Benefytt Technologies Inc. v. Capitol Specialty Insurance Corporation

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE BENEFYTT TECHNOLOGIES, INC. ) (f/k/a Health Insurance Innovations, Inc.), ) ) Plaintiff, ) v. ) C.A. No. N21C-02-143 ) PRW CCLD CAPITOL SPECIALTY INSURANCE ) CORPORATION, MAXUM ) INDEMNITY COMPANY, CERTAIN ) UNDERWRITERS AT LLOYD’S OF ) LONDON, XL SPECIALTY ) INSURANCE COMPANY, ) EXECUTIVE RISK INDEMNITY, INC., ) ARGONAUT INSURANCE COMPANY, ) and ENDURANCE ASSURANCE ) CORPORATION, ) Defendants. )

Submitted: October 8, 2024 Decided: January 2, 2025 Written Decision Withdrawn, Clarified, and Reissued: January 6, 2025 Upon Plaintiff ’s Partial Motion for Summary Judgment on the Keippel Action Claim and Lloyd’s Counterclaims, GRANTED.

Upon Plaintiff ’s Partial Motion for Summary Judgment on the Belin Action Claim, DENIED.

Upon Defendant XL Specialty Insurance Company’s Motion for Summary Judgment, GRANTED.

Upon Defendant Endurance Assurance Corporation’s Motion for Summary Judgment, GRANTED.

Upon Defendant Executive Risk Indemnity, Inc.’s Motion for Summary Judgment, GRANTED.

Upon Defendant Certain Underwriters at Lloyd’s of London’s Motion for Summary Judgment, GRANTED in part, DENIED in part.

MEMORANDUM OPINION AND ORDER Jennifer C. Wasson, Esquire, and Carla M. Jones, Esquire, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Joshua Gold, Esquire (argued), Dennis J.

Nolan, Esquire, and John Leonard, Esquire, ANDERSON KILL, P.C., New York, New York, Attorneys for Plaintiff Benefytt Technologies, Inc. David J. Soldo, Esquire, MORRIS JAMES LLP, Wilmington, Delaware; Michael D. Margulies, Esquire (argued), and Charles W. Stotter, Esquire, CARLTON FIELDS, P.A., New York, New York, Attorneys for Defendant Endurance Assurance Corporation.

Robert J. Katzenstein, Esquire, and Julie M. O’Dell, Esquire, SMITH KATZENSTEIN & JENKINS LLP, Wilmington, Delaware; Ralph A. Guirgis, Esquire, Sean R. Simpson, Esquire (argued), and Amy Resh, Esquire, CLYDE & CO US LLP, Irvine, California, Attorneys for Defendant Executive Risk Indemnity, Inc. Timothy Jay Houseal, Esquire, and Jennifer M. Kinkus, Esquire, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; Raymond T.

DeMeo, Esquire (argued), and Matthew M. Burke, Esquire, ROBINSON & COLE LLP, Boston, Massachusetts, Attorneys for Defendant Certain Underwriters at Lloyd’s of London.

Robert J. Katzenstein, Esquire, and Julie M. O’Dell, Esquire, SMITH KATZENSTEIN & JENKINS LLP, Wilmington, Delaware; Matthew W. Beato, Esquire (argued), and Anna Schaffner, Esquire, WILEY REIN LLP, Washington, DC, Attorneys for Defendant XL Specialty Insurance Company.

WALLACE, J. ii In 2018 and 2019, Plaintiff Benefytt Technologies faced seven different lawsuits or other enforcement actions that alleged securities violations, charges of racketeering, federal trade violations, and other related wrongdoings. Principally, two of those—the Keippel action and the Belin action—are at issue here. Benefytt is before this Court seeking a declaratory judgment against its then-extant insurers that those two underlying suits were covered by those companies’ policies.

Upon the parties’ cross-motions for summary judgment, the Court finds that (1) the Keippel action falls within the 2018-2019 policy period and (2) the Belin action falls outside the 2017-2018 policy period, outside the 2018-2019 policy periods, and is not interrelated with any other covered claim. With these findings in mind—and because the Insurers already indemnified for the Keippel action under the 2018-2019 policy—Certain Underwriters at Lloyd’s of London reimbursement, recoupment, and unjust enrichment counterclaims are moot.

I. FACTUAL AND PROCEDURAL BACKGROUND A. THE PARTIES AND INSURANCE COVERAGE Plaintiff Benefytt is a Delaware corporation with its principal place of business in Florida.1 Before filing for bankruptcy, Benefytt operated a “health insurance technology business.”2 In connection therewith, Lloyd’s provided

Moving Parties’ Joint Appendix of Exhibits (“JA”) Ex. 1 (“Third Am. Compl.”) ¶ 39, and Ex. (“Lloyd’s Answer”), at 20 (D.I. 239).

Benefytt Technologies, Inc. v. Capitol Specialty Insurance Corporation, 2022 WL 16504, at *1 -1- Benefytt $10 million in insurance coverage under both a 2017-2018 primary policy and a 2018-2019 primary policy.3 Lloyd’s also wrote the Primary Policies’ language.4 The other insurer defendants—Capitol Specialty Insurance Corporation, Maxum Indemnity Company, XL Specialty Insurance Company, Executive Risk Indemnity, Inc., Argonaut Insurance Company, and Endurance Assurance Corporation (collectively, “the Excess Policies”)—each contracted to provide Benefytt $5 million in excess coverage above the previous insurance layer.5 The Policies provided coverage as follows:6 Policy Number Coverage Period Coverage Amount Tower 1 Lloyd’s B0507N17FT08360 5/8/2017-5/8/2018 $10M XL Specialty ELU149887-17 5/8/2017-5/8/2018 $5M xs $10M Executive Risk 8242-2156 5/8/2017-5/8/2018 $5M xs $15M Endurance DOX10006425402 5/8/2017-5/8/2018 $5M xs $20M Tower 2 Lloyd’s B0621PHEAL003118 6/8/2018-6/8/2019 $10M XL Specialty ELU155940-18 6/8/2018-6/8/2019 $5M xs $10M Argonaut MLX4209146-0 6/8/2018-6/8/2019 $5M xs $15M Endurance DOX10013192200 6/8/2018-6/8/2019 $5M xs $20M (Del. Super. Ct. Jan. 3, 2022) (“Benefytt I”); see Transcript of Motions Hearing held on Tuesday, September 24, 2024 (“MSJ Tr.”) at 40-45 (noting Benefytt filed for bankruptcy and its effect) (D.I.

