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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

CERNER CORPORATION v. COLUMBIA CASUALTY COMPANY et al

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
4:15-cv-01008 Search Pacer
ACE Group party(s): 
Opposing Party: 
Cerner Corporation
Court Type: 
Federal
US District Court: 
Western District of Missouri
Date Filed: 
Dec 23 2015

COMPLAINT

Cerner Corporation (“Cerner” or “Plaintiff’), by and through its attorneys
Rouse Hendricks German May PC, and Anderson Kill, P.C., as and for its complaint,
respectfully alleges as follows:

THE PARTIES

Plaintiff

  1. Plaintiff, Cerner Corporation, is a corporation incorporated under the laws
    of the state of Delaware with its principal place of business at 2800 Rockcreek Parkway,
    North Kansas City, MO 64117.

Primary Layer Defendant

  1. Upon information and belief, Defendant Columbia Casualty Company
    (“Columbia Casualty” or “CNA”) is a corporation incorporated under the laws of the state
    of Illinois with its principal place of business at 333 S. Wabash Ave, Chicago, IL 60604.

Excess Layer Defendants

  1. Upon information and belief, Defendant AIG Specialty Insurance Company
    (“AIG”) is a corporation incorporated under the laws of the state of Illinois with its
    principal place of business at 175 Water Street, New York, NY 10038.
  2. Upon information and belief, Defendant ACE American Insurance
    Company (“ACE”) is a corporation incorporated under the laws of the state of
    Pennsylvania with its principal place of business at 436 Walnut Street, Philadelphia, PA
    19106.
  3. Upon information and belief, Defendant Liberty Mutual Insurance
    Company (“Liberty”) is a corporation incorporated under the laws of the state of
    Massachusetts with its principal place of business at 175 Berkeley Street, Boston, MA
    02117.
  4. Upon information and belief, Defendant AXIS Insurance Company
    (“AXIS”) is a corporation incorporated under the laws of the state of Illinois with its
    principal place of business at 11680 Great Oaks Way, Alpharetta, GA 30022.

JURISDICTION AND VENUE

  1. Subject matter jurisdiction in this action arises under 28 U.S.C. §1332, in
    that there is complete diversity, and the amount in controversy exceeds $75,000.00,
    exclusive of interest and costs.
  2. This is an action for declaratory judgment (in part) brought pursuant to the
    Declaratory Judgment Act, 28 U.S.C. § 2201 et seq., and for other relief.
  1. This Court has jurisdiction over all Defendants because each defendant is
    licensed in Missouri or authorized to do business on a surplus line basis in Missouri and
    has, within the relevant time periods, transacted business in Missouri. In addition, each
    Defendant has consented to suit in this Court.
  2. Venue in this action is proper under 28 U.S.C. § 1391 because the
    Policies of insurance upon which Cerner predicates its claims were sold to Cerner in
    this District, and each Defendant has consented to venue in this District.

FACTS

The Policies

  1. Columbia Casualty, an insurance company, sold to Cerner, as
    policyholder, an enterprise professional solutions liability insurance policy, known as
    Policy No. 425204233-01, which covered the period from September 1, 2011 to
    September 1,2012 (the “Primary Policy” or “CNA Policy”). A true, correct, and
    complete copy of the CNA Policy is attached hereto as Exhibit A.
  2. AIG, an insurance company, sold to Cerner, as policyholder, an excess
    liability insurance policy, known as Policy No. 08-588-97-22, which covered the period
    from September 1, 2011 to September 1,2012 (the “AIG Policy”).The AIG policy sits
    directly above the limits of the CNA Policy and follows form to the terms of the CNA
    Policy. A true, correct, and complete copy of the AIG Policy is attached hereto as
    Exhibit B.
  3. ACE, an insurance company, sold to Cerner, as policyholder, an excess
    liability insurance policy, known as Policy No. XEO G23664628 002, which covered the
    period from September 1,2011 to September 1, 2012 (the “ACE Policy”).The ACE

policy sits directly above the limits of the AIG Policy and follows form to the terms of the
CNA Policy. A true, correct, and complete copy of the ACE Policy is attached hereto as
Exhibit C.

  1. Liberty, an insurance company, sold to Cerner, as policyholder, an excess
    liability insurance policy, known as Policy No. E04NAABMD6002, which covered the
    period from September 1, 2011 to September 1, 2012 (the “Liberty Policy”).The Liberty
    policy sits directly above the limits of the ACE Policy and follows form to the terms of the
    CNA Policy. A true, correct, and complete copy of the Liberty Policy is attached hereto
    as Exhibit D.
  2. AXIS, an insurance company, sold to Cerner, as policyholder, an excess
    liability insurance policy, known as Policy No. MNN754795/01/2011, which covered the
    period from September 1,2011 to September 1, 2012 (the “AXIS Policy”).The AXIS
    policy sits directly above the limits of the Liberty Policy and follows form to the terms of
    the CNA Policy. A true, correct, and complete copy of the AXIS Policy is attached
    hereto as Exhibit E.

