J-A15047- 14

1 2014 PA Super 198 AMERISOURCEBERGEN CORPORATION, IN THE SUPERIOR COURT OF PENNSYLVANIA INTEGRATED NEPHROLOGY NETWORK D/B/A/ DIALYSIS PURCHASING ALLIANCE, INC., F/K/A INTERNATIONAL NEPHROLOGY NETWORK, AMERISOURCEBERGEN SPECIALTY GROUP AND ASD HEALTHCARE, Appellants

v. ACE AMERICAN INSURANCE COMPANY, Appellee Nos. 2545 EDA 2013

Appeal from the Order Entered July 16 , 2013 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): March Term, 2011, No. 002679 BEFORE: PANELLA, J., LAZARUS, J., AND JENKINS, J. OPINION BY: JENKINS, J. FILED SEPTEMBER 15, 2014 AmerisourceBergen Corporation, AmerisourceBergen Speci alty Group, Integrated Nephrology Network, and ASD Healthcare (co llectively

" Amerisource”) incurred attorney fees and related costs defe nding a False Claims Act 1 lawsuit brought in Massachusetts federal court. Ameriso urce demanded that its insurer, ACE American Insurance Compan y (“ACE”), pay the attorney fees and costs, but ACE refused to pay on t he basis of several exclusions in Amerisource’s 2009 -10 policy. Amerisource brought an

1 31 U.S.C. § 3729 et seq

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insurance coverage action against ACE alleging breach of contract and bad faith. On July 16, 2013, the trial court granted AC E’s motion for summary ju dgment. Amerisource filed a timely appeal to this Court. The trial court did not direct Amerisource to file a statement of matters complai ned of on appeal, opting instead to file a Pa.R.A.P. 1925(a) opinion i ncorporating by reference its order and opinion granting summary judgment. We agree with the trial court that ACE properly deni ed coverage under exclusion L in Amerisource’s 2009

- 10 policy, the “prior or pending litigation” exclusion. Accordingly, we affirm. A brief history of Amerisource’s poli cies with ACE and the False Claims Act lawsuit in Massachusetts provides the factual backdrop for our decision. Amerisource is a group of businesses that provides a vast r ange of services to healthcare providers and pharmaceutical companies, inc luding distribution, logistics, clinical education, and marketi ng 2 . Between May 2006 and May 2010, Amerisource purchased the following prof essional liability insurance policies from ACE:

2006- 07

– Amerisource ’s primary insurance carrier was St. Paul Travelers. Amerisource purchased an excess policy from Ace which provided $10 million in coverage over and above Amerisource ’s self

insurance and St. Paul’s primary coverage of $21 million. Amerisource calls this a “tower” of coverage

2 R.R. 4499-4505.J-A15047- 14

3 in which Ace’s excess coverage was at the top of the tower 3

. 2007- 08

– Ace provided primary coverage, the spot St. Paul’s held in 2006

- 07. This was a “replacement” policy for Ace’s 2006

- 07 policy, because ACE’s 2006

- 07 excess coverage was replaced with primary coverage in 2007-08. The terms of the 37-page 2007-08 primary policy were vastly different than the 4-page 2006-07 excess policy 4

. 2008- 09

– Ace provided primary coverage. The 2008- 09 policy is a “renewal” policy, since it renewed the primary coverage ACE provided in 2007- 08 5

. 2009- 10

– Ace provided primary coverage. This was a “renewal” policy, because it renewed the primary coverage ACE provided in 2008-09 and 2007- 08 6

. The policy year for each policy began on May 1 st

. The False Claims Act (“FCA”) is a civil fraud statute that creates a right of action to recover damages and penalties, on behalf o f the federal government, for false claims or statements to the gover nment relating to government payments. Citizens have the right under t he qui tam provision of the FCA, 31 U.S.C. § 3730(b), to bring “relator co mplaints” on behalf of the United States. The complaint must be filed in camera under seal and cannot be served on the defendant until the court so or ders. Id . The federal government has the duty to examine the seale d complaint to

3 R.R. 3139-46 (2006-07 excess policy). 4 R.R. 3207-45 (2007-08 primary coverage policy). 5 R.R. 3248-3300 (2008-09 primary coverage policy). 6 R.R. 51-107 (2009-10 primary coverage policy); see also Amerisource’s Reply to New Matter, ¶ 58 (Amerisource’s admission that the 2009 -10 policy is the “second renewal of a policy first issued effective Ma y 1, 2007”).J-A15047- 14

