Court Opinion

ID: 2733009
Source: CourtListenerOpinion
Date Created: 2014-09-15 22:08:43.609036+00
Date Added: 2024-06-11T09:44:21.297717
License: Public Domain

J-A15047-14

                                2014 Pa. Super. 198

AMERISOURCEBERGEN CORPORATION,                      IN THE SUPERIOR COURT OF
INTEGRATED NEPHROLOGY NETWORK                             PENNSYLVANIA
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 Specialty Group,

Integrated     Nephrology      Network,     and   ASD   Healthcare   (collectively

"

Claims Act1 lawsuit brought in Massachusetts federal court.          Amerisource

the attorney fees and costs, but ACE refused to pay on the basis of several

                                          -10 policy.   Amerisource brought an

1
    31 U.S.C. § 3729 et seq.
                                           1
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insurance coverage action against ACE alleging breach of contract and bad

judgment.

       Amerisource filed a timely appeal to this Court. The trial court did not

direct Amerisource to file a statement of matters complained of on appeal,

opting instead to file a Pa.R.A.P. 1925(a) opinion incorporating by reference

its order and opinion granting summary judgment.

       We agree with the trial court that ACE properly denied coverage under

                                     -

exclusion. Accordingly, we affirm.

                                              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 range of services

to    healthcare   providers   and       pharmaceutical   companies,   including

distribution, logistics, clinical education, and marketing 2. Between May 2006

and May 2010, Amerisource purchased the following professional liability

insurance policies from ACE:

             2006-07    Amerisource
             was St. Paul Travelers. Amerisource purchased an
             excess policy from Ace which provided $10 million
             in coverage over and above Amerisource          -

             million. Amerisource

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

                                                at the top of the
                  3
             tower .

             2007-08    Ace provided primary coverage, the spot
                                   -
                                 -                            -
             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 policy4.

             2008-09     Ace provided primary coverage. The
             2008-
             the primary coverage ACE provided in 2007-085.

             2009-10      Ace provided primary coverage.    This

             primary coverage ACE provided in 2008-09 and
             2007-086.

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

of action to recover damages and penalties, on behalf of the federal

government, for false claims or statements to the government relating to

government payments. Citizens have the right under the qui tam provision

the United States.     The complaint must be filed in camera under seal and

cannot be served on the defendant until the court so orders.        Id.   The

federal government has the duty to examine the sealed 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
                                                                    -10 policy

                                      3
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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 relator. 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 permit service on all

defendants.

       On June 5, 2006, Kassie Westmoreland filed a qui tam action in the

District Court of Massachusetts against Amerisource and another company,

Amgen, under the FCA7. The complaint was kept under seal for three years.

Westmoreland alleged that Amgen and Amerisource conspired with medical

providers to submit false Medicare claims relating to Aranesp, an anemia

drug8.

       Amerisource claimed that it learned of the qui tam case in March 2008,

when     Amgen   informed   Amerisource    that   Amgen   was   under   federal

investigation9

informed Amerisource

Amgen and Amerisource. On February 11, 2009, the Massachusetts 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, one of
                       bsidiaries, agreed to pay $15 million to the
government.
9
Rawle 4724-
25a (Debra Swartz deposition).
                                       4
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qui tam complaint on the electronic docket10. On June 18, 2009, the DOJ

issued a confidential subpoena to Amerisource concerning the qui tam

matter11.

     On July 8, 2009, Amerisource sent ACE formal notice of a potential

claim and a copy of the redacted complaint12. In January 2010, Amerisource

received service of original process in the Massachusetts lawsuit 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 expenses14.

     In March 2011, Amerisource filed the present insurance coverage

action against ACE, which argued in its defense that exclusions 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

                                                                          tive

     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 Jonathan 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 Letter 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).
                                      5
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            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 to
            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 judgment whether a

claim is within a policy's coverage or barred by an exclusion, provided that

the policy's terms are clear and unambiguous so as to preclude any issue of

material fact. Butterfield v. Giuntoli, 670 A.2d 646, 651 (Pa.Super.1995).

                          -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 the

                                         6
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                 reasonable expectations of either the Insureds or the
                 Insurer15.

In our view, this clause exists in harmony with the well-known principle that

when the court interprets an insurance contract, words that are clear and

unambiguous must be given their plain and ordinary meaning. State Farm

Fire and Cas. Co. v. MacDonald, 850 A.2d 707, 710 (Pa.Super.2004)

(citation omitted).

        Amerisource

which covers all claims made during the policy period and timely reported by

the insured. Since Amerisource made its claim for coverage in early 2010,

the language of the 2009-10 policy governs this case. The 2009-10 policy

                                                                          Amerisource]

seeking monetary damages...commenced by the service of a complaint or

                                                          Amerisource] for monetary

damages16          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 then-
                 pending claims. On the other hand, an insurer incurs
                 a risk with this kind of policy: liability for a claim 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
                                               -10 policy).
                                             7
J-A15047-14

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

49 (W.D.Mich.1993) (internal quotations and citations omitted).

