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Allied World Specialty Insurance Co. v. Blue Cross and Blue Shield
This case arose from an insurance policy between Blue Cross and Blue Shield of Kansas and Allied World Specialty Insurance Co., according to the opinion. Under the policy, Allied World provided Blue Cross with insurance coverage that included reimbursement of defense costs.
Blue Cross was sued and claimed coverage under the policy. With the onset of litigation, Blue Cross sought reimbursement from Allied World for defense costs. Allied World refused, and the refusal led to this litigation.
In applying the terms of the insurance policy, the 10th Circuit Court of Appeals considered two issues.
The first issue was how to interpret an exclusion that appeared to scuttle coverages expressly provided under the policy. For example, the policy expressly covers claims that would necessarily involve managed care, which is Blue Cross’s core business.
But the policy also contained an exclusion for any activities involving managed care. So, according to the opinion, the policy appears to expressly cover and exclude the same claims, creating an ambiguity.
The second issue was how to interpret provisions barring coverage when a prior claim against the insured involved related conduct. Allied World pointed to earlier litigation in which Blue Cross had been sued for using billing codes designed to underpay medical providers. In this case, however, Blue Cross is being sued for antitrust violations involving restrictions on competition in various territories.
Given the difference between the claims, the 10th Circuit found that a fact-finder could reasonably conclude that the new antitrust claims lack any relation to the earlier litigation.
Given the ambiguities and the potential for coverage, the 10th Circuit concluded the district court should not have granted judgment on the pleadings to Allied World on its cause of action for declaratory relief. It reversed the grant of judgment to Allied World on the cause of action for a declaratory judgment.
Because of that reversal, the 10th Circuit also concluded the district court should not have granted judgment on the pleadings to Allied World on Blue Cross’s counterclaims for breach of contract and breach of the duty of good faith and fair dealing. On remand, the district court should further address these causes of action.