327).

JA Ex. 17 (“2017-2018 primary policy”), and Ex. 21 (“2018-2019 primary policy” and together with the 2017-2018 primary policy, “the Primary Policies”).

The Primary Policies.

JA Ex. 18 (“XL 2017-2018 policy”), Ex. 19 (“Executive Risk 2017-2018 policy”), Ex. 20 (“Endurance 2017-2018 policy”), Ex. 22 (“XL 2018-2019 policy”), Ex. 23 (“Argonaut 2018-2019 policy”), Ex. 24 (“Endurance 2018-2019 policy”). In all relevant ways these are identical, so together with the Primary Policies, this collective shall hereinafter be the “Policy” or “Policies.”

JA Exs. 17-24.

-2- All of these listed policies are functionally identical;7 the Excess Policies generally follow the Primary Policies’ operative language.8 B. THE POLICIES’ LANGUAGE The Policies require Insurers to reimburse Benefytt for any: Loss which the Company is required or permitted or has agreed to pay as indemnification to any of the Insured Persons resulting from any Claim first made against the Insured Persons during the Policy Period for a Wrongful Act[.]9 “Insured Persons” included “all persons who [] now are . . . directors, officers or risk managers of the Company[.]”10 The Policies define “Claim” as: any written demand for monetary damages, non monetary relief, injunctive relief or other relief against any of the Insureds, or any civil, criminal, administrative, regulatory, arbitration or mediation proceeding or other alternative dispute resolution process initiated against any of the Insureds[.]11 See the Primary Policies. Because the operative language of the Policies is identical the Court may sometimes cite to them interchangeably.

See, e.g., XL 2017-2018 policy at BFT00057043 (“Coverage hereunder will apply in conformance with the terms, conditions, endorsements and warranties of the Primary Policy together with the terms, conditions, endorsements and warranties of any other Underlying Insurance.”). At oral argument, Executive Risk stressed that its policy included a notice-and- consent to settlement provision that is distinct from the Primary Policies and Excess Policies. MSJ Tr. at 35-39; see JA Ex. 19 at ERCF00538 (defining the notice-and-settlement provisions of the Executive Risk 2017-2018 policy). The distinct notice-and-settlement provision might just provide alternative grounds to absolve Executive Risk of any coverage responsibility. But as the Court concludes neither the Keippel nor the Belin actions fall within 2017-2018 policy, Executive Risk has no further obligations related to those two actions. Accordingly, the Court needn’t address the arguments related to the Executive Risk policy’s separate notice-and-settlement consent provisions.

2017-2018 primary policy § I.B.1.

Id. § II.K.1.

Id. § II.B.1.

-3- Additionally, Insurers agreed to pay Benefytt for any “Company Loss resulting from any Securities Claim first made against the Company during the Policy Period for a Wrongful Act.”12 The Policies recognize the possibility of multiple claims related to the same underlying conduct.13 Accordingly, the Policies provide: More than one Claim involving the same Wrongful Act or Interrelated Wrongful Acts shall be deemed to constitute a single Claim and shall be deemed to have been made at the earliest of the following dates: 1. the date on which the earliest Claim involving the same Wrongful Act or Interrelated Wrongful Acts is first made; or 2. the date on which the Claim involving the same Wrongful Act or Interrelated Wrongful Acts shall be deemed to have been made pursuant to Clause[.]14 “Wrongful Act” is defined as “any actual or alleged act, error, omission, misstatement, misleading statement, neglect or breach of duty,” by a covered individual or entity.15 Similarly, “Interrelated Wrongful Acts” are defined as “Wrongful Acts which have as a common nexus any fact, circumstance, situation, event, transaction or series of facts, circumstances, situations, events or

Id. § I.C.

Id. § IV.C.

Id. Id. § I.BB.

-4- transaction.”16 The Policies contain several coverage exclusions.17 Relevant here is the “Professional Services Exclusion” which bars coverage: For any act, error or omission in connection with the performance of any professional services by or on behalf of the Company for the benefit of any other entity or person; provided however that this Exclusion shall not apply to a Securities Claim.18 Notably, the Policies don’t define “professional service.”19 The Policies require Benefytt to give Insurers notice of any claim for which it seeks coverage.20 Benefytt may also provide a Notice of Circumstances if it “become[s] aware of a specific fact, circumstance or situation which could reasonably give rise to a Claim.”21 If the notice of claim details “the specific fact, circumstance, [or] situation . . . the consequences which have resulted or may result therefrom; and the circumstance by which [Benefytt] first became aware thereof,” then any subsequent related claim “shall be deemed . . . to have been first made or commenced at the time such notice was first given.”22

Id. § I.M.

Id. § III.

Id. at ENDUR001846 (“Professional Services Exclusion”).

See generally Professional Services Exclusion; JA Ex. 21.

2017-2018 primary policy § VI.A.

Id. § VI.C.

Id. -5- C. THE UNDERLYING ACTIONS AGAINST BENEFYTT Central to the parties’ coverage disputes are the seven underlying actions that Benefytt had to defend. Those are the Keippel action, the Belin action, the Daniels action, the DiFalco action, the Rector action, the Federal Trade Commission action, and the Spiewak action.

1. The Keippel Action First filed in February 2019, the Keippel action was a securities class action which asserted claims against Benefytt, its CEO, and its CFO.23 In July 2019, the Keippel action became a consolidated class action asserting the same claims, against the same defendants, with a class period of September 25, 2017 through April 11, 2019.24 The Keippel plaintiffs brought claims for violation of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5.25 The consolidated complaint alleged that: (1) Benefytt and a health insurance provider, Simple Health, conspired to sell Benefytt products to customers who falsely believed they were buying comprehensive health insurance;26 (2) Benefytt omitted material information and

Class Action Complaint for Keippel v. Health Ins. Innovation, Inc., et al., Case No. 8:19-cv- 00421-WFJ-CPJ (M.D. Fla. Feb. 18, 2019) (“Keippel Original Compl.”) (JA Ex. 6).