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determine if the United States will prosecute the FCA claims itself, dismiss the claims, or release them for prosecution by the rela tor. Only when the United States takes up a qui tam action itself or releases it to the relator for prosecution does the court unseal the complaint and permi t service on all defendants. On June 5, 2006, Kassie Westmoreland filed a qui tam action in the District Court of Massachusetts against Amerisource and anot her company, Amgen, under the FCA 7 . The complaint was kept under seal for three years. Westmoreland alleged that Amgen and Amerisource conspire d with medical providers to submit false Medicare claims relating to Ar anesp, an anemia drug 8

. Amerisource claimed that it learned of the qui tam case in March 2008, when Amgen informed Amerisource that Amgen was under f ederal investigation 9 . In February 2009, the Department of Justice (“DOJ”) informed Amerisource that it was reviewing a relator’s allegations about Amgen and Amerisource. On February 11, 2009, the Ma ssachusetts federal court permitted the government to place a redacted copy of the unserved

7 R.R. 701-796 (original qui tam complaint). The complaint was later amended several times. 8 The action concluded with a settlement in which Amgen agreed to pay $762 million in fines to the government, and INN, on e of AmerisourceBergen’s su bsidiaries, agreed to pay $15 million to the government. 9 R. 41a (allegation in Amerisource’s complaint in present action). R. 4724- 25a (Debra Swartz deposition).J-A15047- 14

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qui tam complaint on the electronic docket 10 . On June 18, 2009, the DOJ issued a confidential subpoena to Amerisource concerning th e qui tam
matter 11

. On July 8, 2009, Amerisource sent ACE formal notice of a potential claim and a copy of the redacted complaint 12 . In January 2010, Amerisource received service of original process in the Massachusetts law suit 13 . On April 5, 2010, ACE denied coverage to Amerisource under the 2009-10 primary coverage policy and refused to defend Amerisource in the qui tam matter or pay claims expenses 14

. In March 2011, Amerisource filed the present insurance cov erage action against ACE, which argued in its defense that exc lusions L, K and Y in the 2009-10 policy barred coverage for the qui tam action. Subsequently, the trial court entered summary judgment in favor of ACE on the ground that both exclusions L (“prior or pending litigation”) and Y (“false, decep tive or unfair business practices”) precluded coverage. In an appeal from an order granting summary judgment , our scope of review. . .is plenary, and our standard of review is clear: the trial court's order will be reversed only where it is established that the court committed an error of law or abused its discretion.

10 R.R. 3326-3435a (e-mail from Nathan Andrisani to Jo nathan Sturz). 11 R.R. 3577-90a (June 18, 2009 subpoena Issued by the United States Attorney's Office to Amerisource). 12 R.R. 3592-95a (July 8, 2009 Notice of Circumstance Le tter from Walter J. Hope, Jr to William Wise). 13 R.R. 4827-4930a (relator action docket). 14 R.R. 4318-23a (denial of coverage letter).J-A15047- 14

6 Summary judgment is appropriate only when the record clearly shows that there is no genuine issue of material fact and that the moving party is entitled t o judgment as a matter of law. The reviewing court must view the record in the light most favorable to the nonmoving party and resolve all doubts as to the existence of a genuine issue of material fact against the moving party. Only when the facts are so clear that reasonable minds could not differ can a trial court properly enter summary judgment. Hovis v. Sunoco, Inc. , 64 A.3d 1078, 1081 (Pa.Super.2013) (citation omitted). Generally, the proper construction of an insurance policy is a matter of law which the court may address at the summary judgment stage. Nationwide Mut. Ins. Co. v. Nixon , 682 A.2d 1310, 1313 (Pa.Super.1996). The court may resolve via summary ju dgment whether a claim is within a policy's coverage or barred by an excl usion, provided that the policy's terms are clear and unambiguous so as to pr eclude any issue of material fact. Butterfield v. Giuntoli , 670 A.2d 646, 651 (Pa.Super.1995). Amerisource’s 2009 -10 policy provides that the terms and conditions of the policy

shall be interpreted and construed in an evenhanded fashion as between the parties. If the language of this Policy is deemed to be ambiguous or otherwise unclear, the issue shall be resolved in the manner most consistent with the relevant terms and conditions, without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favor of either the Insureds or the Insurer and without reference to theJ-A15047- 14

