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OneBeacon arrives too late for E&O settlement talks: Court

Too late

Allowing a OneBeacon Insurance Group LLC unit to intervene at this point in a settlement between an Allied World Assurance Co. Holdings Ltd. unit and a Blue Cross unit in a dispute over errors and omission coverage would derail the settlement, says a federal court in refusing OneBeacon’s motion in the matter.

In 2012, several class action lawsuits were filed by providers and subscribers against multiple Blue Cross Blue Shield entities, including Philadelphia-based Independence, and the Blue Cross Blue Shield Association alleging federal antitrust litigation, according to court papers in Tuesday’s ruling in Allied World Specialty Insurance Co. v. Independence Blue Cross.

This underlying litigation led to Canton, Massachusetts-based Allied World filing suit against Independence in U.S. District Court in Philadelphia in March 2017 over the issue of coverage for the litigation under its managed care organization’s E&O policy.

A settlement in principle between Allied and Independence was reached “after a year-long, complex mediation involving the parties and nine other insurance carriers who provided insurance coverage to Independence during the relevant policy period,” according to the ruling.

After learning of the settlement, OneBeacon unit Atlantic Specialty Insurance Co. filed a motion to intervene, which the court denied.

As a condition of the parties’ settlement, Allied and Independence agreed to withdraw their pending cross-motions for summary judgment, said the decision.

But Atlantic argues a ruling on these motions “would determine its obligations as an excess insurer to Independence because its excess policy follows form to Allied’s policy,” it said.

The ruling said, however, that “allowing Atlantic to intervene now and seek a determination of the pending cross-motions for summary judgment would obviate a precondition of Allied and Independence’s settlement and wholly obstruct the parties’ year-long mediation efforts. Therefore, allowing Atlantic to intervene at this stage would prejudice Allied and Independence by derailing their settlement agreement.”

It would also “prejudice the parties by placing a new insurance policy at issue,” said the ruling in referring to Atlantic’s coverage.

In addition, said the ruling, “Atlantic has failed to provide a legitimate reason for waiting over a year to intervene after learning of, and declining to participate in, Allied and Independence’s mediation efforts,” said the court.

“Atlantic has been aware that the parties have been mediating to resolve this dispute since November 2018. Atlantic was invited to join this process but declined” and since that time “did nothing to intervene,” said the court, in denying Atlantic’s motion.

Attorneys in the case could not be reached or had no comment.

In April, a federal appeals court affirmed a lower court ruling and said a New York utility had submitted its claims too late to Chubb Ltd. and OneBeacon Insurance Group units to obtain coverage. 

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