“Bargaining Leverage” Does Not Suffice to Trigger Personal Profit/Financial Advantage Exclusion

A federal court in Idaho has held that “bargaining leverage” in violation of state and federal anti-trust laws is an insufficient gain for purposes of triggering an insurance policy’s improper personal profit or financial advantage exclusion. St. Luke’s Health Sys., Ltd., v. Allied World Nat’l Assurance Co., No. 1:14-CV-475-BLW (D. Idaho  Sept. 4, 2015).

The insured, a non-profit hospital network , was found to have violated state and federal antitrust laws by acquiring more “bargaining leverage” with the purchase of another company, which the court predicted would result in higher prices. The insurer initially defended the underlying anti-trust claims against the hospital subject to a reservation of rights. After the court’s ruling against the insured, however, the insurer denied coverage based on a policy exclusion for any claims based on “the gaining of any profit or financial advantage or improper or illegal remuneration by [the insured], if a final judgment or adjudication establishes that [the insured] was not legally entitled to such profit or advantage or that such remuneration was improper or illegal[.]”

In the coverage litigation that followed, the court concluded that the exclusion did not apply because the insured was not found to have gained an improper monetary or financial benefit. In reaching this conclusion, the court rejected the insurer’s argument that the phrase “financial advantage” in the exclusion included “bargaining leverage.” According to the court, interpreting the phrase in this manner would (1) allow the insurer to “add words to … avoid liability,” and (2) broaden the use of the words “financial advantage” beyond its plain meaning.