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A Philadelphia Commerce Court judge has dismissed a $200 million lawsuit in which Aetna sought from its excess insurance providers coverage related to the defending and settling of at least two nationwide class actions that featured similar claims. In Aetna Inc. v. Lexington Insurance Co., Aetna was attempting to force a group of its excess insurers to help pay for costs stemming from class actions brought against it by various groups of health care providers in 1999 and 2000. Those health care provider classes effectively claimed that the Connecticut-based insurer was thinking more about economics than medical necessity when it denied certain claims. Aetna asserted that the named defendants in Aetna – excess insurers that wrote Aetna professional liability policies for the years 1999 and 2000 – are obligated to help foot the bill for costs that arose from those litigations. But in a 24-page decision filed late last week, Judge Howland W. Abramson found that since the 1999 and 2000 class actions so closely mirrored previous litigations against which Aetna has had to defend itself, Aetna is not entitled to coverage under its 1999 and 2000 excess policies, which mandated that a “series” of acts should result in one single claim. Abramson has dismissed Aetna’s claims against the defendant excess insurers, which include Lexington, certain underwriters at Lloyd’s and Executive Risk Specialty Insurance Co. “Although this may initially seem like a harsh result, it is dictated by the unambiguous terms of the policies,” Abramson wrote. “The court also believes that this result furthers the purpose for which liability insurance exists. Liability insurance is intended to spread an individual’s unforeseen (or at least unpreventable) risk among a pool of willing participants; it is not intended to alleviate the individual’s obligation to behave rationally and to be risk averse. Once an insured becomes aware that it is engaging in behavior that may result in a loss, it should adjust its behavior to avoid the loss.” The 1999 and 2000 policies were nearly identical, according to Abramson’s decision. They state that the excess insurers are to pay out on costs stemming from professional liability actions against Aetna, but only if Aetna’s claim for that coverage is made during the relevant period of the policy’s applicability. Both policies also include language to the effect that any Aetna claims resulting from “a series of acts, errors or omissions” on the part of Aetna should be considered as one claim. Interpreting the policy, Abramson found that if the allegations contained in the 1999 and 2000 class actions are “the same or similar to” those that formed the basis for previous litigations against Aetna, then the excess insurers should not be required to indemnify Aetna pursuant to the 1999 and 2000 policies. “It does not matter if the [legal] claims in one action [against Aetna] are for violation of RICO and in another they are for violation of a consumer protection statute or the common law, so long as the underlying acts complained of are the same,” Abramson wrote. “Differences in the applicable law do not cause [legal] claims [against Aetna] to be treated as separate and distinct under the [1999 and 2000] policies; instead, only differences in the underlying facts alleged can give rise to separate claims.” Jurisdictional differences, he added in a footnote, “are likewise irrelevant.” One of the underlying nationwide health care provider class actions against Aetna was filed in Alabama, the other in Florida. But as early as 1996, Abramson wrote, Aetna had been sued by a Texas class similarly comprised of health care providers. And in 1998, the Texas attorney general filed suit against Aetna on behalf of insured patients in an action that involved similar allegations of denied coverage, delayed payments and discouraged use of services, among other things. After finding that the excess carriers do not owe Aetna coverage over the costs of settling the Alabama and Florida class actions, Abramson also concluded that they owe no duty to help pay for Aetna’s resulting defense costs. He noted that under the policies, the excess insurers merely had the right to participate in Aetna’s defense against professional liability actions, while Aetna was to take the lead in mounting its legal defense. “Aetna, unlike many insureds, is a sophisticated insurer in its own right, and it may be presumed to understand the import of the defense rights it retained for itself,” Abramson wrote. Aetna should have become aware somewhere between 1996 and 1998 that some of its practices might result in its being sued, he added later. “It should not have waited to get caught in the [Alabama and Florida litigations] and then try to make its insurers share in its (by then) foreseeable and preventable loss,” he wrote. Aetna’s lawyers in the case are Ann Laupheimer and Jerome Richter of Blank Rome in Philadelphia. Aetna spokeswoman Cynthia Michener said that “we disagree with the decision, and intend to file an appeal.” Jeffrey Lerman of Montgomery McCracken Walker & Rhoads in Philadelphia, who defended Lexington, said he believes that Abramson “identified concepts that are well established, and for that reason Aetna is going to have an enormous uphill battle on appeal.” Ronald Schiller of DLA Piper Rudnick Gray Cary in Philadelphia, who defended Executive Risk, said his client is pleased with the decision and declined to comment further. The Lloyd’s underwriters involved in the matter are being represented by John Gordan III of Morgan Lewis & Bockius in New York. He did not immediately respond to a call seeking comment.

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