by Chris Graham and Joseph Kelly

William Beaumont Hospital v. Federal Ins. Co., Case No. 11-15528 (E.D. MI March 13, 2013)

Hospital obtained declaration that D&O insurer is obligated to defend and indemnify hospital in class action Sherman Act anti-trust suit filed by nurses. The primary issue was whether the damages sought were “Loss” under the policy. The policy’s definition of “Loss” via endorsement provided coverage for “Claims for Antitrust Activities”; the definition of “Antitrust Activities” specifically included actual or alleged violations of the Sherman Act; and for claims “based upon, arising from or in consequence of profit, remuneration or advantage to which an Insured was not legally entitled, the term ‘loss’… shall not include disgorgement by any Insured or any amount reimbursed by any Insured Person.” D&O insurer argued plaintiff nurses sought disgorgement so there was no “Loss.” But the court found plaintiff nurses’ Sherman Act claims weren’t “based upon, arising from or in consequence of profit, remuneration or advantage to which an Insured was not legally entitled.” Rather the claims were based on an alleged conspiracy by various hospitals to hold down nurses wages in violation of the Sherman Act. Hospital cited Level 3 Communications v. Fed. Ins. Co., 272 F. 3d 908 (7^th Cir. 2001) for the proposition that “coverage for restitution or disgorgement is uninsurable as a matter of public policy.” The court rejected this argument in three ways – namely, (1) there’s no need to identify a public policy basis to exclude disgorgement from “Loss” when the policy here already incorporates that principle; (2) Level 3 didn’t cite to Michigan caselaw; and (3) the damages sought weren’t really restitution or disgorgement when the nurses were seeking ordinary compensatory damages under the Sherman Act.
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