United States District Court, N.D. Illinois, Eastern Division
Astellas U.S. Holding, Inc., and Astellas Pharma US, Inc., Plaintiffs,
Starr Indemnity and Liability Company, Beazley Insurance Company, Inc., and Federal Insurance Company, Defendants.
MEMORANDUM OPINION AND ORDER
S. Shah United States District Judge.
government issued a subpoena to Astellas Pharma, Inc.,
demanding the production of documents, and later entered into
an agreement with Astellas Pharma U.S. to toll the statute of
limitations on possible violations of criminal law.
Plaintiffs Astellas U.S. Holding and Astellas Pharma U.S.
bring this action against their insurers, Starr Indemnity and
Liability Company, Beazley Insurance Company, and Federal
Insurance Company, for denying coverage for the expenses
incurred in response to the government's investigation.
Each of the defendants move to dismiss plaintiffs'
amended complaint because, they say, the policies cover
losses from claims for wrongful acts and neither the subpoena
nor the tolling agreement count as covered claims. For the
following reasons, those motions are denied.
motion to dismiss under Rule 12(b)(1) challenges the
court's subject-matter jurisdiction. Fed.R.Civ.P.
12(b)(1). The plaintiff bears the burden of establishing the
elements necessary for subject-matter jurisdiction.
Scanlan v. Eisenberg, 669 F.3d 838, 841-42 (7th Cir.
2012). By contrast, a Rule 12(b)(6) motion “tests
whether the complaint states a claim on which relief may be
granted.” Richards v. Mitcheff, 696 F.3d 635,
637 (7th Cir. 2012). The complaint must contain factual
allegations that plausibly suggest a right to relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When
analyzing a motion under Rule 12(b)(1) or Rule 12(b)(6), the
court accepts all well-pleaded factual allegations as true
and draws all reasonable inferences in favor of the
plaintiff. Scanlan, 669 F.3d at 841; Virnich v.
Vorwald, 664 F.3d 206, 212 (7th Cir. 2011). The court
need not accept legal conclusions or conclusory allegations,
however. Virnich, 664 F.3d at 212.
pharmaceutical companies sponsored patient assistance
programs that subsidized the purchase of drugs for certain
Medicare beneficiaries.  ¶ 19. For example,
plaintiffs made charitable contributions to organizations
that assisted financially needy patients, and some of those
patients may have taken drugs sold by plaintiffs.
Id. ¶ 26. The Department of Health and Human
Services, Office of Inspector General, announced that these
programs risked violating the anti-kickback statute, and
beginning January 1, 2006, Medicare Part D beneficiaries
would no longer be eligible to participate in patient
assistance programs. Id.¶ 19. In May 2014, the
OIG issued a supplemental bulletin to provide additional
guidance regarding patient assistance programs that were
operated by independent charities and that provided
cost-sharing assistance for prescription drugs. Id.
March 3, 2016, the United States Department of Justice issued
a subpoena to plaintiffs demanding certain documents relating
to the DOJ's industrywide investigation of pharmaceutical
companies for alleged “Federal health care
offenses.” Id. ¶ 21. The subpoena
commanded plaintiffs to appear before government officials
and to produce documents about plaintiffs' payments to
charitable organizations that provided financial assistance
to patients taking plaintiffs' drugs. Id. ¶
24; [39-4]. It advised plaintiffs that failure to comply
exposed them to liability in judicial enforcement proceedings
and punishment for disobedience. [39-4]. Although the DOJ
formally addressed the subpoena to Astellas Pharma, Inc.,
plaintiffs' Japanese parent company, the subpoena also
used the term “You, ” which the subpoena defined
as including the parent company's subsidiaries. 
¶ 22; see also [39-4]. Astellas Pharma US, the
U.S.-based subsidiary, was the only relevant entity for
purposes of the subpoena because plaintiffs' parent
company never provided charitable contributions to the
patient assistance programs at issue in the
subpoena.  ¶ 22.
the government's position is not stated in the subpoena,
the DOJ alleged that plaintiffs' contributions to
independent charity patient assistance programs violated
applicable law. Id. ¶¶ 27-29. The
investigation is ongoing; and the DOJ has subpoenaed
additional documents from plaintiffs. Id. ¶ 30.
On October 26, 2017, the DOJ entered into a “Limited
Tolling Agreement on Statute of Limitations” with
Astellas Pharma US, which states that the DOJ “is
currently conducting a joint criminal and civil investigation
of  Astellas, and its officers, employees, and agents,
” and that “[t]he conduct being investigated
includes, without limitation, the possible violation by
Astellas . . . of various federal criminal statutes . . . in
connection with Astellas's payments to
‘501(c)(3)' organizations that provide financial
assistance to Medicare beneficiaries.” Id.
