Wellpoint, Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA
2015 Ind. LEXIS 316
| Ind. | 2015Background
- Anthem (WellPoint) was self-insured for E&O liability and bought multi-tier reinsurance; excess/reinsurance policies “follow form” to Anthem’s primary policy.
- Multiple suits by physicians and associations (consolidated into In re Managed Care Litigation) alleged Anthem used systemic practices to deny, delay, or diminish provider payments; claims included RICO, CUTPA, and other torts.
- Anthem settled the MDL in 2005 for $198 million (plus business-practice changes) while denying liability; primary reinsurer National Union paid/exhausted; Excess Reinsurers (including CNA and Twin City) denied coverage.
- Anthem sued its Excess Reinsurers for indemnification under Coverage II (Professional Liability) of the Policy; key policy language required Wrongful Acts to occur “solely in the rendering of or failure to render Professional Services,” defined to include claims handling/adjusting.
- CNA moved for summary judgment arguing no coverage because (a) acts were not committed “solely” in professional services; (b) settlement relief was not an insurable “Loss” / barred by public policy; and (c) exclusion for dishonest/fraudulent acts applied. Trial court granted summary judgment for CNA; appellate court affirmed on the “solely” ground; Indiana Supreme Court reversed in large part and entered summary judgment for Anthem except as to CSMS-related losses and bad-faith claim.
Issues
| Issue | Plaintiff's Argument (Anthem) | Defendant's Argument (CNA/Twin City) | Held |
|---|---|---|---|
| Whether wrongful acts arose "solely" from Professional Services (claims handling) | Anthem: Alleged scheme was conduct in the course of claims handling/adjusting; Policy defines Professional Services to include claims handling, so coverage applies | Defendants: Allegations went beyond claims handling and thus did not occur solely in Professional Services; no coverage | Held: Court: wrongful acts (denying/delaying payments) occurred in claims handling and qualify as Wrongful Acts occurring solely in Professional Services — coverage applies; reversed adverse summary judgment |
| Whether settlement costs are an insurable "Loss" or barred by Indiana public policy/known-loss rule | Anthem: Monetary settlement (treble/punitive/compensatory and defense costs) are covered as Loss; business-practice injunctive relief is uninsurable but monetary items are insurable | Defendants: Relief is contractual/restitutionary or for intentional wrongdoing and thus uninsurable under public policy/known-loss principles | Held: Court: Monetary settlement and defense costs are insurable under the Policy and Indiana law; business-practice nonmonetary relief excluded; contract enforced — no public policy bar |
| Applicability of Exclusion (b) for dishonest/fraudulent acts and its exception (claims seeking compensatory and punitive damages based on fraud and bad faith) | Anthem: Exception to Exclusion (b) applies because the MDL included claims seeking both compensatory and punitive (treble) damages and alleged bad faith/fraud in claims handling | Defendants: Exception inapplicable as a matter of law; either claims lacked punitive/bad-faith element or Professional Services nexus | Held: Court: Exception avoids Exclusion (b) for settlement losses from Shane, Thomas, and Levinson (treble/punitive/bad-faith allegations); CSMS (which sought no punitive damages) is remanded for factual determination |
| Whether Anthem's bad-faith tort claim against reinsurers fails as a matter of law because coverage position was reasonable | Anthem: Reinsurers acted unreasonably in denying coverage and breached duty of good faith; seeks punitive damages | Defendants: Coverage denial was reasonable; dispute of coverage defeats bad-faith tort as a matter of law | Held: Court: Denial of summary judgment on bad-faith/punitive claim — whether denial was unreasonable is a fact question for trial; summary judgment reversed on this claim |
Key Cases Cited
- Holiday Hospitality Franchising, Inc. v. AMCO Ins. Co., 983 N.E.2d 574 (Ind. 2013) (standard for de novo review and insurance-contract interpretation)
- First Fed. Sav. Bank of Ind. v. Key Mkts., Inc., 559 N.E.2d 600 (Ind. 1990) (contract interpretation rules and intent of parties)
- Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126 (Ind. 1995) (public-policy analysis for enforcing contracts)
- Freidline v. Shelby Ins. Co., 774 N.E.2d 37 (Ind. 2002) (standard for proving insurer bad faith requires clear and convincing evidence of unreasonable denial)
- In re Managed Care Litig., 430 F. Supp. 2d 1336 (S.D. Fla. 2006) (district-court rulings in the underlying MDL, including disposition of RICO claims)
- Town of Orland v. Nat'l Fire & Cas. Co., 726 N.E.2d 364 (Ind. Ct. App. 2000) (discussion of insurability of deliberate business decisions and E&O coverage)