Risk Management

Allied World units must cover legal costs from unapproved merger

Judy Greenwald

August 31, 2017 Reprints

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Allied World units must cover legal costs from unapproved merger

Allied World Assurance Co. Holdings A.G. units are obligated to pay more than $292,000 in legal costs in connection with an unapproved merger involving an Idaho medical center, says a federal appeals court in upholding a lower court ruling.

In 2015, the 9th U.S. Circuit Court of Appeals held that a merger between Boise, Idaho-based St. Luke’s Health System Ltd. and Nampa, Idaho-based Saltzer Medical Group violated antitrust law and ruled against it, according to court papers in St. Luke’s Health System Ltd.; St. Luke’s Regional Medical Center Ltd. v. Allied World National Assurance Co.; Allied World Specialty Insurance Group.

Litigation then ensued as to whether the units of Zug, Switzerland-based Allied World Assurance were obligated to pay $292,482 in legal fees. The U.S. District Court in Boise ruled in St. Luke’s favor, which was upheld by a unanimous-three judge appeals court panel.

“Under the plain terms of the contract, attorneys’ fees are covered,” said the appeals court ruling. The contract covers loss arising from a claim for antitrust activities, it states.

“Allied World’s contention that the contract doesn’t cover instances in which the insured loses its antitrust suit hinges on the notion that a finding that a merger is anticompetitive … is equivalent to the insured having ‘gained … financial advantage,’” which is an exclusion in the insurance contract, says the ruling.

“But under Idaho law, insurance contracts are to be construed strictly against the insurer and insurance exclusions in favor of the insured,” said the ruling, in affirming the lower court’s decision.