NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ____________
No. 20-2359 ____________
BENECARD SERVICES, INC., Appellant
v.
ALLIED WORLD SPECIALTY INSURANCE COMPANY, f/k/a Darwin National Assurance Company; ATLANTIC SPECIALTY INSURANCE COMPANY; RSUI INDEMNITY COMPANY; TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA; ACE PROPERTY & CASUALTY INSURANCE COMPANY ____________
No. 20-2360 ____________
ALLIED WORLD ASSURANCE COMPANY (US) INC
BENECARD SERVICES, INC., Appellant ____________
On Appeal from the United States District Court for the District of New Jersey (D.C. Nos. 3-15-cv-08593 & 3-17-cv-12252) District Judge: Honorable Michael A. Shipp ____________
Submitted Pursuant to Third Circuit L.A.R. 34.1(a) June 23, 2021
Before: SMITH, Chief Judge, MATEY and FISHER, Circuit Judges. (Filed: September 8, 2021) ____________
OPINION* ____________
FISHER, Circuit Judge.
This is an insurance coverage dispute. Appellant Benecard Services, Inc. is a
company that manages prescription drug benefit plans. In 2015, it was sued by its
onetime business partner, another company that sponsors such plans under Medicare Part
D. The lawsuit included claims for breach of contract and fraudulent misrepresentation.
In 2016, the lawsuit settled. Benecard sought coverage for its defense and settlement
costs under various business insurance policies it held. Denials of coverage, and then
litigation, followed. In 2020, the District Court granted summary judgment to the insurers
in both cases composing this litigation—one case involving Benecard’s directors and
officers liability and general liability policies, and another involving its errors and
omissions liability policy. Benecard timely appealed, and we consolidated its appeals for
disposition. Because we conclude that the District Court did not err, and that summary
judgment for the insurers was warranted, we will affirm.
* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent.
2 I.1
Benecard first challenges the District Court’s grant of summary judgment to its
errors and omissions insurer, Allied World Specialty Insurance Company. Allied World
paid Benecard’s defense costs to the tune of $3.8 million, but declined to indemnify any
portion of the settlement. The District Court, in a commendably thorough opinion, held
that indemnification was not required, because Benecard settled the underlying lawsuit
against it without obtaining Allied World’s prior written consent—an express condition
of coverage under the policy’s consent clause.2
Benecard challenges that holding on three grounds, which we address in turn.3
First, Benecard argues that the District Court erred by drawing inferences in favor of
1 The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction under 28 U.S.C. § 1291. “We review summary judgments de novo, applying the same test as the District Court.” Disability Rts. N.J., Inc. v. Comm’r, N.J. Dep’t of Hum. Servs., 796 F.3d 293, 300 (3d Cir. 2015). Under that test, “[s]ummary judgment is appropriate when ‘the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’” Id. (quoting Fed. R. Civ. P. 56(a)). 2 See App. 1486 (“No coverage is available under this Policy for . . . any settlements or settlement offers made[] without the Underwriter’s prior written consent.”). 3 In a brief footnote, Benecard mentions a fourth ground, asserting that Allied World’s “lack of consent” defense has been “waive[d].” Appellant’s Br. 64 n.21. Ironically, this waiver argument is itself waived. See Prometheus Radio Project v. F.C.C., 824 F.3d 33, 53 (3d Cir. 2016) (argument “relegated to a footnote” considered waived); John Wyeth & Bro. Ltd. v. CIGNA Int’l Corp., 119 F.3d 1070, 1076 n.6 (3d Cir. 1997) (“[A]rguments raised in passing (such as, in a footnote), but not squarely argued, are considered waived.”).
3 Allied World, the moving party, contrary to settled summary judgment principles.4
Specifically, it says the Court improperly inferred that Benecard’s defense costs did not
exhaust the policy’s $5 million coverage limit, and that Benecard merely “anticipated” its
defense costs would do so.5 This mattered, Benecard says, because according to its legal
theory, exhaustion of the coverage limit excused Benecard’s failure to obtain prior
written consent.
