The United States District Court for the Northern District of Illinois, applying Illinois law, has held that a government-issued subpoena constituted a Claim under the directors and officers liability policies at issue, thus allowing a company’s coverage action to proceed against its primary and excess insurers.  Astellas US Holding, Inc. v. Starr Indem. & Liab. Co., 2018 WL 2431969 (N.D. Ill. May 30, 2018).  The court also held that the company’s excess insurers were appropriate parties to the action even though the underlying limits had not been exhausted.

The insured pharmaceutical company made charitable contributions to non-profit patient assistance programs that provided low-cost prescription drugs to financially needy patients.  After discovering that patients of these programs may have taken drugs sold by the company in violation of federal health care laws, the Department of Justice issued a subpoena to the company demanding certain documents about its payments to these programs.  Upon receiving the subpoena, the company provided timely notice to its primary and two excess D&O insurers, seeking coverage for the expenses incurred in responding to the subpoena.  The insurers denied coverage on the basis that the subpoena did not satisfy the definition of a Claim, and the company filed suit.

In the ensuing coverage action, the primary insurer argued that the subpoena did not satisfy any of the enumerated subparts of the definition of a Claim.  The insurer asserted that document production is not “relief” and that the subpoena is not a written “demand for relief” as contemplated by the policy because it only seeks information and does not make a request of the court.  The court disagreed, holding that “[t]he broad definition of a ‘Claim’ . . . indicates that the policy was designed to cover something like a subpoena—which is a demand for relief in response to an accusation of wrongdoing.”  The court stated that the subpoena demanded information, as opposed to merely requesting it, and that enforcement proceedings—i.e., relief—would follow any non-compliance.  Accordingly, the court held that the subpoena was a written demand for non-monetary relief, and thus constituted a Claim under the policy.

In addition, the court dismissed the excess insurers’ motions to dismiss for lack of subject matter jurisdiction.  The excess insurers argued that the action was not ripe because their policies are only triggered upon exhaustion of the underlying limits, and plaintiffs failed to show that such exhaustion had occurred.  Although the court recognized that the primary carrier had not paid any amounts under its policy, it stated that “[a] substantial controversy is brewing between the parties; plaintiffs need not wait for [the excess insurers] to breach their policies before brining suit.”