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. In our view, this clause exists in harmony with the wel l-known principle that when the court interprets an insurance contract, words tha t are clear and unambiguous must be given their plain and ordinary me aning. State Farm Fire and Cas. Co. v. MacDonald , 850 A.2d 707, 710 (Pa.Super.2004) (citation omitted).
Amerisource ’s policies are “claims made” policies, a type of policy which covers all claims made during the policy period an d timely reported by the insured. Since Amerisource made its claim for coverag e in early 2010, the language of the 2009-10 policy governs this case. The 2009-10 policy defines “claim”, in relevant part, as a “civil proceeding against [ Amerisource ] seeking monetary damages...commenced by the service of a complaint or similar pleading” or a “written demand against [ Amerisource] for monetary damages 16 .” As one court has said, claims made policies

are intended by insurers to avoid the hazard of an indefinite future: Once the policy period has expired,the book can be closed on everything except thenpending claims. On the other hand, an insurer incurs a risk with this kind of policy: liability for a clai m that has been brewing and was ripe to erupt before the policy period, but is asserted only after the policy period begins. For this reason, claims made policies generally include a number of endorsements and exclusions intended to limit this front end risk by cutting off liability for claims ready, but not yet made, at the start of the policy period.

15 R. R. 74. 16 R.R. 57 (definition of “claim” in 2009 -10 policy).J-A15047- 14

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Ameriwood Indus. Int'l Corp. v. Am. Cas. Co. , 840 F.Supp. 1143, 1148

– 49 (W.D.Mich.1993) (internal quotations and citation s omitted). Exclusion L in the 2009-10 policy, entitled “Prior or Pending Litigation”, is one such exclusion “intended to limit [ACE’s] front en d risk for claims ready, but not yet made, at the start of the policy p eriod.” Id . Exclusion L excludes any claim

alleging, based on, arising out of, or attributable to any prior or pending litigation , claims, demands, arbitration, administrative or regulatory proceeding or investigation filed or commenced on or before the earlier of the effective date of this policy or the effective date of any policy issued by [ACE] of which this policy is a continuous renewal or a replacement , or alleging or derived from the same or substantially the same fact, circumstance or situation underlying or alleged therein. [Emphasis added]. Applied to this case, exclusion L p recludes coverage of any claim based on prior litigation filed or commenced on or before the earlier of: (1) the effective date of Amerisource ’s 2009 -10 policy, or (2) the effective date of any policy issued by ACE of whic h the 2009- 10 policy is a continuous renewal or a replacement. Based on our review of the record, we conclude that the effective date of Amerisource’s 2009 -10 primary coverage policy was May 1, 2009. This policy was a continuous renewal of the primary coverage policy issued by ACE to Amerisource effective May 1, 2007. Therefore, exclusion L precludesJ-A15047- 14

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coverage for litigation filed or commenced on or befor e May 1, 2007. Since Westmoreland filed her qui tam action on June 5, 2006, almost one year before May 1, 2007, ACE properly invoked exclusion L to deny coverage for defense costs that Amerisource incurred in defending agai nst Westmoreland’s action

. Amerisource submits two arguments for the proposition tha t exclusion L does not apply. We address each in turn. First , Amerisource contends that Westmoreland’s lawsuit falls ou tside of exclusion L because Westmoreland merely filed her com plaint under seal in June 2006 but did not serve it on Amerisource until midway through the 2009-10 policy period (January 2010). We disagree. Amerisource’s argument requires us to interpret the mean ing of “filed” and “commenced” within the context of Exclusion L. Ameri source’s policy does not define these terms

-- but as explained above, we must construe clear and unambiguous words in accordance with their pla in and ordinary meaning. State Farm , supra , 850 A.2d at 710. Viewed in this light, w e think it is clear that litigation is “filed” or “commenced” against an entity when it names that entity as a defendant, is filed wit h a court, and is docketed and given a case number. Nothing in the ord inary meaning of these terms requires service of original process or unsealin g of the complaint in order for an action to be “filed” or “commenced”. No l itigator in today’sJ-A15047- 14