Benecard fails to support this excuse theory with any citation to legal authority, so
we decline to accept it. We also disagree that the District Court drew any improper
inferences. The record shows that the Court merely pointed to the policy’s plain
language, which links exhaustion to “payment” by the insurer—rather than accrual by the
insured—of defense costs.6 The Court then referred to the undisputed facts and concluded
that Benecard did not exhaust its coverage limit. That conclusion is amply supported by
the record, above all by Benecard’s express admission that Allied World “paid defense
counsel only $3.8 million - rather than its limits of $5 million.”7
Next, Benecard argues that the District Court erred in interpreting applicable New
4 At the summary judgment stage, “[a]ll facts should be viewed ‘in the light most favorable to the non-moving party,’ with ‘all reasonable inferences [drawn] in that party’s favor.’” Heraeus Med. GmbH v. Esschem, Inc., 927 F.3d 727, 733 (3d Cir. 2019) (second alteration in original) (quoting Scheidemantle v. Slippery Rock Univ. State Sys. of Higher Educ., 470 F.3d 535, 538 (3d Cir. 2006)). 5 App. 132. 6 App. 1486. 7 App. 1902.
4 Jersey law. It says that, contrary to the District Court’s view, Allied World may not
enforce the consent clause unless it proves “appreciable prejudice.”8 Again, we disagree.
New Jersey’s appreciable prejudice doctrine applies to “‘occurrence’ policies, [in which]
the policy holders are unsophisticated consumer[s] unaware of all of the policy’s
requirements.”9 However, the doctrine has “no application whatsoever to a ‘claims made’
policy that fulfills the reasonable expectations of the insured with respect to the scope of
coverage.”10 That is because “claims made” policies are generally held by
“knowledgeable insureds, purchasing their insurance requirements through sophisticated
brokers[.]”11 Here, Benecard’s errors and omissions policy is a “claims made” policy.12
Benecard itself is not an individual consumer, unaware of the terms of its policy, but a
corporate insured which obtained that policy through its broker Wells Fargo.
Nevertheless, Benecard insists that appreciable prejudice must be shown here
because this case involves a consent requirement, rather than a notice requirement. The
Supreme Court of New Jersey has recently indicated otherwise, stating flatly that it “has
never afforded a sophisticated insured the right to deviate from the clear terms of a
8 Ohaus v. Cont’l Cas. Ins. Co., 679 A.2d 179, 184 (N.J. App. Div. 1996) (internal quotation marks omitted). 9 Templo Fuente De Vida Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 129 A.3d 1069, 1080 (N.J. 2016) (internal quotation marks omitted) (second alteration in original). 10 Id. at 1078 (emphasis omitted) (quoting Zuckerman v. Nat’l Union Fire Ins. Co., 495 A.2d 395, 406 (N.J. 1985)). 11 Id. at 1081 (alteration in original) (internal quotation marks omitted). 12 App. 1482.
5 ‘claims made’ policy.”13 The consent clause is a clear term of Benecard’s claims made
policy. Accordingly, Allied World need not show appreciable prejudice to enforce it.
Benecard’s third argument against the District Court’s errors and omissions ruling
centers on Allied World’s own conduct leading up to the settlement. Benecard says
Allied World “operate[d] with less than candor” and “engaged in ‘gotcha’ claims
handling,” because it knew Benecard was considering (and then actively negotiating)
settlement, yet it failed to “remind [Benecard] of the E&O Policy’s Consent Clause.”14
According to Benecard, this amounted to a violation of Allied World’s duty of good faith
and fair dealing, and of New Jersey statutes and regulations implementing that duty. In
addition, Benecard says, Allied World’s conduct left it equitably estopped from denying
coverage based on Benecard’s failure to obtain consent.
We are not persuaded by these arguments. On good faith and fair dealing,
Benecard relies on Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Center
Associates.15 There, a tenant notified its landlord, nineteen months before the deadline
(and repeatedly thereafter), of its intent to exercise a lease option.16 The landlord
responded with a “nineteen-month posture of silence, . . . punctuated by written and
13 Templo Fuente De Vida Corp., 129 A.3d at 1081 (emphases added); see also Sparks v. St. Paul Ins. Co., 495 A.2d 406, 416 (N.J. 1985) (emphasizing “the total inapplicability of the [appreciable prejudice] doctrine to a true ‘claims made’ policy” in New Jersey). 14 Appellant’s Br. 56, 62-63. 15 864 A.2d 387 (N.J. 2005). 16 Id. at 389.