JA Ex. 7 (“Keippel Compl.”) ¶ 228.

Keippel Compl. ¶¶ 242-257.

Id. ¶¶ 49-69.

-6- made false statements to investors by failing to disclose the specifics of the Simple Health scheme;27 (3) Benefytt’s directors were aware of the Simple Health scheme since they received thousands of customer complaints;28 and (4) the individual defendants participated in the endeavor so they could sell their Benefytt stock at an artificially high price.29 Before the action was consolidated, Benefytt provided notice of the Keippel action and Lloyd’s accepted coverage for the suit under the 2018-2019 primary policy.30 But Lloyd’s revised its position in December 2019, months after the action was consolidated. It argued the Keippel action was interrelated to three earlier lawsuits, which meant that the action now fell within the 2017-2018 primary policy’s coverage period.31 Despite this change, Lloyd’s agreed to cover the Keippel settlement and defense costs under the 2018-2019 primary policy while reserving its right to contest the Keippel claim’s placement.32 Ultimately, the Keippel action settled for $11 million that was paid to class

See id. ¶¶ 158-59.

Id. ¶¶ 70-114.

See id. ¶¶ 83, 121-35.

Affidavit of Carla M. Jones in Support of Plaintiff’s Motion for Partial Summary Judgment Regarding Keippel Claim Placement for Primary and Excess D&O Insurance Coverage and a Ruling that Lloyd’s Counterclaims Fail as Matter of Law (“Keippel Jones Aff.”) Ex. 1.

Keippel Jones Aff. Ex. 2.

Id. -7- members plus approximately $4.2 million in attorneys’ fees.33 2. The Belin Action The original Belin class action complaint was filed on June 7, 2019, and asserted claims against Benefytt with a class period of June 2015 to June 2019.34 On July 17, 2019, the Belin plaintiffs amended their complaint to add Benefytt’s chairman and founder Michael Kosloske as a defendant.35 The Belin complaint was later amended two more times, with the third and final amended complaint filed in October 2020.36 The Belin class consisted of individuals who “purchased [Benefytt’s] limited benefit indemnity plans through Simple Health.”37 The third amended complaint brought claims for: (1) violation of RICO § 1962(c); (2) violation of RICO § 1962(d); (3) unjust enrichment; (4) aiding and abetting a violation of RICO § 1962(c); (5) aiding and abetting breach of fiduciary duties; and (6) aiding and abetting fraud.38

Id. at Ex. 4, at 12-15.

See Class Action Complaint, Belin v. Health Ins. Innovations, Inc. et al., Case No. 0:19-cv- 61430-AHS (S.D. Fla. June 7, 2019) ¶¶ 1-7, 172 (JA Ex. 9) (“First Belin Compl.”).

See First Amended Class Action Complaint, Belin v. Health Ins. Innovations, Inc., et al., Case No. 0:19-cv-61430-AHS (S.D. Fla. July 17, 2019) (JA Ex. 10) (“Belin First Am. Compl.”).

See Third Amended Class Action Complaint, Belin v. Health Ins. Innovations, Inc., et al., Case No. 0:19-cv-61430-AHS (S.D. Fla. Oct. 28, 2020) (JA Ex. 12) (“Belin Third Am. Compl.”).

Belin Third Am. Compl. ¶ 261.

Id. ¶¶ 269-305.

-8- On October 31, 2019, Benefytt provided its 2018-2019 Insurers with notice of the Belin action along with the original and first amended complaints (the “Belin Notice”).39 Insurers denied coverage arguing the Belin notice was insufficient, and the Belin action only became a covered claim after the 2018-2019 policies had expired.40 In 2021, Benefytt settled the Belin action for $27.5 million.41 3. The Daniels42 and DiFalco43 Actions The Daniels complaint was filed in April 2018 and asserted securities law violations and corporate duty breach claims against several Benefytt directors.44 The action had a class period running from November 3, 2016 to April 6, 2018.45 Similarly, the DiFalco action was also filed in April 2018, with a similar class period of November 3, 2016 to April 5, 2018 (its class period was only a day shorter than the period in the Daniels action) and its claims were identical to the Daniels

Affidavit of Carla Jones in Support of Plaintiff’s Motion for Partial Summary Judgment Regarding Insurance Coverage for the Belin Claim Under Defendants Primary and Excess D&O Coverage (“Belin Jones Aff.”) Ex. 8 (D.I. 249).

Belin Jones Aff. Ex. 9.

Id. at Exs. 1, 2 (providing court approval of the Belin settlement).

Daniels v. Health Ins. Innovations, Inc., et al., Case No. 1:18- 00527-UNA (D. Del. Apr. 6, 2018).

DiFalco v. Health Ins. Innovations, Inc., et al., Case No. 1:18- cv-00519-UNA (D. Del. Apr. 5, 2018).

Verified Shareholder Derivative Complaint, Daniels v. Health Ins. Innovations, Inc., et al., Case No. 1:18- 00527-UNA (D. Del. Apr. 6, 2018) (“Daniels Compl.”) ¶¶ 234-284 (JA Ex. 14).

Daniels Compl. ¶ 1.

-9- action claims.46 The Daniels and DiFalco actions are functionally identical for the purpose of this litigation. Both actions alleged violations of Sections 14(a), 10(b), 20(a), and SEC Rule 10b-5, fiduciary duty breaches, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.47 The plaintiffs alleged Benefytt’s directors made false statements and omitted material information concerning Benefytt’s Florida third-party administrator (“TPA”) application.48 4. The Rector Action The Rector action was filed in March 2018, and asserted various claims against Benefytt’s directors. It had a class period of November 3, 2016 to September 11, 2017.49 The Rector complaint brought claims for violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 as well as a violation of SEC Rule 10b-5.50 Similar to the Daniels and DiFalco actions, the Rector action alleged that Benefytt’s directors made material misstatements and omissions related to

Verified Shareholder Derivative Complaint, DiFalco v. Health Ins. Innovations, Inc., et al., Case No. 1:18- cv-00519-UNA (D. Del. Apr. 5, 2018) (“DiFalco Compl.”) ¶ 1 (JA Ex. 15).

