Homeland Insurance Company of Delaware v. Independent Health Association, Inc.

CourtDistrict Court, W.D. New York
DecidedFebruary 1, 2024
Docket1:22-cv-00462
StatusUnknown

This text of Homeland Insurance Company of Delaware v. Independent Health Association, Inc. (Homeland Insurance Company of Delaware v. Independent Health Association, Inc.) is published on Counsel Stack Legal Research, covering District Court, W.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Homeland Insurance Company of Delaware v. Independent Health Association, Inc., (W.D.N.Y. 2024).

Opinion

UNITED STATES DISTRICT COURT W ESTERN DISTRICT OF NEW YORK

HOMELAND INS. CO. OF DELAWARE,

Plaintiff, 22-CV-00462-WMS-HKS v.

INDEPENDENT HEALTH ASS’N, INC., INDEPENDENT HEALTH CORP., DXID, LLC, AND ELIZABETH GAFFNEY,

Defendants/Third-Party Plaintiffs,

v.

ACE AMERICAN INS. CO.,

Third-Party Defendant.

DECISION AND ORDER This case was referred to the undersigned by the Hon. William M. Skretny, pursuant to 28 U.S.C. ' 636(b)(1)(A) for all pretrial matters. Dkt. #20.

INTRODUCTION This is a declaratory judgment action in which plaintiff Homeland Insurance Company of Delaware (“Homeland”) seeks a declaration that it has no defense or indemnity obligations arising out of an insurance policy it issued to defendant Independent Health Association, Inc. (“IHA”) as to claims asserted against IHA and other insureds1 in

1 Defendants Independent Health Corporation (“IHC”), DxID, LLC, and Elizabeth Gaffney (“Gaffney”) were also insureds under the Homeland policy. IHC and DxID are or were subsidiaries of IHA. Dkt. #1, ¶¶ 7-8. Gaffney was the Chief Executive Officer of DxID. Dkt. #1, ¶ 9. a federal qui tam action and related arbitration. Dkt. #1, ¶¶ 1-3. Third-party defendant Ace American Insurance Company (“Ace”) seeks a similar determination as to an excess insurance policy it issued to defendants. Dkt. #30.

Currently before the Court are Homeland’s motion to compel and motion to settle an order, as well as a joint status report that the Court ordered the parties to file. Dkt. ##45, 52, 57. For the following reasons, Homeland’s motion to compel will be granted in part and taken under advisement in part, and the motion to settle an order will be taken under advisement pending the parties’ filing of an amended proposed case management order.

BACKGROUND The facts alleged in this matter have been set forth in a previous Decision and Order by the presiding district court judge, Dkt. #51, and they are incorporated here

by reference.

Briefly summarized, Homeland and Ace seek declarations that they owe no duty to defend or indemnify defendants relating to an underlying qui tam action pending in this Court, United States ex rel. Ross v. Indep. Health Corp., Case No. 12-CV-299- WMS, and a related arbitration that was settled in July 2022. Dkt. #51, p. 4.

In the qui tam action, “the government maintains that Defendants defrauded the federal Medicare program by submitting false and inflated claims for reimbursement.” Dkt. #51, p. 3. The government’s complaint-in-intervention alleges claims under the False Claims Act (“FCA”), 31 U.S.C. §§ 3729, et seq., and common law. Dkt. #51, p. 2. The arbitration arose, in part, out of the same allegations. Dkt. #51, p. 4.

Homeland maintains that several exclusions in its policy2 preclude coverage

for the claims against defendants in those actions: (1) Exclusion A (“the intent-based” exclusion), which excludes coverage for intentionally fraudulent acts that are established by a final adjudication, Dkt. #1, ¶45; (2) Exclusion D (the “knowledge-based” exclusion), which excludes coverage for any claims, damages, or claims expenses arising out of any actual or alleged act, error, or omission if, before the inception date of the policy, defendants knew or should reasonably have known that the act, error, or omission would give rise to a claim, Dkt. #1, ¶ 46; (3) Exclusion J, which excludes coverage for any claims, damages, or claim expenses brought by, or on the behalf of, certain governmental or regulatory bodies or agencies, Dkt. #1, ¶ 47; and (4) Exclusion K, which excludes

coverage for certain claims, damages, or claims expenses for liabilities arising under any indemnification agreement, Dkt. #1, ¶ 48.