6 verbal evasions and delay.”17 It also engaged in “subterfuge,” for instance by not
challenging the tenant’s formal declaration, while applying for a loan, that it had indeed
“exercised its option.”18 This conduct “lulled [the tenant] into believing it had exercised
the lease option properly.”19 Accordingly, the New Jersey Supreme Court concluded, the
conduct violated the landlord’s duty of good faith and fair dealing.20
Here, accepting Benecard’s version of events, there is nothing remotely
approaching the pattern of evasion and subterfuge, over more than a year and a half,
displayed by the landlord in Brunswick Hills. Allied World was informed that settlement
negotiations were a possibility just five to six weeks before the settlement was
consummated. Benecard correctly states that Allied World never reminded it, during that
period, of the consent clause. But there is no evidence that Allied World led Benecard to
believe the consent clause had been satisfied, like the evidence in Brunswick Hills that
the landlord left unchallenged the tenant’s declaration that it had “exercised its option.”21
Here, Benecard made no analogous declaration that it had satisfied the consent clause.
Benecard points to an email from Allied World’s representative, remarking, in apparent
reference to the settlement: “I hope that everything was finalized.”22 But this email was
17 Id. at 390. 18 Id. at 398. 19 Id. at 399. 20 Id. 21 Id. at 398. 22 App. 2656.
7 sent five days after the date on which, by Benecard’s own account, it informed Allied
World that “a confidential settlement-in-principle” had already been reached.23 For these
reasons, Brunswick Hills does not control this case.
Benecard fares no better with respect to the New Jersey statutes and regulations it
cites.24 It suggests in passing that Allied World violated these provisions, but it never
clarifies how, and cites nothing in the record to substantiate its claim. Likewise,
Benecard’s estoppel argument fails. “To establish a claim of estoppel, a party must prove
. . . ‘that the [other party’s] alleged conduct was done, or representation was made,
intentionally or under such circumstances that it was both natural and probable that it
would induce action.’”25 “Further, the conduct must be relied on, and the relying party
must act so as to change his or her position to his or her detriment.”26 Here, Benecard
asserts that Allied World intentionally maintained “silence on the ‘lack of consent’
issue.”27 But it fails to explain how it “relied on” this silence, or how Allied World’s
silence during the relevant period “induce[d]” Benecard to “change [its] position to [its]
detriment.”28 Additionally, Benecard cites no authority that would support employing the
estoppel doctrine as Benecard seeks to employ it here—in effect, as a vehicle for
23 App. 2802. 24 See, e.g., N.J. Stat. Ann. § 17:29B-4; N.J. Admin. Code. §§ 11:2-17.5, 17.8. 25 Boritz v. N.J. Mfrs. Ins. Co., 968 A.2d 1223, 1227 (N.J. App. Div. 2009) (quoting Miller v. Miller, 478 A.2d 351, 355 (N.J. 1984)). 26 Id. (quoting Miller, 478 A.2d at 355). 27 Appellant’s Br. 66. 28 Boritz, 968 A.2d at 1227 (quoting Miller, 478 A.2d at 355).
8 imposing on insurers an obligation to remind their insureds that they must comply with
conditions precedent stated plainly in the policy.
In sum, Benecard has not shown that the District Court erred in granting summary
judgment to Allied World in the errors and omissions action. The operative policy’s
consent clause states that “[n]o coverage is available under this Policy for . . . any
settlements or settlement offers made[] without [Allied World’s] prior written consent.”29
It is undisputed that Benecard failed to obtain that consent. Accordingly, the District
Court correctly concluded that Allied World is not required to indemnify the settlement.
II.
Benecard next challenges the District Court’s grant of summary judgment to
Allied World in the action involving its directors and officers liability policy. There, the
Court held that Benecard’s claim fell within that policy’s “Third Party” and “Professional
Services” exclusions.30 Benecard contends this was reversible error, because in its view
the policy’s multiple exclusions conflict, creating an ambiguity that must be resolved in
Benecard’s favor. We disagree.
Coverage exclusions in insurance policies “are presumptively valid and are
enforced if they are ‘specific, plain, clear, prominent, and not contrary to public
29 App. 1486. 30 App. 465, 478 (capitalizations altered).
9 policy.’”31 The exclusions at issue here meet this standard. The “Third Party” exclusion
unambiguously bars coverage for claims involving, among other things, “alleged . . .
misleading statement[s] or breach[es] of duty in connection with the rendering of . . .
services to a third party.”32 The “Professional Services” exclusion likewise
unambiguously bars coverage “relating to the rendering [of] or failure to render any
professional services.”33 These exclusions sweep broadly and overlap to some degree,
with one another and with a third exclusion Benecard mentions.34 But there is nothing
unclear or uncertain about their language. Nor does the overlap itself create an ambiguity.
As written, the exclusions straightforwardly bar coverage for the underlying lawsuit
against Benecard, which alleged that Benecard misrepresented its expertise in managing
prescription drug plans, and breached its contractual duties by failing to provide
satisfactory member enrollment, claims adjustment, and other services. Contrary to
Benecard’s protestations, no adverse inferences are needed to reach this conclusion.