DiFalco Compl. ¶¶ 234-84.

Id. ¶¶ 11-13, 110-18, 136; Daniels Compl. ¶¶ 4-14, 100-118.

Consolidated Class Action Complaint, In re Health Ins. Innovations Securities Litig., Case No. 8:17-cv-02186-EAKMAP (M.D. Fla. Mar. 23, 2018) ¶¶ 1-2 (JA Ex. 17).

Id. - 10 - Benefytt’s Florida TPA application.51 This action ultimately settled for $924,000 plus expenses.52 5. The Federal Trade Commission Action In October 2018, the Federal Trade Commission (FTC) filed an action alleging Simple Health, its directors, and other similar entities engaged in practices that violated the Federal Trade Commission Act and Telemarketing Sales Rules.53 The suit challenged Simple Health’s alleged practice of selling “[l]imited benefit plans to consumers” who “thought they had purchased comprehensive health insurance” leaving them “without [] coverage.”54 The FTC sought an injunction and any relief “necessary to redress injury to consumers.”55 Benefytt provided its 2018- 2019 Insurers with notice of the FTC action in December 2018, including a copy of the complaint (collectively, the “2018 Notice of Circumstances”).56 Notice of this action was provided as a precautionary Notice of Circumstance because Benefytt wasn’t listed in the action but Benefytt could foresee their business with Simple Health giving rise to a claim.57

Id. ¶¶ 155-65.

In re Health Ins. Innovations Sec. Litig., 2021 WL 1186838, at *2 (M.D. Fla. Mar. 30, 2021).

Belin Jones Aff. Ex. 3, at ENDUR007813-40. Id. at ENDUR007818-19. Id. at ENDUR007839.

Belin Jones Aff. Exs. 3, 8.

See id. at Ex. 3.

- 11 - 6. The Spiewak Action In October 2018, Matthew Spiewak filed suit against Benefytt seeking a declaration that he was the managing general agent of a health insurance vendor that sold Benefytt products and insisting Benefytt breached their commission agreement.58 In the 2018 Notice of Circumstances, as required by the D&O policy, Benefytt provided the Insurers notice of the Spiewak action and a copy of the Spiewak complaint.59 D. PROCEDURAL HISTORY OF THIS LITIGATION Benefytt initiated this suit in February 2021.60 After the Court denied Executive Risk’s motion to dismiss the Second Amended Complaint,61 Benefytt filed the now-operative twelve-count Third Amended Complaint.62 In Count I, Benefytt seeks declaratory judgment concerning the Belin action as to “whether: (i) the Belin Claim is a claim first made in the 2018-2019 policy period; (ii) Argonaut and Endurance must provide insurance coverage up to their respective policy limits for the Belin Claim costs of defense and damages, including from settlement, and that their policies otherwise cover the Belin Claim; and (iii) the

Id. at ENDUR007842-43, ENDUR007847-49.

Belin Jones Aff. Exs. 3, 8.

See Complaint (D.I. 1). See also D.I. 290 and 294 (notice of bankruptcy and order transferring matter back from dormant docket).

See Benefytt I, 2022 WL 16504, at *1.

See Third Am. Compl. ¶¶ 124-226.

- 12 - Belin Claim is related to the Keippel Claim.”63 Count III seeks declaratory judgment regarding “whether [] the Keippel Claim was first made in the 2018-2019 policy period and is not related to the 2017-2018 Actions, and Lloyd’s may not seek reimbursement from Benefytt for amounts paid by Lloyd’s under the Lloyd’s 18-19 Primary Policy in defense and settlement of the Keippel Claim[.]”64 Count IV seeks declaratory judgment (in the alternative to Count III), as to “whether: (i) the Keippel Claim was first made in the 2018-2019 policy period and is not related to the 2017-2018 Actions, and Lloyd’s may not seek reimbursement from Benefytt for amounts paid by Lloyd’s under the Lloyd’s 18-19 Primary Policy in defense and settlement of the Keippel Claim; and (ii) if not, then the Lloyd’s, XL, Executive Risk and Endurance must pay the Keippel Claim in full under the 2017- 2018 policy period.”65 Count V alleges (in the alternative) that Lloyd’s, XL, Executive Risk and Endurance breached their contract concerning the Keippel action.66 Also, Count VII alleges that Argonaut and Endurance breached its contract concerning the Belin

Id. ¶ 132.

Id. ¶ 147. The “2017-2018 Actions” are collectively the Rector, Daniels and DiFalco actions.

Id. ¶ 158.

Id. ¶¶ 159-67.

- 13 - action.67 While, Count XII alleges (in the alternative) that Lloyd’s, XL, Argonaut, CapSpecialty, Maxum, and Endurance breached their contract concerning the Belin action.68 Because Benefytt reached settlements with CapSpecialty,69 Maxum,70 and Argnonaut,71 claims which name only them as defendants (Counts II, VI, VIII, IX, X, and XI) are moot.

Lloyd’s also filed counterclaims on Counts I, II, III, IV, and V.72 In Count I, Lloyd’s seeks a declaration that the Rector, Daniels, Keippel, and other related actions all involve the same wrongful or interrelated wrongful act and all constitute a single claim first made during the 2017-2018 policy period and thus are subject to a single $10 million limit.73 Additionally, Lloyd’s seeks a declaration that there is no coverage for the Belin action under the 2018-2019 policy, and that Lloyd’s is owed the amount it paid in excess of $10 million, totaling $5.2 million.74 In Count II, Lloyd’s seeks a declaration that there is no coverage for the

Id. ¶¶ 175-82.

Id. ¶¶ 214-26.

Partial Stipulation of Dismissal, Against Capitol Specialty Insurance Corporation (“CSIC”) as well as all counterclaims asserted by CSIC against Benefytt (D.I. 144).

D.I 163 (granting stipulated dismissal of Maxum).

D.I 236 (order granting dismissal of Argonaut).

D.I. 134 (“Countercl.”).

Countercl. ¶¶ 14, 84-91.

Id. ¶ 91.

