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Insurers prevail in coverage dispute with UnitedHealth Group

Insurers prevail in coverage dispute with UnitedHealth Group

Units of American International Group Inc., Swiss Re Ltd., Chubb Ltd. and Starr Cos. have prevailed in complex litigation with UnitedHealth Group Inc. over indemnity and defense costs under their professional liability excess insurance policies.

At issue in Wednesdays’ ruling by the 8th U.S. Circuit Court of Appeals in St. Louis in UnitedHealth Group Inc. v. Executive Risk Specialty Insurance Co. et al., is a single lump-sum $350 million settlement UnitedHealth had reached in two lawsuits, in which there was potential insurance coverage for claims in one lawsuit but not the other.

In the first lawsuit, which was filed in New York in 2000, plaintffs including the Chicago-based American Medical Association charged the Minnetonka, Minnesota-based health care provider had conspired with other insurers to provide inaccurate information to databases the company used to reduce payment for out-of-network claims.

The second action, filed in New Jersey in 2008, was a lawsuit filed against Oxford Health, which UnitedHealth had acquired in 2004, in which plaintffs charged violations of the Employee Retirement Income Security Act of 1974 and violations of state regulations arising from alleged contract breaches and claims regarding Oxford Health’s billings and payments.

UnitedHealth agreed to settle both the AMA and Oxford Health lawsuits for $350 million. The settlement did not state how that sum was to be allocated between plaintiffs in the two lawsuits.

UnitedHealth then filed suit in U.S. District Court in Minneapolis on charges including the insurers’ failure to indemnify it for the AMA portion of the settlement.

After several years of litigation, four excess insurers now remain in the lawsuit, according to the ruling: Chubb unit Executive Risk; Swiss Re unit First Specialty Insurance Corp.; Starr unit Starr Excess Liability Insurance International Ltd.; and AIG unit National Union Fire Insurance Co., according to the ruling.

Executive Risk’s coverage attached at $95 million, with the others providng coverage at higher levels, according to the ruling.

The District Court ruled UnitedHealth had failed to meet its burden to present sufficient evidence to support an allocation between the potentially covered AMA claims and the noncovered Oxford Health claims. It also ruled the insurers were entitled to summary judgment on UnitedHealth’s claim for defense costs in the AMA suit.

On appeal, a three-judge appeals court panel unanimously ruled in the insurers’ favor. The District Court determined that UnitedHealth’s argument that it is entitled to coverage for the entire $350 million settlement so long as the settlement included covered antitrust claims “was untimely and meritless. We agree,” said the ruling.

“Its claim that it can recover the entire $350 million including the amount attributable to the (Oxford Health) suit, was not timely advanced,” said the ruling.

It “is not enough under Minnesota law for UnitedHealth to show simply that its $350 million settlement included a covered claim for an unspecified amount. UnitedHealth bears the burden to allocate the settlement between the potentially covered AMA suit and the non-covered (Oxford Health) with enough specificity to permit a reasoned judgment about liability,” said the ruling, in affirming the lower court’s decision.

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