¶ 31; see also [21-4]. The parties agreed to
toll the applicable statutes of limitation for Astellas's
possible violations of law in making payments to
organizations that gave financial assistance to Medicare
receiving the first subpoena, plaintiffs provided each of the
defendants-the insurance companies-timely written notice of
the subpoena.  ¶ 34. Plaintiffs' primary
insurance policy came from Starr; that policy had a $5
million limit of liability excess of a $500, 000 self-insured
retention, id. ¶ 11, and it provided:
“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, and reported
to the Insurer in accordance with the terms of this policy,
” [39-1] at 18. In addition to its primary policy with
Starr, plaintiffs also had excess insurance policies with
Beazley and Federal Insurance. Beazley's policy provided
a $5 million limit of liability excess of the Starr
policy's $5 million limit of liability and the applicable
$500, 000 self-insured retention.  ¶ 17. In order
for the Beazley policy to apply, all of the underlying limits
had to have been exhausted through payments of amounts
covered under the Starr policy. Id. Federal provided
a $10 million limit of liability excess of the Starr
policy's and the Beazley policy's combined limits of
$10 million and the applicable $500, 000 self-insured
retention. Id. ¶ 18. The Federal policy only
covers a loss if all of the underlying limits have been
exhausted through payments of amounts covered under the Starr
and Beazley policies. Id.
response to plaintiffs' notice of the subpoena, Beazley
reserved its rights, noting that “[a]s an excess
carrier, Beazley cannot have any coverage obligations until
the underlying layer is exhausted, ” id.
¶ 35, and Federal acknowledged receipt of the notice,
but stated that “it must reserve the right to raise all
of the defenses available to it under the policy and the law,
” id. ¶ 36. Starr denied coverage,
asserting that “the Subpoena does not currently fall
within the scope of coverage afforded by the Policy”
because “the definition of Claim requires . . . a
written demand for monetary, non-monetary or injunctive
relief made against an Insured. Here, there has been no
written demand for relief made against any Insured[.] . . .
The Subpoena simply requests that certain documents be
produced.” Id. ¶ 37. Beazley and Federal
both adopted Starr's coverage positions, reservations of
rights, and defenses. Id. ¶ 38.
incurred defense costs that exceed the retention in the Starr
policy. Id. ¶ 45. While plaintiffs have
complied with all of the applicable conditions of Starr's
policy, Starr has refused to pay the amounts owed under that
policy. Id. ¶¶ 46-47. After deducting the
self-insured retention, plaintiffs' defense costs have
exceeded the limits of liability of the Beazley policy and
the underlying limits of the Federal policy. Id.
¶ 50. Plaintiffs seek a declaration that Beazley and
Federal must pay all reasonable and necessary costs of
investigating and defending “this Claim, ” up to
the respective limits of liability. Id. ¶ 54.
moved to dismiss plaintiffs' complaint. . Both
Beazley and Federal Insurance joined that motion.  at 2;
 at 2. Additionally, Beazley filed its own motion to
dismiss plaintiffs' amended complaint, , and Federal
Insurance joined that motion,  at 2. After the parties
completed briefing defendants' motions to dismiss,
plaintiffs moved for leave to file an amended complaint. 
at 1 (citing Fed.R.Civ.P. 15(a)(2), 19). In that motion,
plaintiffs explained their intention to address the issues
defendants raised in their motions to dismiss by adding
certain factual allegations. Id. at 2. I granted
plaintiffs' motion for leave to file an amended
complaint, and I permitted defendants to adopt the arguments
they had raised in their motions to dismiss as well as in
their responses to plaintiffs' motion for leave to amend
the complaint. . Plaintiffs filed a first amended
complaint, , and defendants moved to dismiss the amended
complaint, adopting their previous arguments, ; ;
brought this action against Starr for breaching its duty
under the policy to pay for a loss plaintiffs suffered.
Starr's policy provides: “The Insurer shall pay on
behalf of the Company the Loss arising from a Claim . . .
against the Company for any Wrongful Act.” [39-1] at
18. The parties dispute whether there was: (1) a
“Claim” (2) that was asserted against the
“Company” (3) for a “Wrongful Act.”
Courts must interpret the terms of an insurance policy in the
context of the entire policy and the parties' intentions.
Emp'rs Ins. of Wausau v. James McHugh Constr.
Co., 144 F.3d 1097, 1104 (7th Cir. 1998); Travelers
Ins. Co. v. Eljer Mfg., Inc., 197 Ill.2d 278, 292
(2001). If the policy language is unambiguous, as it is here,
courts ascertain the parties' ...