      Exclusion L in the 2009-10 policy,

                                                               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 precludes coverage of

any claim based on prior litigation filed or commenced on or before the

earlier of:

      (1)     the effective date of Amerisource       -10 policy, or

      (2)     the effective date of any policy issued by ACE of which the 2009-

              10 policy is a continuous renewal or a replacement.

      Based on our review of the record, we conclude that the effective date

                         -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 precludes

                                        8
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coverage for litigation filed or commenced on or before 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   against

                        .

      Amerisource submits two arguments for the proposition that exclusion

L does not apply. We address each in turn.

      First

of exclusion L because Westmoreland merely filed her complaint under seal

in June 2006 but did not serve it on Amerisource until midway through the

2009-10 policy period (January 2010). We disagree.

                                                                        policy

does not define these terms -- but as explained above, we must construe

clear and unambiguous words in accordance with their plain and ordinary

meaning. State Farm, supra, 850 A.2d at 710. Viewed in this light, we

think it is clear that litigation

when it names that entity as a defendant, is filed with a court, and is

docketed and given a case number.         Nothing in the ordinary meaning of

these terms requires service of original process or unsealing of the complaint

                                      9
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world would interpret an action he has filed with the prothonotary to be

     We also find significant that the 2009-

                                     Amerisource]    seeking    monetary

The explicit service requirement in this definition demonstrates that the

parties knew how to include a service requirement when they so desired.

Thus, the absence of a service requirement from exclusion L demonstrates

exclusion L to depend upon service of process.

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 (11th Cir. 2008).      In

Hand, Hand filed a civil complaint against Norristown Automobile Company

Hand in a different court on the same day at 4:13 p.m.         Hand filed

that both actions should be deemed filed at the same time because they

were filed on the same day. We h

                                                    Id., 562 A.2d at 904.

                                    10
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Hand thus limits the determination of priority to the time that the first

action is filed; the time of service is irrelevant to whether the first action

                               Hand

contention that the qui tam action filed under seal in June 2006 was not

                                               -10 policy.

     In HR Acquisition I Corp., an insured requested the insurer to

derivative lawsuit commenced during the policy period.        The gravamen of

the action was that the insured participated in a fraudulent scheme with

other defendants to submit false claims to the federal government's

exclusion17                                      qui tam action alleging the

same misconduct that had been filed under seal several years 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 million plus interest,

and the case was dismissed with prejudice. Despite the lack of service, the

Eleventh Circuit held that the insurer properly denied coverage under the

17

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 applicable Prior
Litigation Date specified by endorsement to this Policy, or the same or
substantially the same facts, circumstances or allegations which are the
                                                                   Id., 547
F.3d at 1312.
                                      11
J-A15047-14

                                 Id., 547 F.3d at 1317.      Given the similarity

between HR Acquisition I Corp. and this case, we find HR Acquisition I

Corp.

                                  -10 policy.

        Second, Amerisource contends that exclusion L does not apply

because the series of insurance policies issued by ACE to Amerisource

ext

                                                                the earlier of the

effective date of the [2009-10] policy or of any policy issued by [ACE] of

which [the 2009-

disagree with Amerisource.

        Westmoreland obviously filed her June 2006 lawsuit before the

effective   date   of   the   2009-10   policy   (May   1,   2009).    Therefore,

which [the 2009-10] policy is a continuous renewal or a replacement

        The 2009-10 policy does not define

Therefore, we must construe these words in accordance with their plain and

                                        12
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ordinary meaning18.   State Farm, supra, 850 A.2d at 710.        The ordinary
                                               19

                       20

     The 2009-10 primary coverage policy is a

2007-08 and 2008-09 primary coverage policies. The policy 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 numerical

suffixes (001, 002 and 003).

Ins. Co., 2007 WL 710242, *2 (S.D. Ohio 2007) (observing that policies

numbered EON G21639175 002 and 003 were successive renewals of policy

number EON G21639175 001).21          This, however, does not overcome

18

insurance policies, see
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,

not control in a contract dispute. This Court is constrained to interpret the
language of this private contract in accordance with the plain and ordinary
19
   See Merriam Webster Online Dictionary.
20
   Id.
21
    Indeed, ACE concedes that the 2009-10 policy is a continuous renewal of
the 2007-08 and 2008-09 policies.
                                     13
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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 argues:

     (1) the 2007-

     2006-07 excess policy that ACE issued on May 1, 2006; thus,

     policy issued by ACE of which the 2009-

     renewal or a replacement

In effect, Amerisource claims the right under exclusion L to graft the

cogently explains:

                                           Exclusion L is worded in

             any policy issued by the Insurer of which this Policy
             is a continuous renewal or a
             Exclusion L does not say the prior/pending date is
                                           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 whether this Policy, i.e., the
             2009
             [Amerisource] does not contend the 2009 Policy

ACE Brief, p. 22 (emphasis in part in original and in part added).    Under

Amerisourc                               -

                                      14
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                    -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 scrutiny due to the

                                                        or a

     In short, the 2009-                                   -07 policy. The

                                      -07 policy was the 2007-08 policy.

                                   -10 policy precludes Amerisource from

obtaining coverage from ACE for attorney fees and related costs incurred in

                                   qui tam lawsuit.    Since we find that

exclusion L applies, we need not review whether exclusion Y applies or

     Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 9/15/2014

                                    15