Search
We use cookies to better understand how you use our site and to improve your experience by personalizing content. Please review our updated Privacy Policy and Terms of Use. If you accept the use of cookies, please click the "I accept" button.I acceptI declineX
 
Skip navigational links
 
 

U.S. Court In Massachusetts Holds Investigative Subpoena Not A Claim Under Insurance Policy

 
 

HLD, v. 30, n. 2 (February 2002)

U.S. Court In Massachusetts Holds Investigative Subpoena Not A Claim Under Insurance Policy

Plaintiff Center for Blood Research, Inc. (Center) bought a Non-profit Organization Liability Policy from Coregis Insurance Company (Coregis). The policy incorporated a "Nonmonetary Claims Endorsement" (Endorsement), which stated that Coregis "shall have the right and duty to defend . . . any Claim against INSURED(S) alleging, based upon or arising out of claims, demands or actions solely for relief or redress in any form other than monetary damages." The policy defined a "claim" as "any demand made upon the insured for monetary damages, whether formal or informal, written or oral, as a result of a WRONGFUL ACT." The Endorsement extended the definition of a "claim" to include "any judicial or administrative proceeding in which any INSURED(S) may be subjected to a binding adjudication of liability for damages or other relief." The U.S. Attorney for the District of Massachusetts issued a subpoena to the Center, commanding the production of documents and records related to a potential federal healthcare offense. The Center hired counsel to assist in responding to the subpoena. Following the investigation, the Center was not charged with any healthcare offense. Coregis refused to pay the legal expenses incurred by the Center, concluding that the subpoena was not a covered "claim" under the policy. The Center sued Coregis, alleging breach of insurance contract and the implied covenant of good faith and fair dealing.

The U.S. District Court for the District of Massachusetts granted summary judgment in favor of Coregis, and held that the investigative subpoena was not a covered "claim" under the insurance policy. In reaching this conclusion, the court first determined that the production of documents did not constitute a demand for "relief" under the policy's definition of a "claim." After explaining the legal definition of "relief," the court held that a

claim that is a demand for relief seeks redress for a wrong or a remedy in the nature of a court-ordered benefit. An investigative subpoena's demand for the production of documents does not seek redress or a remedy in that sense. It does not depend on there having been a wrong that needs to be redressed or remedied.

Next, the court determined that the issuance of a subpoena, generally and in the instant case, was not based upon any "wrongful act" by the Center. Finally, the court determined that the subpoena was issued during an investigation and did not involve a "binding adjudication for liability for damages or other relief." The court further held that the Center's legal expenses were not incurred as a result of any judicial proceedings, but rather were incurred as a result of compliance with the subpoena. The court held that the case of Hazen Paper Co. v. U.S., 555 N.E.2d 576 (Mass. 1990) did not apply because Hazen involved ambiguous policy language. The court noted that, in the instant case, neither party alleged any ambiguity in the policy language, and thus the principle that ambiguous terms should be interpreted in favor of the insured did not apply.

Center for Blood Research, Inc. v. Coregis Ins. Co., No. 01-10708-GAO (D. Mass. Nov. 14, 2001) (10 pages).

© 2018 American Health Lawyers Association. All rights reserved. 1620 Eye Street NW, 6th Floor, Washington, DC 20006-4010 P. 202-833-1100 F. 202-833-1105