SavaSeniorCare, LLC v. Starr Indem. & Liab. Co.

• Decision Date: 29 September 2020
• Docket Number: Civil Action No. 1:18-cv-01991-SDG
• Citation: 491 F.Supp.3d 1275
• Parties: SAVASENIORCARE, LLC, Plaintiff/Counterclaim Defendant, v. STARR INDEMNITY AND LIABILITY COMPANY, Defendant/Counterclaim Plaintiff, and Aspen American Insurance Company, Defendant/Counterclaim Plaintiff.
• Court: U.S. District Court — Northern District of Georgia

491 F.Supp.3d 1275

SAVASENIORCARE, LLC, Plaintiff/Counterclaim Defendant,

v. STARR INDEMNITY AND LIABILITY COMPANY, Defendant/Counterclaim Plaintiff,andAspen American Insurance Company, Defendant/Counterclaim Plaintiff.

Civil Action No. 1:18-cv-01991-SDG

United States District Court, N.D. Georgia, Atlanta Division.

Signed September 29, 2020

Anthony Paul Tatum, Shelby S. Guilbert, Jr., Joseph Matthew Englert, Melanie Christina Papadopoulos, Morgan Bridgman, King & Spalding, LLP, Atlanta, GA, for Plaintiff/Counterclaim Defendant.

James Henry Geiser, III, Pro Hac Vice, Troutman Pepper Hamilton Sanders LLP, Washington, DC, Kevin F. Kieffer, Troutman Sanders LLP, Irvine, CA, Thomas S. Hay, Alan Bakowski, Troutman Pepper Hamilton Sanders LLP, Atlanta, GA, for Defendant/Counterclaim Plaintiff Starr Indemnity and Liability Company.

James Michael Young, Sabrina Haurin, Bailey Cavalieri LLC, Columbus, OH, David L. Rusnak, Drew Eckl & Farnham, Atlanta, GA, for Defendant/Counterclaim Plaintiff Aspen American Insurance Company.

OPINION AND ORDER

Steven D. Grimberg, United States District Court Judge

This matter is before the Court on Plaintiff SavaSeniorCare's (Sava) motion for partial summary judgment [ECF 124] and Defendants Starr Indemnity and Liability Company's (Starr) and Aspen American Insurance Company's (Aspen) (collectively, the Insurers) respective motions to continue Sava's motion for partial summary judgment [ECF 133; ECF 140]. For the following reasons, Sava's motion is GRANTED and the Insurers’ motions are DENIED .

I. BACKGROUND

Unless otherwise noted, the following facts are not disputed by the parties or are supported by undisputed evidence in the record. In January 2013, Starr issued Policy No. SISIFNL20060613 to Sava for the initial policy period of January 21, 2013 through January 31, 2014 (the Starr Policy).¹ Pursuant to a "Mid-Term Run-Off Endorsement" that became effective on October 11, 2013, the Starr Policy provides coverage for Claims made during the October 11, 2013 through October 1, 2019 discovery period for acts allegedly committed before October 11, 2013.² The Starr Policy contains a $15 million aggregate policy limit of liability.³ Sava purchased an additional $10 million in excess insurance coverage from Aspen, Policy Number MCA9J6V13 (the Aspen Excess Policy).⁴ The Aspen Excess Policy only provides coverage after exhaustion of the $15 million coverage limits in the Starr Policy.⁵ The Aspen Excess Policy follows form to the Starr Policy, meaning that the Aspen Excess Policy generally provides coverage in accordance with the terms and conditions of the Starr Policy.⁶

The Starr Policy contains a coverage provision entitled the Directors & Officers Liability Coverage Section (D&O Section).⁷ In relevant part, the D&O Section provides: "The Insurer shall pay on behalf of the Company the Loss arising from a Claim first made during the Policy Period (or Discovery Period, if applicable) against the Company for any Wrongful Act, and reported to the Insurer in accordance with the terms of this policy."⁸ The term Wrongful Act means "with respect to the Company, any actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission or act by the Company."⁹

The Starr Policy requires Sava to provide Starr with timely notice of a Claim as a condition precedent to receiving insurance coverage.¹⁰ In relevant part, the notice of claim provision (hereafter, Notice Provision) states:

The Insured(s) shall, as a condition precedent to the obligations of the Insurer under this policy, give written notice of a Claim made against an Insured or an Occurrence, as applicable under the appropriate Coverage Section, to the Insurer at the address set forth in Item 9 of the Declarations. If mailed, the date of mailing shall constitute the date that such notice was given and proof of mailing shall be sufficient proof of notice.

