July 23, 2018 Practice Points

Do Insurance Policies Cover the Cost of Responding to Subpoenas?

This dispute arises frequently in today’s business world

by Diana Shafter Gliedman

Policyholders and their insurance companies frequently disagree over what constitutes the claim needed to trigger the policy’s insuring agreement. This dispute arises frequently in today’s business world, as more and more professional liability policyholders are forced to defend against investigations by government regulatory agencies. Given the seriousness of such investigations and the glacial pace at which they typically proceed, policyholders can end up incurring millions of dollars in legal fees responding to subpoenas before formal legal proceedings even begin.

It is typical insurance industry practice to deny coverage for legal fees incurred responding to a subpoena by maintaining that the subpoena does not constitute a claim. Such was the case in the recently decided Astellas US Holding, Inc. v. Starr Indem. & Liab. Co., 2018 U.S. Dist. LEXIS 89725. In Astellas, plaintiff/ policyholder Astellas, a pharmaceutical company, found itself subject to a subpoena issued by the Department of Justice demanding documents relating to the DOJ's investigation of pharmaceutical companies for alleged “federal health care offenses.” Astellas, 2018 U.S. Dist. LEXIS 89725, at *3. The subpoena commanded plaintiffs to appear before government officials and to produce documents, advising plaintiffs that failure to comply exposed them to liability in judicial enforcement proceedings and punishment for disobedience. Id. at *4. Astellas provided its professional liability insurance companies with timely notice. Its primary insurance company, however, denied coverage, arguing that the subpoenas did not constitute a claim because the policy’s definition of Claim required a written demand for “monetary, non-monetary or injunctive relief” against an Insured, while the subpoena (according to the insurance company) simply requested that certain documents be produced. Id. at *8.

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