Benecard argues that enforcing the exclusions as written renders coverage illusory,
31 Flomerfelt v. Cardiello, 997 A.2d 991, 996 (N.J. 2010) (quoting Princeton Ins. Co. v. Chunmuang, 698 A.2d 9, 17 (N.J. 1997)). 32 App. 465. 33 App. 478. 34 Under the “Insurance Company E&O” exclusion, no coverage is available for claims arising from “the rendering of or failure to render professional services,” including but “not limited to . . . the handling and adjusting of claims arising under an insurance policy.” App. 474. As Benecard now points out, the overlap between these various exclusions is not complete. But their adoption of different language and different carve- outs does not create inconsistency or ambiguity in the policy.
10 and that the policy should instead be interpreted to honor Benecard’s “objectively
reasonable expectations.”35 However, coverage here is not illusory, because the
exclusions leave intact the policy’s coverage for breaches of duty by company executives
acting in their executive capacity—the typical domain of directors and officers liability
insurance.36 As for Benecard’s objectively reasonable expectations, such expectations can
overcome the plain meaning of a policy only “in exceptional circumstances.”37 We have
held that “the ‘exceptional circumstances’ that might allow a court to construe a clear and
unambiguous policy exclusion in accordance with the objectively reasonable expectations
of the insured, rather than in accordance with the plain language of the exclusion, arise
only when a literal application of the exclusion would also violate public policy.”38
Benecard does not contend that enforcing the exclusions here would violate public
policy. Thus, the exclusions are enforceable as written.
In sum, Benecard has not demonstrated any error by the District Court in granting
summary judgment to Allied World in the directors and officers action.
III.
Next, Benecard challenges the District Court’s grant of summary judgment to
35 Doto v. Russo, 659 A.2d 1371, 1376-77 (N.J. 1995). 36 See, e.g., 1 Couch on Ins. § 1:35 (noting that directors and officers policies commonly provide coverage for “liability based on official actions of corporate officers and directors”). 37 Doto, 659 A.2d at 1377. 38 Colliers Lanard & Axilbund v. Lloyds of London, 458 F.3d 231, 237 (3d Cir. 2006) (applying New Jersey law).
11 another of its directors and officers liability insurers, Atlantic Specialty Insurance
Company. The Court concluded that Benecard’s policy with Atlantic Specialty does not
provide coverage for the underlying lawsuit against Benecard, because that suit falls
within the policy’s exclusion for “Managed Care Activities.”39 Benecard contends this
was error. In its view, the Managed Care exclusion “specifically excludes from its
purview misstatements and misleading statements” like those alleged in the lawsuit
against Benecard.40
Benecard’s theory is foreclosed by the policy’s plain language. Contrary to
Benecard’s assertion, the Managed Care exclusion does not specifically address
misstatements or misleading statements. Rather, it covers claims involving “any actual or
alleged act, error or omission in the performance of . . . Managed Care Activities.”41 As
the District Court concluded, the term “act” is broad enough to encompass both sorts of
conduct alleged in the underlying lawsuit against Benecard—misstatements or
misrepresentations about Benecard’s expertise, and poor or non-performance in its
management of the prescription drug plans. Moreover, we find no merit in Benecard’s
contention that the District Court treated the Managed Care exclusion as ambiguous, and
then improperly resolved that ambiguity against Benecard. On the contrary, the District
Court concluded that the exclusion “unambiguously” bars coverage for Benecard’s
39 App. 332. 40 Appellant’s Br. 92. 41 App. 332 (emphasis added).
12 claim.42
Benecard’s remaining arguments are likewise unavailing. The District Court’s
reading of the Managed Care exclusion does not render coverage illusory simply because
it bars coverage for the particular claim Benecard filed. The exclusion concerns
“Managed Care Activities,” defined to include services like the ones Benecard performed
while managing the prescription drug plans, such as enrollment and claims handling.43
But it does not affect coverage for alleged wrongful acts by Benecard’s executives, or
other forms of coverage provided under the policy.
