HOMELAND INSURANCE COMPANY OF NEW YORK, Defendant Below, Appellant,
CORVEL CORPORATION, Plaintiff Below, Appellee.
Submitted: September 26, 2018
Below: Superior Court of the State of Delaware C.A. Nos.
N11C-01-089 and N15C-05-069 (Consolidated)
appeal from the Superior Court. REVERSED.
Newmann, Esquire, and Catherine E. Stetson, Esquire (Argued),
Hogan Lovells U.S. LLP, Washington, D.C., Timothy Jay
Houseal, Esquire, Jennifer M. Kinkus, Esquire, and William E.
Gamgort, Esquire, Young Conaway Stargatt & Taylor, LLP,
Wilmington, Delaware, Michael J. Rosen, Esquire and Peter F.
Lovato, III, Esquire, Skarzynski Black, LLC, for Appellant,
Homeland Insurance Company of New York.
M. Seaman, Esquire (Argued), and April M. Kirby, Esquire,
Abrams & Bayliss LLP, Wilmington, Delaware, for Appellee,
STRINE, Chief Justice; VALIHURA, VAUGHN, SEITZ, and TRAYNOR,
Justices, constituting the Court en Banc.
Insurance Company of New York appeals from a Superior Court
judgment entered against it in the amount of $13.5 million
plus pre-judgment interest. The litigation that led to the
judgment was initiated by CorVel
CorVel is a Delaware company that operates a national
Preferred Provider Organization (PPO) network. Homeland
issued CorVel a claims-made errors and omissions liability
policy with limits of $10 million and a policy period of
October 31, 2005 to October 31, 2006. Thereafter, Homeland
issued renewal policies, which were the same in all material
PPO network included agreements with medical providers in
Louisiana. In late 2004 and early 2005, Louisiana medical
providers began filing claims (the "PPO claims")
asserting that CorVel had improperly discounted medical
payments without providing proper notice in violation of a
Louisiana statute (the "Louisiana PPO Statute").
Litigation ensued in Louisiana which ultimately involved
millions of dollars of claims against CorVel. In 2011, CorVel
entered into a settlement of the litigation. As part of the
settlement consideration, CorVel paid $9 million.
2015, CorVel filed its complaint in this case, alleging that
Homeland owed it damages and penalties under another
Louisiana statute. The statute in question, La. R.S. 22:1973
("Louisiana's Bad Faith Statute"), provides, in
relevant part, that an insurance company that knowingly
misrepresents "pertinent facts or insurance policy
provisions" shall be liable for any damages sustained by
the insured "as a result of" the misrepresentation
and may, in addition, be held liable for
penalties.CorVel alleged that Homeland knowingly
misrepresented facts or policy provisions in a complaint that
Homeland filed in a declaratory judgment action in Delaware
in 2011. The alleged misrepresentation was an averment that
CorVel had not timely reported the PPO claims in accordance
with the policy's requirements. The damages CorVel sought
were the $9 million that it paid to settle the Louisiana
litigation, penalties, attorneys' fees, and pre-judgment
interest. The Superior Court agreed with CorVel's claim
and awarded it $9 million in damages, $4.5 million in
penalties, and pre-judgment interest.
makes three arguments on appeal. First, it argues that the
allegation in its declaratory judgment complaint, that CorVel
had not timely reported the claims, was a statement of a
coverage position that could not give rise to a finding of
bad faith under either Delaware or Louisiana law. Next, it
argues that no causal connection exists between the
allegation in the declaratory judgment complaint and
CorVel's decision to settle the PPO claims. Finally, it
argues that the applicable statute of limitations bars
CorVel's claim. The Superior Court, Homeland contends,
committed errors by ruling against it on each of these three
concluded that the statute of limitations does bar
CorVel's claim and that the Superior Court erred by
ruling that it did not. Because the statute of limitations
bars CorVel's claim, we find it unnecessary to address
Homeland's first two arguments.
FACTS AND PROCEDURAL HISTORY
mentioned, the earliest PPO claims against CorVel were filed
in late 2004 and early 2005. Those claims included claims
filed by Lake Charles Memorial Hospital ("LCMH")
with the Louisiana Department of Labor, Office of
Workers' Compensation. In July 2005, CorVel filed an action in
a federal district court in Louisiana seeking to compel
arbitration of the claims. The federal district court agreed
with CorVel, and on November 6, 2006, ordered that the
parties submit their disputes to arbitration. On or about
December 22, 2006, LCMH submitted a demand for arbitration to
the American Arbitration Association (the "LCMH
arbitration"). CorVel notified Homeland in writing of
the arbitration proceeding on March 28, 2007.
letter dated June 4, 2007, Homeland informed CorVel that it
declined coverage of all the PPO claims. As grounds for
denial, Homeland relied upon provisions in the policy that
excluded (1) claims made against CorVel prior to the
inception date of CorVel's claims-made policy, (2) claims
made during the policy period but which were related to
claims made prior to the inception date, and (3) claims not
reported within 90 days of the end of the policy period.
September 3, 2010, the American Arbitration Association
issued an Order holding that LCMH's arbitration demand
against CorVel could proceed as a class-wide arbitration. On
September 24, 2010, CorVel wrote to Homeland informing it of
the arbitration order. CorVel's letter also stated that
CorVel would look to Homeland for full defense and indemnity
of the arbitration claims. In December 2010, ...