motion. [Doc. No. 15.]

In this insurance rescission case brought by Philadelphia Indemnity Insurance Company ("PIIC"), Defendant United States Olympic Committee ("USOC") requests that the court stay proceedings until after

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the resolution of the numerous underlying cases to which the insurance policies at issue may or may not be applicable. Defendant claims that allowing PIIC to proceed at this time would impermissibly prejudice the USOC in defending the cases below and as grounds claims 1) this case would not "fully and finally resolve the uncertainty and controversy as to all parties with a substantial interest in the matter" including numerous alleged plaintiffs who claim to be victims of abuse as well as defendant in many of the cases, USA Gymnastics, the national governing body for gymnastics, which is currently in the midst of bankruptcy proceedings (Mot. at 2), and 2) this case is "inextricably intertwined with the claims currently pending against the USOC in courts across the country – the vast majority of which have been stayed as part of USA Gymnastics' bankruptcy."1 (Id. ) Plaintiff responds that forcing PIIC to fund the defense for multiple tort actions bought in numerous jurisdictions when PIIC is claiming rescission of the insurance coverage in whole as a result of alleged misrepresentations by the USOC prejudices PIIC. (Resp at 1.)


The USOC is a corporation whose fifteen authorized purposes include, among others,

(2) to coordinate and develop amateur athletic activity in the United States, directly related to international amateur athletic competition, to foster productive working relationships among sports-related organizations;

(3) to exercise exclusive jurisdiction, directly or through constituent members of committees, over--

(A) all matters pertaining to United States participation in the Olympic Games, the Paralympic Games, and the Pan-American Games, including representation of the United States in the games;


(15) to promote a safe environment in sports that is free from abuse, including emotional, physical, and sexual abuse, of any amateur athlete.

36 U.S.C.A. § 220503 (See Pub. L. 115-126, Title II, § 201, Feb. 14, 2018, 132 Stat. 320.) The USOC "shall establish and maintain provisions with respect to its governance and the conduct of its affairs for reasonable representation of -- (1) amateur sports organizations recognized as national governing bodies and paralympic sports organizations ..." 36 U.S.C. § 220504(1). For any sport which is included on the program of the Olympic Games, the Paralympic Games, or the Pan-American Games, the USOC "is authorized to recognize as a national governing body ["NGB"] ... [one] amateur sports organization....." 36 U.S.C. § 220521(a). "For the sport that it governs, a national governing body may --", inter alia ,

(2) establish national goals and encourage the attainment of those goals;

(3) serve as the coordinating body for amateur athletic activity in the United States;

(4) exercise jurisdiction over international amateur athletic activities and sanction international amateur athletic competition held in the United States and sanction the sponsorship of international amateur athletic competition held outside the United States;

(5) conduct amateur athletic competition, including national championships, and international amateur athletic competition in the United States, and establish procedures for determining eligibility
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standards for participation in competition, ...;

36 U.S.C. § 220523(a).

Within the past several years numerous parties have filed suit seeking to hold the USOC legally responsible for the sexual abuse committed against Olympic athletes, including that perpetrated by disgraced physician and convicted felon Larry Nassar against gymnasts as well as individuals affiliated with two other sports, taekwondo and weightlifting. (Mot., Ex. 1, [Doc. No. 10-1] underlying lawsuit list.) These lawsuits are typically predicated on allegations that the USOC knew or should have known about, and done more to stop, abuse taking place within those sports. PIIC is one of the USOC's insurers.2

In this rescission case PIIC states that the two policies it issued to USOC contained the application question, "Has your organization ever had as (sic) incident which resulted in an allegation of sexual abuse?," to which the USOC responded, "No." and upon which the USOC further elaborated, "Based on the USOC's understanding of appropriate definitions of sexual abuse, there have been no incidents." (Compl. [Doc. No. 1] at ¶¶ 15-17). PIIC claims the USOC controls the NGBs, including USA Gymnastics, to the point of being legally indistinguishable from them (id. at ¶¶ 24–26), that the USOC knew about and should have done something different concerning abuse occurring in various Olympic sports (id. at ¶¶ 30–54), and that the USOC had knowledge of Nassar's criminal conduct when it applied for insurance from PIIC in 2015 (id. at ¶ 55).3 PIIC claims that its "decision to issue the policies was made in reliance on the USOC's representations and it would not have issued the policies if it had truthful information." (Id. at ¶ 62.) PIIC claims "the USOC concealed material facts with the intent that PIIC take a course of action – namely, issue liability insurance to cover sexual or physical abuse or molestation – that it would not have taken if PIIC had known the actual facts. (Id. at ¶ 85.) PIIC seeks to rescind the insurance policies it issued by returning the $130,445.00 premium paid for policy number PHPK1330247, and the $27,760.00 premium paid for policy number PHUB498238. (Id. at ¶ 80.)

The USOC claims, inter alia , that the underlying lawsuits confuse and conflate the USOC with the NGBs, implicitly suggesting that the USOC is operationally and legally responsible for the more than three million NGB members and tens of thousands of NGB staff and volunteers. (Mot. at 2.) The legal relationship between the USOC and the NGBs and their staff and athletes participating in the sports represented is obviously an important liability component of both this case – which concerns the contract of insurance between

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the USOC and PIIC – and the underlying cases, where often both the USOC and the relevant NGB(s) and others are defendants. In this case, however, the focus is on what was meant by "your organization" at the time when the USOC applied for and obtained the PIIC insurance policies verses the focus of the underlying cases on 1) what, if anything, the USOC knew or should have known about allegations of abuse in and through the various NGBs and 2) the USOC's legal obligations, if any, to recognize and stop abuse within both the governance, management and participation in Olympic sports through the NGBs. While the issues are somewhat interknit, especially concerning what the USOC was legally required to know and address with respect to alleged athlete abuse in Olympic sports at the time it obtained the PIIC insurance, they are not interdependent.


A. Colorado River Abstention

The parties both address the ability a District Court to stay a federal suit out of deference to parallel litigation brought in state court pursuant to Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). See also Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 13, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). In Colorado River the government brought suit in federal court to adjudicate federal water rights, suing 1000 non-federal water users. A defendant in that suit sought to join the United States in a state-court proceeding for the comprehensive adjudication and administration of all water rights within the river system that was the subject of the federal court suit. The Supreme Court ultimately held that dismissal of the federal action was proper on "considerations of ‘(w)ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.’ " Colo. River , 424 U.S. at 817, 96 S.Ct. 1236.


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