Nor can we agree with Benecard’s law of the case argument. “The ‘law of the case
. . . doctrine posits that when a court decides upon a rule of law, that decision should
continue to govern the same issues in subsequent stages in the same case.’”44 Benecard
asserts that by declining to rule favorably on Atlantic Specialty’s motion to dismiss, the
District Court established, as law of the case, that Benecard is potentially entitled to
coverage under the policy. But that is incorrect. The District Court’s dismissal ruling did
not “decide[] upon a rule of law,” and thus did not create law of the case.45 It merely
concluded that Atlantic Specialty had, at that stage, failed to “establish the application of
42 App. 96. 43 App. 326. 44 Feesers, Inc. v. Michael Foods, Inc., 591 F.3d 191, 207 (3d Cir. 2010) (quoting Arizona v. California, 460 U.S. 605, 618 (1983)). 45 Id.
13 any exclusion based on the face of the Complaint.”46 That determination did not bind the
Court’s later decision on summary judgment.
Accordingly, we conclude that the Managed Care exclusion bars coverage for
Benecard’s claim, and that Benecard has not shown the District Court erred in granting
summary judgment to Atlantic Specialty.
IV.
Benecard next challenges the District Court’s summary judgment for Travelers
Property Casualty Company of America, again in the directors and officers action. It
argues that the District Court erred in concluding coverage was unavailable under two
provisions of the Travelers policies. One provided coverage for the publication of
material that “[u]nreasonably places a person in a false light.”47 Another provided
coverage for the publication of material that “disparages a person’s or organization’s
goods, products or services,” provided the claim is brought by a person or organization
that alleges it was disparaged.48 In addition, Benecard contends the District Court erred in
determining that only the 2012 Travelers policies, not the 2011 or 2013 policies, were
potentially implicated by the underlying lawsuit against Benecard.
Again, we are unpersuaded. New Jersey law provides that if the terms of an
46 App. 1678 (emphasis added). 47 App. 956, 2115. 48 App. 956, 2115.
14 insurance policy are clear, “courts should interpret the policy as written.”49 The District
Court did just that in construing the provisions at issue. On false light, the Court correctly
noted that the underlying lawsuit against Benecard did not include any claim for the
common law tort of false light. Benecard counters that the term “false light” can bear a
broader meaning. It points to allegations in the underlying lawsuit that it made statements
exaggerating its expertise in managing prescription drug plans, and misrepresenting its
plans for addressing various performance issues that arose. However, the lawsuit’s
contention was not that these alleged misrepresentations themselves “place[d]”
Benecard’s partner company “in a false light.”50 Rather, the lawsuit alleged that the
company suffered reputational damage due to Benecard’s allegedly shoddy performance.
Similarly on disparagement, we disagree with Benecard’s assertion that genuine
issues of material fact exist regarding its alleged misrepresentations. In the underlying
lawsuit, Benecard’s partner company never claimed that Benecard’s alleged
misrepresentations disparaged it. On the contrary, the subject of the alleged
misrepresentations was not the partner company’s “goods, products[,] or services,” but
Benecard’s own abilities, expertise, and plans.51 Finally, the District Court correctly
concluded that only the 2012 Travelers policies are implicated here, because the lawsuit
against Benecard alleged that “all of [Benecard’s] misrepresentations and material
49 President v. Jenkins, 853 A.2d 247, 254 (N.J. 2004). 50 App. 956, 2115. 51 App. 956, 2115.
15 omissions” were made “in the last few months of 2012 and the first two months of 2013,”
exclusively within the coverage period of the 2012 policies.52
Lastly, Benecard argues that the District Court erred in ruling that it could not
maintain bad faith claims against the insurers absent a finding of coverage. We disagree.
Under New Jersey law, “a claimant who could not have established as a matter of law a
right to summary judgment on the substantive [coverage] claim would not be entitled to
assert a claim for an insurer’s bad-faith refusal to pay the claim.”53 Likewise for bad faith
claims premised on alleged processing delays, “the test appears to be essentially the
same.”54 Such bad faith claims are viable when the substantive claim for coverage is
“valid” and “uncontested.”55 Here, however, Benecard could not establish a right to
coverage. Additionally, Benecard’s citation to the New Jersey Unfair Claim Settlement
Practices Act56 is unavailing, because that statute does not create a private right of
action.57 We conclude that the District Court did not err in granting summary judgment to
the insurers on Benecard’s bad faith claims.
52 App. 263. 53 Pickett v. Lloyd’s, 621 A.2d 445, 454 (N.J. 1993). 54 Id. 55 Id. 56 N.J. Stat. Ann. § 17:29B-1 et seq. 57 See, e.g., Pierzga v. Ohio Cas. Group of Ins. Cos., 504 A.2d 1200, 1204 (N.J. App. Div. 1986).
16 VI.
For the foregoing reasons, we will affirm.