- 14 - Keippel action because that action “involves Wrongful Acts that are the subject of notices given in the 2017-2018 policy period.”75 Additionally, Lloyd’s seeks a declaration that there is no coverage for the Belin action under the 2018-2019 policy, and Benefytt is entitled to repayment for the costs and expenses it incurred in regard to the Keippel action.76 In Count III, Lloyd’s seeks a reimbursement for the costs and expenses it incurred above the policy limit.77 In Count IV, Lloyd’s asserts unjust enrichment against Benefytt.78 And in Count V, Lloyd’s asserts that Benefytt breached its contracts with Lloyd’s regarding the Keippel action.79 Plaintiff Benefytt and Defendants Lloyd’s, XL Specialty, Endurance, and Executive Risk have all moved for summary judgment. Briefing and argument on each of the motions that remain before the Court is complete. They are now ripe for decision.

Id. ¶ 94.

Id. ¶ 97.

Id. ¶¶ 98-106.

Id. ¶¶ 107-17.

Id. ¶¶ 118-24.

- 15 - II. THE PARTIES CONTENTIONS A. BENEFYTT’S MOTION FOR SUMMARY JUDGMENT REGARDING KEIPPEL AND ON LLOYD’S COUNTERCLAIMS80 Benefytt contends that the 2018-2019 policies cover the Keippel action.81 According to Benefytt, the Keippel action was filed during the 2018-2019 policies’ coverage period, so the only way it could be a 2017-2018 policy claim is if it is interrelated to the 2017-2018 Actions.82 Benefytt insists that neither the facts nor case law support finding that the Keippel action was interrelated with any other lawsuit.83 Additionally, Benefytt says that Lloyd’s recoupment claim fails because nothing in the Primary Policies permits recoupment of an overpayment by Lloyd’s, especially as Lloyd’s could have included such a provision when it drafted those insurance contracts.84 B. BENEFYTT’S MOTION FOR SUMMARY JUDGMENT REGARDING BELIN85 Benefytt argues the Belin action is a covered claim.86 To Benefytt, the original Belin complaint’s lack of a securities claim doesn’t preclude coverage because the

D.I. 247 (“Benefytt Keippel MSJ”).

Benefytt Keippel MSJ at 17-29.

Id. at 1-2, 17.

Id. at 17-29.

Id. at 32-33.

D.I. 249 (“Benefytt Belin MSJ”).

Benefytt Belin MSJ at 11-15.

- 16 - ultimate settlement included at least some covered loss related to Mr. Kosloske.87 Similarly, Benefytt maintains its 2018 Notice of Circumstances also applies to the Belin action.88 And, even if notice was insufficient, says Benefytt, that doesn’t bar coverage because Insurers have demonstrated no prejudice.89 Finally, Benefytt submits that the Keippel action is not interrelated with the Belin action, and the Keippel claim was first made during the 2018-2019 policy period.90 Benefytt also rejects Insurers’ contention that the Professional Services Exclusion bars coverage because the Policies don’t define “professional service” and “[a]ny uncertainty in the language must be resolved against the insurance company” in favor of coverage.91 C. XL SPECIALTY’S MOTION FOR SUMMARY JUDGMENT92 Defendant XL Specialty moves for summary judgment requesting its exit from the case because it has paid “all sums that [it] owes or could be held to owe for the Keippel Action and Belin Action.”93 XL Specialty notes that it “agreed to pay $5 million towards the settlement and defense costs for the Keippel Action,” because

Id. at 20-25.

Id. at 25-28.

Id. at 28-29.

Id. at 29-31.

Id. at 11-19 (citing Pac. Ins. Co. v. Liberty Mut. Ins. Co., 956 A.2d 1246, 1255 (Del. 2008)).

D.I. 240 (“XL Specialty MSJ”).

XL Specialty MSJ at 1.

- 17 - it “occupied the same first excess position [in] both [policy periods].”94 Because that $5 million payment exhausted its coverage limit, XL says it doesn’t owe any more no matter how the Court rules on the other parties’ arguments.95 While not going quite that far, Benefytt does agree that “XL has paid its 2018- 2019 policy limits for the Keippel Claim as a Claim first made in February 2019.”96 And important to the resolution of XL’s individual motion, all parties agree that: If the Court finds that the Keippel Claim is fully covered under the 2018-2019 Policies, and the Belin Claim is not covered under either the 2017-2018 Policies or the 2018-2019 Policies . . . [for the] 2018-2019 Policies . . . XL’s policy limits are exhausted by its prior payment toward the Keippel Claim . . .97 D. EXECUTIVE RISK’S MOTION FOR SUMMARY JUDGMENT98 Executive Risk was only an excess insurer for the 2017-2018 policy period.99 It insists that it owes nothing to Benefytt because neither the Keippel action nor the Belin action are claims that fall under the 2017-2018 policy’s coverage period.100 In

Id. at 3 (citing Defendant XL Specialty Insurance Company’s Answer and Affirmative Defenses to Plaintiff’s Third Amended Complaint ¶ 105 (“XL admits that it agreed to pay settlement and defense costs for the Keippel Action up to $5 million, the limit of liability under both its 2017-2018 policy and its 2018-2019 policy under a full reservation of rights.”) (D.I. 132)).

Id. at 3-4.

D.I. 265 (“Benefytt’s Omnibus Answer”) at 6.

D.I. 331 (Parties’ Joint Submission Regarding Potential Coverage Outcomes) at 3 (cleaned up).

D.I. 243 (“Executive Risk MSJ”).

See JA Ex. 19.

Executive Risk MSJ at 16 (“neither Keippel nor Belin was a claim first made during the period of the ER Policy”).

- 18 - making that argument, Executive Risk contends that the Keippel and Belin actions are also not interrelated with each other or the 2017-2018 Actions.101 In the alternative, Executive Risk submits the Belin action is uncovered because Benefytt failed to comply with the notice-and-settlement consent provisions unique to the Executive Risk policy.102 It also says that the claim would be barred by the Professional Services Exclusion.103 E. ENDURANCE’S MOTION FOR SUMMARY JUDGMENT104 Endurance argues that the Keippel and Belin actions fall within the coverage policy that was in effect when Benefytt first noticed a “covered claim” arising out of the litigation.105 Endurance adopts Benefytt’s position that the Keippel action falls within the 2018-2019 policy because it was filed in February 2019 and reported in March 2019.106 Given that Benefytt incurred $11 million in settlement costs107 and $4.3

Id. at 17-29.