In December 2022, Homeland served document requests and interrogatories on defendants. Dkt. ##45-3, 45-4. As discussed more specifically below, the requests seek information relevant to the policy exclusions, particularly Exclusion D. That is, many of the requests concern what defendants knew—prior to the issuance of

2 The Homeland policy was issued on August 1, 2013 and renewed on August 1, 2014. Dkt. #1, ¶¶ 13-14. the Homeland policy on August 1, 2013—about the government’s investigation into their Medicare billing practices and the potential qui tam action.

On January 18, 2023, defendants filed a motion for partial stay of this matter

pending resolution of the qui tam case. Dkt. #35. Defendants argued that discovery in this case would overlap with liability-related issues in the qui tam action and would thus be prejudicial. That motion became ripe on February 22, 2023. Dkt. #42.3

In the meantime, on February 10, 2023, defendants served their responses and objections to Homeland’s discovery requests. Dkt. ##45-5, 45-6.

Defendants objected to many of these requests on the grounds that they are “premature, prejudicial, and potentially unnecessary to the extent they seek information related to matters that are contested in and potentially or actually relevant or

actually relevant to the factual allegations and legal claims asserted against the Policyholders in the Government Action.” Dkt. 45-6, p. 6. As noted, this was the same argument advanced in defendants’ motion to stay.

In March 2023, counsel met and conferred regarding defendants’ discovery responses. Dkt. #45-2, ¶8. Defendants’ counsel did not withdraw their objections but stated that they would “take another look” at their responses. Dkt. #45-2, ¶ 10. On March

3 Because only non-dispositive pretrial matters had been referred to the undersigned, the motion to stay fell within the presiding district court judge’s authority. Dkt. #20. 27, 2023, defendants served supplemental responses and objections to Homeland’s discovery requests. Dkt. ##45-10, 45-11.

As set forth in the attached appendix4, in response to fourteen

interrogatories, defendants refused to answer twelve and gave only partial responses to two. As to the twenty-six document requests, defendants agreed to produce documents as to six requests; they agreed to partial production as to four requests; and they refused to produce any documents as to the remaining sixteen requests.

On April 14, 2023, the parties filed a proposed protective order, Dkt. #43, which the Court entered on April 18, 2023. Dkt. #44.

On June 1, 2023, plaintiff filed the instant motion to compel asking the Court to order defendants to answer plaintiff’s Interrogatories 1-14 and to produce documents

responsive to plaintiff’s requests 4, 5, 8-16, and 18-26. Dkt. #45. Defendants filed their memorandum in opposition on June 29, 2023, relying on—and specifically incorporating—the arguments advanced in their still-pending motion to stay. Dkt. #47, passim.

On August 15, 2023, Judge William M. Skretny issued a Decision and Order denying defendants’ motion to stay. Dkt. #51. Judge Skretny rejected defendants’ argument that “Homeland’s pursuit of discovery related to the knowledge- and intent-

4 This appendix reflects the status of defendants’ discovery responses as of March 27, 2023; it does not reflect more recent changes, which are discussed below. based policy exclusions could (at least in theory) result in the type of discovery that the government would seek to prove knowledge and intent in the under lying action.” Dkt. #51, p. 7. Judge Skretny explained: Defendants contend that Exclusions D and A ‘turn on facts squarely at issue in the Underlying Action.’ . . . But as set out above, the knowledge at issue in Exclusion D principally concerns the scope and timing of Defendants’ knowledge of the qui tam action, not the knowledge required to establish a FCA violation.

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Related

False claims
31 U.S.C. § 3729

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Homeland Insurance Company of Delaware v. Independent Health Association, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/homeland-insurance-company-of-delaware-v-independent-health-association-nywd-2024.