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world would interpret an action he has filed with the prothonotary to be “unfiled” or “uncommenced” until he serves the complaint on the defendant. We also find significant that the 2009- 10 policy defines a “claim” as a “civil proceeding against [ Amerisource] seeking monetary damages...commenced by the service of a complaint or simil ar pleading.” The explicit service requirement in this definition de monstrates that the parties knew how to include a service requirement when they so desired. Thus, the absence of a service requirement from exclusio n L demonstrates that the parties did not intend for “filing” or “commence ment” of litigation in exclusion L to depend upon service of process. Our interpretation of “filed” and “commenced” is consistent with a decision from this Court and from another federal court

. See Norristown Auto. Co., Inc. v. Hand , 562 A.2d 902 (Pa.Super.1989); HR Acquisition I Corp. v. Twin City Fire Ins. Co. , 547 F.3d 1309 (11 th Cir. 2008). In Hand , Hand filed a civil complaint against Norristown Autom obile Company (“Norristown”) at 1:01 p.m., and Norristown filed a civi l complaint against Hand in a different court on the same day at 4:13 p.m . Hand filed preliminary objections seeking dismissal of Norristown’s co mplaint on the ground that Hand’s action was a prior pending action. Norristown argued that both actions should be deemed filed at the same t ime because they were filed on the same day. We h eld, however, that “Hand's action must be considered prior in time to that of Norristown.” Id ., 562 A.2d at 904.J-A15047- 14

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Hand thus limits the determination of priority to the ti me that the first
action is filed ; the time of service is irrelevant to whether the fir st action constitutes a “prior” action. Hand thus implicitly refutes Amerisource’s contention that the qui tam action filed under seal in June 2006 was not “prior litigation” under exclusion L of the 2009 -10 policy.
In HR Acquisition I Corp. , an insured requested the insurer to provide coverage for litigation expenses incurred in a shareholder’s derivative lawsuit commenced during the policy period. The gravamen of the action was that the insured participated in a frau dulent scheme with other defendants to submit false claims to the federal government's Medicare program. The insurer denied coverage under t he “prior litigation” exclusion 17 in the insured’s policy based on a qui tam action alleging the same misconduct that had been filed under seal several ye ars before the policy period and that was never served on the insured

– circumstances that are virtually identical to the present case. Another defendant settled the claims by paying the United States government $7.9 mi llion plus interest, and the case was dismissed with prejudice. Despite the la ck of service, the Eleventh Circuit held that the insurer properly denie d coverage under the

17 The exclusion stated that the insurer “shall not be lia ble to make any payment for Loss in connection with any Claim. . .based upon, arising from, or in any way related to any demand, suit, or other proceeding against any Insured which was pending on or existed prior to the a pplicable Prior Litigation Date specified by endorsement to this Policy, or the same or substantially the same facts, circumstances or allegations wh ich are the subject of or the basis for such demand, suit, or other pr oceeding.” Id ., 547 F.3d at 1312.J-A15047- 14

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“prior litigation” exclusion, stating: “The ‘prior liti gation’ exclusion only requires that a related lawsuit ‘against’ [the insured ] be ‘pending’ or that it ‘exist.’ The exclusion does not require that [the insu red] be ‘served’ or made ‘party’ to an action.” Id ., 547 F.3d at 1317. Given the similarity between HR Acquisition I Corp. and this case, we find HR Acquisition I Corp. persuasive authority for our construction of the “prior litigation” exclusion in Amerisource’s 2009 -10 policy. Second , Amerisource contends that exclusion L does not apply because the series of insurance policies issued by ACE to Ame risource
ext ends back to May 1, 2006, thus predating Westmoreland’s June 2006 lawsuit. Amerisource’s argument, phrased in terms of exc lusion L, is that Westmoreland filed or commenced her lawsuit on or after “ the earlier of the effective date of the [2009-10] policy or of any poli cy issued by [ACE] of which [the 2009- 10] policy is a continuous renewal or a replacement.” We disagree with Amerisource. Westmoreland obviously filed her June 2006 lawsuit bef ore the effective date of the 2009-10 policy (May 1, 2009). Therefore, Amerisource’s argument boils down to whether Westmorelan d filed her lawsuit on or after “the effective date of. . .any pol icy issued by [ACE] of which [the 2009-10] policy is a continuous renewal or a rep lacement .” The 2009-10 policy does not define “renewal” or “replacement”. Therefore, we must construe these words in accordance with their plain andJ-A15047- 14