Id. at 32-26.

Id. at 30.

D.I. 244 (“Endurance MSJ”).

Endurance MSJ at 22-25.

Id. at 22.

JA Ex. 8 (“Keippel Settlement”); Declaration of David J. Soldo, Esquire in Support of Defendant Endurance Assurance Corporation’s Motion for Summary Judgment (“Soldo Aff.”) Ex. (approving the Keippel Settlement) (D.I. 244).

- 19 - million in defense costs,108 Endurance maintains the Keippel action does “not trigger [its] 2018-19 excess policy layer.”109 Regarding the Belin action, Endurance suggests that while the suit was first filed during the 2018-2019 policy’s coverage period, it did not become a covered claim until June 17, 2019, when the first amended complaint was filed.110 Endurance notes that Benefytt didn’t report the Belin action until October 31, 2019.111 Accordingly, Endurance maintains the Belin action isn’t indemnifiable because it was not a covered claim and was not reported until the 2018-2019 policy expired.112 Endurance also argues that regardless of where the Belin action is placed (1) there is no covered loss and (2) the Professional Services Exclusion bars coverage.113 Specifically, Endurance argues the Belin action made allegations against Mr. Kosloske, not Benefytt, and “Kosloske paid nothing toward the Belin settlement.”114 It also says the Belin claim concerned wrongful acts performed in

Soldo Aff. Ex. 2, at 2-4.

Endurance MSJ at 24.

Id. at 24-25. Endurance points out that the Policies only cover “Company Loss” for securities suits and the Belin action was a consumer class action. Id. (citing 2017-2018 primary policy § I.C.). Thus, says Endurance, the fact that Benefytt was named in the first Belin complaint didn’t trigger coverage. Id. Rather, the Belin action only became a covered claim when the complaint was amended to add Mr. Kosloske, an “Insured Person,” as a defendant. Id. (citing 2017-2018 primary policy §§ I.B.1, II.K.1.).

Id. at 24 (citing Soldo Aff. Ex. 5 (October 2019 notice of Belin claim)).

Id. at 24-26.

Id. at 30.

Id. at 31.

- 20 - connection with professional services which the Policies don’t cover.115 Finally, Endurance contends neither the Keippel action nor the Belin action are interrelated to any previous suit.116 F. LLOYD’S MOTION FOR SUMMARY JUDGMENT117 Lloyd’s Motion for Summary Judgment asks for three declarations.118 First, Lloyd’s requests a declaration that the Keippel action is a 2017-2018 policy claim because “it involve[d] the same Wrongful Acts or Interrelated Wrongful acts” as the 2017-2018 Actions.119 Lloyd’s argues that the actions have “as a common nexus the same facts [and] circumstances,” because they all challenge “wrongful acts regarding sales misconduct and misrepresentations or omissions related thereto.”120 Second, Lloyd’s asks the Court to declare there is no coverage for the Belin action. It posits two independent reasons therefor: (1) the Belin action is barred by the Professional Services Exclusion; and (2) the original Belin complaint wasn’t

Id. at 32-34.

Id. at 22-23, 28-30.

D.I. 245 (“Lloyd’s MSJ”).

Lloyd’s MSJ at 35 (“(1) the Keippel Action is a Claim first made in the 2017-2018 Policy, (2) there is no coverage under the Policies for the Belin Action or, in the alternative, the Belin Action and the 2017-2018 Actions involve Interrelated Wrongful Acts and constitute a single Claim first made in the 2017-2018 Policy, and (3) Underwriters are entitled to recoup the defense costs and settlements paid by them in the Actions in excess of the $10,000,000 limit under the 2017-2018 Policy.”).

Id. at 22-26.

Id. at 26.

- 21 - covered and the would-be covered amended complaint was filed after the 2018-2019 policy period ended.121 As an alternative, Lloyd’s suggests that the Court find that the Belin action claim was first made in 2017-2018 as it is interrelated to the Keippel, Rector, DiFalco, and Daniels claims.122 Finally, Lloyd’s insists that it is entitled to recoup the $5.3 million it overpaid to Benefytt under the 2017-2018 policy.123 III. APPLICABLE LEGAL STANDARDS A. DELAWARE MOTIONS FOR SUMMARY JUDGMENT Summary judgment is warranted “if the pleadings, depositions, answers to interrogatories, and admission on file, together with the affidavits” show “there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”124 The movant bears the initial burden of proving its motion is supported by undisputed facts.125 If the movant meets its burden, the non-movant must show there is a “genuine issue for trial.”126 To determine whether a genuine

Id. at 27-33.

Id. at 35; id. at 33 (“The alleged facts and circumstances underlying the Keippel Action and the Belin Action are virtually identical.”).

Id. at 26-27.

Del. Super. Ct. Civ. R. 56(c); Options Clearing Corp. v. U.S. Specialty Ins. Co., 2021 WL 5577251, at *7 (Del. Super. Ct. Nov. 30, 2021).

Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).

Del. Super. Ct. Civ. R. 56(e); see also Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995) (“If the facts permit reasonable persons to draw but one inference, the question is ripe for summary judgment.”).

- 22 - issue exists, the Court construes the facts in the light most favorable to the non- movant.127 The same “well-established standards and rules apply in full when the parties have filed cross-motions for summary judgment.”128 Here, since the cross-motions are filed and “neither party argues the existence of a genuine issue of material fact, ‘the Court shall deem the motions to be the equivalent of a stipulation for decision on the merits based on the record submitted with the[m].’”129 B. NEW YORK INSURANCE CONTRACT INTERPRETATION There is no dispute that the Policies are governed by New York law.130 As such, the interpretation of an insurance policy is a question of law.131 “[T]he duty of the insurer to defend the insured rests solely on whether the complaint alleges any facts or grounds which bring the action within the protection purchased.”132 When determining whether claims are interrelated, New York courts examine

Judah v. Del. Tr. Co., 378 A.2d 624, 632 (Del. 1977).