The Underlying Claim

  1. On or about April 19, 2012, counsel for Trinity Health in Minot, North
    Dakota (“Trinity”) made a demand to Cerner seeking damages in connection with the
    sales, installation and implementation of Cerner’s ProFit/Revenue Cycle product.
  2. Trinity Health initiated an arbitration against Cerner relating to the April 19,
    2012 demand on or about February 28, 2013.
  3. The April 19, 2012 demand fits within the definition of a “Claim” under the
    Policies, as a “written demand for monetary damages or non-monetary relief.”
  1. Together, the allegations in the April 19, 2012 demand and in the
    arbitration (the “Trinity Claim”) trigger coverage under, at a minimum, the “Technology
    and Telecommunication Liability” coverage, the “Professional Service Liability”
    coverage, and the “Media Liability” coverage of the Policies.
  2. Following an Interim Award in the arbitration, Trinity and Cerner resolved
    their claims against one another and settled those claims on December 20, 2013.
  3. Before the settlement, Cerner informed each Defendant of the Interim
    Award and the potential settlement. All of them denied coverage and none expressed
    any objection to the potential settlement.
  4. The Interim Award specifically provided that the “the Hearing shall remain
    open” in anticipation of a “Final Award.”
  5. As part of that resolution, Cerner paid to Trinity an amount greater than
    the combined limits of the Defendants’ Policies. In addition, Trinity paid to Cerner a
    smaller sum also in resolution of the claims in the arbitration.
  6. The amount that Cerner paid to Trinity, even when offset by the amount
    that Trinity paid to Cerner, is also greater than the combined limits of the Defendants’
    Policies.
  7. On or about December 27, 2013, the parties advised the arbitration panel
    that “the parties reached agreement and exchanged payments in full satisfaction of their
    respective claims in the arbitration, including claims for attorneys’ fees, costs and
    disbursements. Accordingly, the parties need nothing further from the Panel.”
  1. On or about January 16, 2014, the firm of Lindquist & Vennum confirmed
    that “the parties have reached settlement and the Panel’s services are no longer
    needed.”
  2. Pursuant to an agreement entered into on September 21, 2015, Trinity
    licensed the Cerner Health Information Management solution, formerly known as
    ProFile®, which was part of the revenue cycle suite of solutions addressed in the
    arbitration.

The Coverage Dispute

  1. Cerner has requested that each Defendant pay its portion of the
    settlement payment.
  2. Every Defendant has refused Cerner’s demand and has denied coverage
    for the Trinity Claim.
  3. CNA paid more than $3.8 million in claim expenses in connection with the
    Trinity Arbitration.
  4. CNA has demanded reimbursement for that amount from Cerner.
  5. As grounds for its reimbursement demand, CNA relied upon Exclusion E
    of the Policy, a “Deliberate Acts” exclusion that applies only “after final adjudication in
    any proceeding establishes that such act, or such commingling, misappropriation or
    misuse was committed.” The Exclusion further provides that the Insured will reimburse
    the Carrier for Claim Expenses only “If such act, or such commingling, misappropriation
    or misuse is so determined to have been committed” (emphasis added).
  1. Because Cerner and Trinity settled the Trinity Claim via settlement, before
    a Final Award, and before the time for reconsideration or judicial review of the award
    had expired or even started to run, there was no “final adjudication” and CNA is not
    entitled to reimbursement.
  2. Cerner is entitled to all benefits provided by the Policies.
  3. Cerner is entitled to have the Policies interpreted in a reasonable manner
    that maximizes its insurance coverage.
  4. Accordingly, Cerner seeks to have this Court construe the meaning of,
    and enforce the provisions of, the Policies.
  5. Cerner has complied with all applicable conditions under the Policies, and
    Defendants have not been prejudiced by the nature of any such compliance by Cerner.
  6. All parties have agreed to waive any requirements in the subject policies
    that may have required arbitration and/or mediation in advance of or in place of
    litigation.

COUNT I

DECLARATORY JUDGMENT AGAINST CNA

  1. Plaintiff hereby repeats and realleges each of the allegations contained in
    the preceding paragraphs as if fully set forth herein.
  2. As a result of the Trinity Claim, Cerner has incurred Claim Expenses that
    were properly paid by CNA.
  3. CNA has demanded reimbursement of those Claim Expenses.
  1. CNA is not entitled to reimbursement of the Claim Expenses under the
    terms of the CNA Policy, which require a “final adjudication” not present in this matter.
  2. By reason of the foregoing, an actual and justiciable controversy exists
    between Plaintiff and CNA regarding CNA’s demand for reimbursement of the Claim
    Expenses in connection with the Trinity Claim.

COUNT II

BREACH OF CONTRACT AGAINST ALL DEFENDANTS

  1. Plaintiff hereby repeats and realleges each of the allegations contained in
    the preceding paragraphs as if fully set forth herein.
  2. Each Insurance Policy constitutes a valid contract between a Defendant
    and Cerner.
  3. In breach of their obligations under the Insurance Policies that they sold to
    Cerner, each Defendant has failed and refused to accept its obligations to provide
    Plaintiff with the full costs of defense, investigation, and/or indemnification with respect
    to the Trinity Claim, as required by the Policies.

WHEREFORE, Plaintiff seeks,

  1. under the Declaratory Judgment Act, 28 U.S.C. § 2201 et sea.,
    a judicial declaration by this Court declaring that CNA is not
    entitled to reimbursement of Claim Expenses for the Trinity
    Claim. For the foregoing reasons, such a judicial declaration is
    necessary and appropriate at this time; and
  2. damages for breach of contract against each Defendant in
    amounts yet to be ascertained for all costs of investigation,

defense, damages and payments, and all other sums incurred
to date by Plaintiff or which may be incurred, together with the
costs and disbursements of this action, including, but not limited
to, reasonable attorneys’ fees, costs and pre-judgment and
post-judgment interest.

DEMAND FOR JURY TRIAL

Plaintiff Cerner hereby demands a jury trial for all claims which are so

eligible.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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