Allied World Surplus Lines Insurance Company v. Blue Cross and Blue Shield of South Carolina
3:17-cv-00903
D.S.C.Aug 3, 2017Background
- Allied World (insurer) sought a declaratory judgment on coverage under E&O and D&O policies for underlying antitrust actions against BCBS and other Blue Plans.
- Policies contain an ADR clause requiring arbitration or mediation administered under AAA rules; if mediation occurs, no suit may be filed until 120 days after mediation terminates.
- Parties mediated before retired Judge Layn R. Phillips; dispute arose whether that mediation satisfied the ADR requirement (whether it was administered per AAA and whether mediation had terminated).
- BCBS moved to stay or dismiss for lack of ripeness/noncompliance with ADR; court treated the challenge as a Rule 12(b)(1) ripeness/subject-matter jurisdiction issue.
- The court found Judge Phillips never declared mediation ended, and communications from him or his staff within the relevant 21-day window meant mediation had not terminated under AAA rules.
- Because the contractual ADR condition precedent may still be satisfied, the court held the coverage dispute was not ripe and dismissed the complaint without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the action is ripe given the ADR/mediation condition precedent | Allied World contends mediation occurred and ADR requirement satisfied so suit is ripe | BCBS contends ADR (mediation termination and AAA administration) not satisfied, so suit is unripe | Court held dispute not ripe because mediation had not terminated and ADR condition may still be satisfied; dismissed without prejudice |
| Proper procedural vehicle: Rule 12(b)(1) ripeness challenge vs. Rule 12(b)(6) failure to meet condition precedent | Allied World implicitly prefers merits consideration | BCBS urged dismissal under Rule 12(b)(1) for lack of jurisdiction due to ripeness | Court treated motion as Rule 12(b)(1); ripeness is jurisdictional, so dismissal appropriate if unripe |
| Whether non-AAA-administered mediation waived strict AAA administration requirement | Allied World argued mediation before Judge Phillips satisfied ADR despite not being AAA-administered | BCBS argued lack of AAA administration undermined compliance | Court previously found parties waived strict AAA administration by voluntarily mediating before Judge Phillips; AAA administration not dispositive |
| Whether mediation terminated under AAA M-13 (including 21-day no-communication rule) | Allied World argued certain sessions/communications were irrelevant and that termination occurred | BCBS produced communications showing mediator or staff contacted parties within 21 days; argued mediation ongoing | Court held communications from mediator or staff within 21 days and absence of mediator declaration that mediation ended meant mediation had not terminated under AAA rule |
Key Cases Cited
- Arbaugh v. Y & H Corp., 546 U.S. 500 (U.S. 2006) (distinguishes jurisdictional defects from merits; Rule 12(b)(1) context)
- Adams v. Bain, 697 F.2d 1213 (4th Cir. 1982) (standards for facial vs. factual challenges to subject-matter jurisdiction)
- Kerns v. United States, 585 F.3d 187 (4th Cir. 2009) (when factual jurisdictional challenges are raised, court may consider evidence beyond pleadings)
- 24th Senatorial Dist. Republican Comm. v. Alcorn, 820 F.3d 624 (4th Cir. 2016) (district court should resolve factual disputes after appropriate discovery in jurisdictional inquiries)
- Miller v. Brown, 462 F.3d 312 (4th Cir. 2006) (ripeness doctrine balancing fitness and hardship)
- Sansotta v. Town of Nags Head, 724 F.3d 533 (4th Cir. 2013) (ripeness is a question of subject-matter jurisdiction)