The Northern District of Illinois in Astellas US Holding, Inc. v. Starr Indemnity and Liability Co., 2018 WL 2431969, at *1 (N.D. Ill. May 30, 2018) held that a U.S. Department of Justice subpoena demanding documents relating to a government investigation constitutes a “Claim.”
The DOJ issued a subpoena to two Astellas entities demanding production of documents relating to an industry-wide investigation of pharmaceutical companies for alleged “Federal health care offenses.” Failure to comply exposed Astellas to liability and punishment.
Astellas notified its insurers. The Starr primary D&O insurance policy provided that the “Insurer shall pay on behalf of the Company the Loss arising from a Claim first made during the Policy Period … against the Company for any Wrongful Act ….” The policy defined “Claim”, in relevant part, as any:
(1) written demand for monetary, non-monetary or injunctive relief made against an Insured;
(2) judicial, administrative or regulatory proceeding…commenced against an Insured. . .;
(3) arbitration proceeding commenced against an Insured…; [or]
(4) formal civil, criminal, administrative or regulatory investigation of an Insured Person, which is commenced by the filing or issuance of a notice of charges, formal investigative order or similar document identifying such Insured Person as a person against whom a proceeding identified in (2) or (3) above may be commenced…[.]
Starr denied coverage, asserting “there has been no written demand for relief made against any Insured[.] … The Subpoena simply requests that certain documents be produced.”
In finding the subpoena satisfied a “Claim,” the court made three key findings. First, the court held that the DOJ’s allegations—that Astellas’ actions violated federal law—and issuance of the subpoena because of those allegedly unlawful acts satisfy the “Wrongful Act” requirement. The court further determined the policy requires only that a “Claim” be made “for any Wrongful Act,” not an allegation that the Astellas entities themselves engaged in an actual or alleged wrongful act.
Second, the court held the subpoena was a “written demand for monetary, non-monetary or injunctive relief made against an Insured” because the demand to appear before government officials and produce documents is “non-monetary relief.” The court rejected Starr’s argument that “relief” should be defined as “legal remedy or redress,” or as “‘redress or benefit,’ especially ‘equitable in nature (such as an injunction or specific performance), that a party asks of a court,’” (which, according to Starr, the subpoena did not satisfy because it sought only information and does not make a request of a court). Rather, the court determined that because the DOJ alleged that Astellas violated federal law, it was reasonable to infer enforcement proceedings would follow if Astellas did not comply with the subpoena, and thus the court found the subpoena was not a mere request, but rather a demand, and not distinct from any potential enforcement proceedings. “Because courts may compel parties to give testimony or to produce documents as demanded in the subpoena,” the subpoena demanded a form of non-monetary relief and constituted a “Claim” under the policy.
And third, the court rejected Starr’s argument that interpreting “Claim” to allow the subpoena to fall within subpart (1) of the definition (as a demand for non-monetary relief) would render subpart (4) (providing for investigation coverage of Insured Persons) “superfluous.” The court found that subpart (1) is broader than subpart (4) and that “each of the policy’s subparts offer alternative forms of coverage; they do not limit one another.” In addition, subpart (4) also is different because it covers an investigation of an insured person against whom a proceeding may be commenced, but does not require a present demand for relief against that person. Thus, the conclusion that the subpoena constitutes a Claim does not make subpart (4) superfluous.
Ultimately, the court held the broad definition of a “Claim,” indicates that the policy was designed to cover something like the subpoena, and its holding was “precisely what the policy intended.”
Astellas presents a correct ruling, in accord with the majority of courts throughout the country.