With respect to the Directors & Officers Liability Coverage Section, the Insured(s) shall, as a condition precedent to the obligations of the Insurer under this policy, give written notice to the Insurer pursuant to this Clause 5, of a Claim, other than a Pre-Claim Investigation, made against an Insured as soon as practicable after the Company's general counsel or risk manager (or individuals with equivalent responsibilities) becomes aware of the Claim; however, in no event shall such notice be provided later than sixty (60) days after the expiration of the Policy Period (or Discovery Period, if applicable).¹¹

Endorsement 50 of the Starr Policy later amended the D&O Section with the following:

b.) Government Funding – Defense Costs Coverage

1. Loss shall not include the return of any funds received from any federal, state or local governmental agency and any interest, fines or penalties arising out of the return of such funds. However, solely in the event of a Claim(s) for Wrongful Acts arising out of the return, or request to return such funds, this policy shall pay Defense Costs up to an amount not to exceed $1,000,000 ("Government Funding Sublimit of Liability"). The Government Funding Sublimit of Liability shall be part of, and not in addition to, the Limit of Liability applicable to the Directors & Officers and Employment Practices Liability Coverage Section as set forth in Item 4 of the Declarations.¹²

Since 2011, Sava has been named in three qui tam lawsuits filed by plaintiff-relators in various jurisdictions, as well as in a consolidated action brought by the United States in the Middle District of Tennessee (collectively, the Qui Tam Actions).¹³ The lawsuits accuse Sava of violating the False Claims Act ( 31 U.S.C. § 3729, et seq. ) by allegedly submitting invoices for excessive or medically unnecessary services not covered by the Medicare program.¹⁴ Each of these actions was initially filed under seal.¹⁵ While the parties dispute the precise time Sava acquired knowledge or notice of the Qui Tam Actions, it is undisputed that the actions were not completely unsealed until October 28, 2015.¹⁶

On October 30, 2015, Sava notified Starr and Aspen of the Qui Tam Actions and requested insurance coverage for its defense costs.¹⁷ On January 19, 2016, Starr issued a coverage letter to Sava stating: "As discussed in detail below, we have reviewed the provisions of the Policy and confirm that Starr will provide the Insured with defense costs up to $1,000,000, pursuant to the Policy's Healthcare Coverage Extension-Anti-Trust Coverage Extension."¹⁸ Starr further explained that:

Based on our review ... the Wrongful Acts described [ ] appear to relate to the return of funds received by Sava from the United States Government for payment to Medicare ... together with any interest, fines or penalties arising out of the return of such funds. Accordingly, in accordance with Governmental Funding – Defense Costs Coverage, coverage ... under the Policy is limited only to the payment of Defense Costs up to an amount not to exceed $1,000,000 ("Government Funding Sublimit of Liability")....¹⁹

The letter also provided the following boilerplate disclaimer:

Starr continues to reserve all of its rights, remedies, and defenses for this matter under the Policy, in equity, and at law. Neither this letter nor any other prior or future act by or on behalf of Starr shall constitute a waiver of any of Starr's rights, remedies, or defenses. Please note that the foregoing analysis is not meant to be exhaustive as certain other potentially applicable provisions of the Policy that may similarly preclude or limit coverage under the Policy have not been addressed herein.²⁰

On March 4, 2016, Starr sent a second letter to Sava purporting to supplement its preliminary coverage determination.²¹ Like the first letter, Starr stated: "[W]e have reviewed the provisions of the Policy and confirm that Starr will provide the Insured with defense costs up to $1,000,000 pursuant to the Policy's Healthcare Coverage Extension-Anti-Trust Coverage Extension."²² Starr reiterated that "coverage ... under the Policy is limited only to the payment of Defense Costs up to an amount not to exceed $1,000,000 (‘Government Funding Sublimit of Liability’).").²³ This letter again contained a boilerplate reservation of rights disclaimer, but also referenced the following: "We note that the first of the Complaints was filed on August 26, 2011. Please advise on what date the Insured was first served with a copy of the Complaints or the Consolidated Complaint."²⁴

On June 22, 2017, Starr sent Sava a third coverage letter.²⁵ Citing the Government Funding Sublimit of Liability provision, Starr again stated that its "coverage obligations under the Policy ... are limited to defense costs not to exceed $1,000,000."²⁶ The letter also stated:

As previously requested in our March 4, 2016 letter, please advise the date(s) on which the Insured was first served with a copy of the complaints, amended complaints, and the Consolidated Complaint.

Additionally, Starr reiterates its request for copies of the subpoenas mentioned by defense counsel during a conference call in April 2016 as well as the date(s) when these subpoenas were served. Starr reserves its rights with respect to the date that this matter first became a Claim first made against an Insured .²⁷

On November 2, 2017, Sava sent Starr a letter, requesting that "Starr reconsider and withdraw its preliminary position that Sava's coverage for the Qui Tam Claim is limited to $1 million," but also requesting that Starr "promptly reimburse Sava for the $1 million in Defense Costs that Starr has agreed that it owes."²⁸ On November 30, 2017, Starr sent its fourth letter to Sava and stated that "Starr is not in a position to reconsider its preliminary coverage analysis."²⁹ Starr again included a boilerplate reservation of rights disclaimer.³⁰

On April 6, 2018, Starr sent Sava a fifth coverage letter, purporting to further respond to Sava's November 2, 2017 letter.³¹ In this letter, Starr agreed "to advance...