Radulski v. Liberty Mutual Fire Ins. Co., 2020 WL 8676027, at *4 n.35 (Del. Super. Ct. Oct.

28, 2020) (collecting cases); Zenith Energy Terminals Joliet Hldgs. LLC v. CenterPoint Props. Tr., 2023 WL 615997, at *8 (Del. Super. Ct. Jan. 23, 2023).

Radulski, 2020 WL 8676027, at *4 (alteration in original) (quoting Del. Super. Ct. Civ. R. 56(h)).

2017-2018 primary policy (“Choice of Law . . . This insurance shall be governed by and construed in accordance with the law of New York . . .”); 2018-2019 primary policy (“Declarations Item N . . . Choice of Law New York.”).

Hansard v. Federal Ins. Co., 147 A.D.3d 734, 737 (N.Y. App. Div. 2017).

Seaboard Sur. Co. v. Gillette Co., 476 N.E.2d 272 (N.Y. 1984).

- 23 - the coverage policy’s terms and conduct a comparison of the claims at issue.133 The Court decides: (1) whether the provisions are ambiguous as a matter of law, and if the answer to that question is yes, then what are the “plain and ordinary meanings” if the provisions applied to the facts,134 and (2) “whether the Actions are related” by “engag[ing] in a ‘side-by-side review of the underlying claims.’”135 “‘[T]o establish that a prior Claim is interrelated with a subsequent Claim, the Claims must share a sufficient factual nexus.’”136 “A sufficient factual nexus exists where the Claims ‘are neither factually nor legally distinct, but instead arise from common facts’ and where the ‘logically connected facts and circumstances demonstrate a factual nexus’

Zunenshine v. Exec. Risk Indem., Inc., 1998 WL 483475, at *4 (S.D.N.Y. Aug. 17, 1998), aff’d, 182 F.3d 902 (2d Cir. 1999).

Lonstein Law Office, P.C. v. Evanston Ins. Co., 2022 WL 311391, at *8 (S.D.N.Y) (quoting Nomura Holding Am., Inc. v. Federal Ins. Co., 45 F. Supp. 3d 354, 364 (S.D.N.Y. 2014), aff’d, 629 F. App’x 38 (2d Cir. 2015)). Id. (quoting Nomura Hldg., 629 F.App’x at 40).

While not universally applied, New York courts typically use “a side-by-side review of the factual allegations in the relevant complaints” to determine if a sufficient factual nexus exists. Lonstein, 2022 WL 311391, at *11 (citing Cushman & Wakefield, Inc. v. Illinois Nat’l Ins. Co., 2018 WL 1898339, at *17-18 (N.D. Ill. Apr. 20, 2018) (applying New York law)); Glascoff v. OneBeacon Midwest Ins. Co., 2014 WL 1876984, at *6 (S.D.N.Y. May 8, 2014); see Zahler v. Twin City Fire Ins. Co., 2006 WL 846352, at *6-7 (S.D.N.Y. Mar. 31, 2006) (applying the side-by-side test to determine two claims were interrelated). But see Alvarez v. XL Specialty Ins. Co., 2021 WL 2940963, at *4 (N.Y. Sup. Ct. July 12, 2021) (noting that the court did not engage the side-by-side test when determining two suits weren’t interrelated). But even where a New York court doesn’t apply the side-by-side methodology, it will nevertheless consider the underlying complaints’ allegations. See Darwin Nat. Assur. Co. v. Westport Ins. Corp., 2015 WL 1475887, at *12-14 (E.D.N.Y. Mar. 31, 2015); Alvarez, 2021 WL 2940963, at *4.

Glascoff, 2014 WL 1876984, at *5 (applying New York Law) (quoting Quanta Lines Ins. Co. v. Investors Capital Corp., 2009 WL 4884096, at *12 (S.D.N.Y. Dec. 17, 2009)); Seneca Ins. Co. v. Kemper Ins. Co., 2004 WL 1145830, at *8-9 (S.D.N.Y. May 21, 2004), aff’d, 133 F. App’x 770 (2d Cir. 2005); Zunenshine, 1998 WL 483475, at *5.

- 24 - among the Claims.”137 But claims need not “involve precisely the same parties, legal theories, Wrongful Acts, or requests for relief” to be interrelated.138 Rather, “all that is required is ‘any’ common fact, circumstance, situation, event, transaction, cause or series of casually or logically connected facts, circumstances, situations, events, transactions or causes.”139 That said, New York courts may draw the line at interrelatedness when the connection between the “two claims [is] tenuous at best.”140 IV. DISCUSSION The nub of the dispute (and inter-disputes) here is the proper policy-period placement for the Keippel and Belin actions, and whether they are interrelated to previous, covered actions. For a claim to be covered, (1) the claim must be a claim against an Insured Person made within a covered policy period or interrelated to a covered claim, and (2) the Insurers must receive a proper notice of circumstances.

The Policy’s insuring language mandates coverage for “any Claim first made

Quanta Lines, 2009 WL 4884096, at *14, aff’d sub nom., Quanta Specialty Lines Ins. Co. v. Investors Capital Corp., 403 F. App’x 530 (2d Cir. 2010) (internal reference omitted).

Zunenshine, 1998 WL 483475, at *5; see Glascoff, 2014 WL 1876984, at *5.

Weaver v. Axis Surplus Ins. Co., 2014 WL 5500667, at *12 (E.D.N.Y. Oct. 30, 2014), aff’d, 639 F. App’x 764 (2d Cir. 2016).

See Glascoff, 2014 WL 1876984, at *6 (“Here, the factual overlap between the two Claims is tenuous at best: Plaintiffs allegedly failed to act properly with respect to Antonucci, whether it be their control and oversight of him, as alleged in the Kingsley Complaint, or their failure to investigate allegations of his misconduct, as alleged by the FDIC.”).

- 25 - against the Insured Persons.” 141 A “Claim” is defined as: any written demand for monetary damages, non monetary relief, injunctive relief or other relief against any of the Insureds, or any civil, criminal, administrative, regulatory, arbitration or mediation proceeding or other alternative dispute resolution process initiated against any of the Insureds[.]142 Interrelated Wrongful Acts mean: “Wrongful Acts which have as a common nexus any fact, circumstance, situation, event, transaction or series of facts, circumstances, situations, events or transactions.”143 And there is little dispute that the actions’ allegations constitute wrongful acts.