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ordinary meaning 18

. State Farm , supra , 850 A.2d at 710. The ordinary meaning of “replace” is “to be used instead of 19 .” The ordinary meaning of “renew” is “to do again 20 .” Thus, we construe “replacement policy” to mean “a policy used instead of another policy” and “continuou s renewal policy” to mean “a policy that is used again for consecutive policy periods”. The 2009-10 primary coverage policy is a “continuous renewal” of the 2007-08 and 2008-09 primary coverage policies. The po licy numbers of the 2007-08, 2008-09 and 2009-10 policies

-- EON 621683498 001, EON 621683498 002, and EON 621683498 003

– share the same prefix and middle components (EON 621683498) and have consecutive n umerical suffixes (001, 002 and 003). See Wendy’s Intern., Inc. v. Illinois Union Ins. Co. , 2007 WL 710242, *2 (S.D. Ohio 2007) (observing tha t policies numbered EON G21639175 002 and 003 were successive renew als of policy number EON G21639175 001). 21 This, however, does not overcome

18 Although our legislature has defined “renewal” for purp oses of automobile insurance policies, see 40 P.S. § 991.2001, and “replacement” for purposes of life insurance policies, see 40 P.S. § 625-1, these definitions are not controlling in this dispute over the interpretation of an agreement between two private parties. See Profit Wize Marketing v. Wiest , 812 A.2d 1270, 1276 n. 4 (Pa.Super.2002) (“While the General Assembly is free to define ‘prevailing party’ in any fashion it chooses, its defini tion [of this term] does not control in a contract dispute. This Court is constrain ed to interpret the language of this private contract in accordance with the plain and ordinary meaning of the Agreement's terms”). 19 See Merriam Webster Online Dictionary. 20 Id

. 21 Indeed, ACE concedes that the 2009-10 policy is a contin uous renewal of the 2007-08 and 2008-09 policies.J-A15047- 14

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exclusion L, because the 2007-08 policy became effective on May 1, 2007, almost one year after Westmoreland filed suit. In an attempt to surmount this obstacle, Amerisource ar gues: (1) the 2007- 08 primary coverage policy is a “replacement” of the 2006-07 excess policy that ACE issued on May 1, 2006; th us, (2) Westmoreland’s June 2006 lawsuit was filed one mont h after a policy issued by ACE of which the 2009- 10 policy “is a continuous renewal or a replacement .” In effect, Amerisource claims the right under exclusion L to graft the “replacement” of the 2006 policy onto subsequent “continuou s renewals.” This construction is not consonant with exclusion L’s langu age, as ACE cogently explains:

Exclusion L’s actual wording does not permit conjoining a supposed ‘replacement’ with a subsequent ‘renewal line.’ Exclusion L is worded in the disjunctive, referencing: ‘the effective date of any policy issued by the Insurer of which this Policy is a continuous renewal or a replacement. . .’ Exclusion L does not say the prior/pending date is determined by ‘. . .the effec tive date of any policy issued by the Insurer of which this Policy is the last of any combination of renewals and replacements ...’ Thus, it is irrelevant whether the 2007 policy replaced another policy. The actual wording of Exclusion L focuses on whethe r this Policy, i.e., the 20 09 policy, is a ‘replacement’ of another policy. [Amerisource] does not contend the 2009 Policy could be ‘a replacement’ of any 2006 policy. ACE Brief, p. 22 (emphasis in part in original and in part added). Under
Amerisourc e’s interpretation, the 2009

- 10 policy is both (1) a “continuousJ-A15047- 14

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renewal” of the 2007 -08 and 2008-09 policies and (2) a replacement of the 2006-07 policy issued three policy terms before with two primary policies issued in between. This construction does not withstand scr utiny due to the disjunctive wording of exclusion L: “a continuous renewal or a replacement”. In short, the 2009- 10 policy did not “replace” the 2006 -07 policy. The only policy that “replaced” the 2006 -07 policy was the 2007-08 policy. ACE’s construction of exclusion L thus carries the day. For these reasons, we agree with the trial court’s dete rmination that exclusion L of Amerisource’s 2009 -10 policy precludes Amerisource from obtaining coverage from ACE for attorney fees and rel ated costs incurred in defending against Westmoreland’s qui tam lawsuit. Since we find that exclusion L applies, we need not review whether excl usion Y applies or address the other grounds for affirming the judgment r aised in ACE’s brief. Order affirmed. Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary Date: 9/15/2014