For coverage, multiple claims can constitute a single claim if they involve the same wrongful act or interrelated acts.144 If this occurs, the earlier date is deemed the first-made date and the later claims are covered as if they were filed within the original policy period.145 Also, the Notification Provision of the 2018-2019 primary policy states that notice must be provided: C. If the Insureds: 1. become aware of a specific fact, circumstance or situation which could reasonably give rise to a Claim or Investigation, or 2017-2018 primary policy § II.

Id. § II.B.1.

Id. § II (emphasis added).

Id. § IV.

Id. - 26 - 2. receive any request to toll a period or statute of limitation which may be applicable to any Claim or Investigation, and if the Insureds during the Policy Period give written notice to Underwriters of: (a) the specific fact, circumstance, situation or the request to toll a period or statute of limitation; (b) the consequences which have resulted or may result therefrom; and (c) the circumstances by which the Insureds first became aware thereof, then any Claim or Investigation made subsequently arising out of such fact, circumstance, situation or the request to toll a period or statute of limitation shall be deemed for the purposes of this Policy to have been made or commenced at the time such notice was first given.146 Essentially, the Policies’ notification provision allows that once Benefytt “become[s] aware of a specific fact, circumstance or situation which could reasonably give rise to a Claim,” it may provide notice of “the specific fact, circumstance, [or] situation . . . the consequences which have resulted or may result therefrom; and [] the circumstances by which the Insureds first became aware thereof.”147 If Benefytt provides such notice “then any Claim . . . made subsequently arising out of such fact, circumstance, [or] situation . . . shall be deemed for the purposes of this Policy to have been made or commenced at the time such notice was first given.”148

2018-2019 primary policy § VI.C.

Id. Id. - 27 - A. THE KEIPPEL ACTION IS COVERED BY THE 2018-2019 POLICY.

The Keippel action is covered by the 2018-2019 policy because it was properly filed in accord with the Policy, and it isn’t interrelated with any actions that are covered by the 2017-2018 policy period.

The Keippel action was a securities class action alleging securities fraud and false statements as the causes of action (Exchange Act §§ 10(b), 20(a) and SEC Rule 10b-5). The Keippel action was filed on February 18, 2019.149 It was amended and consolidated on July 19, 2019.150 And it settled in December 2020.151 Executive Risk, Endurance, and Benefytt say the Keippel action is covered by and filed in the 2018-2019 policy period.152 While Lloyd’s maintains the Keippel action was first filed in the 2017-2018 policy period, as an interrelated action.153 Specifically, Lloyd’s argues the Keippel and the 2017-2018 Actions all dealt with Interrelated Wrongful Acts.154 If that were true, then under Section IV.C of the Policies, the Keippel claim should be deemed first made during the 2017-2018 policy’s coverage period.155

Keippel Original Compl.

Keippel Compl.

Keippel Settlement.

ER’s MSJ at 16-29; Endurance’s MSJ at 22; Benefytt’s Keippel MSJ at 17-20.

Lloyd’s MSJ at 22-26.

Id. See 2017-2018 primary policy § IV.C (providing for coverage placement of claims involving - 28 - There is no dispute that the Keippel action itself was filed within the 2018- 2019 policy period.156 Accordingly, that action will be covered by the 2018-2019 policy period unless it is interrelated with the 2017-2018 Actions. If the Keippel action is interrelated, then it would be covered by the prior 2017-2018 policy period.

But to be interrelated with those prior actions, the Keippel action must “share a sufficient factual nexus.”157 In this case particularly, with the term “any” used in the interrelated coverage provision, “it is ‘immaterial’ that one claim may involve additional facts or allegations because all that is required is ‘any’ common fact, circumstance, situation, event, transaction, cause or series of casually or logically connected facts, circumstances, situations, events, transactions or causes.”158 That said, the claims do need “numerous logically connected facts and circumstances” to be interrelated.159 And they shouldn’t be deemed interrelated when their relation to each other is only “tenuous at best.”160 Here, a side-by-side examination of the actions reveals that the Keippel action

the same or interrelated wrongful acts); 2018-2019 primary policy § IV.C (same).

Soldo Aff. Ex. 8 (RFA 3 at 7).

Quanta Lines, 2009 WL 4884096, at *12; see also Glascoff, 2014 WL 1876984, at *5.

Weaver, 2014 WL 5500667, at *12.

See Seneca Ins. Co. v. Kemper Ins. Co., 133 F. App’x 770, 772 (2d Cir. 2005) (approvingly noting the district court’s use of this construction when determining interrelatedness).

Glascoff, 2014 WL 1876984, at *6.

- 29 - does not share a sufficient factual nexus with the Daniels, DiFalco, or Rector actions.161 Making mere allegations about a company’s general misconduct that may be related to another action isn’t enough.162 Here, Lloyd’s largely relies on the introduction and background of the various complaints to make bald allegations of interrelatedness; that’s insufficient.163 Remember, the 2017-2018 Actions were also securities class actions asserting that Benefytt omitted material information and made false statements to investors.164 But those allegations were made in connection with the Florida TPA application, not the Simple Health fraud.165 Indeed, the 2017-2018 Actions all concerned the Florida TPA Application, while the Keippel action concerned Simple Health.166 The Keippel

In its briefing, Lloyd’s concedes “[t]he 2017-2018 Actions are not materially different from one another” and therefore compares the Keippel complaint to only the DiFalco complaint. Lloyd’s MSJ at 23 n.3. Accordingly, the Court also cites to the DiFalco complaint when discussing the 2017-2018 Actions here.

See Glascoff, 2014 WL 1876984, at *7 (S.D.N.Y. May 8, 2014) (referencing Home Ins. Co. of Ill. v. Spectrum Info Tech, Inc., 930 F.Supp. 825, 850 (E.D.N.Y. 1996) (finding unpersuasive the “attempt to intertwine the [claims] by relying on naked allegations in the original complaints that they represent mere pieces of a larger ‘scheme’”)).

See id. (referencing Nat’l Union Fire Ins. Co. of Pittsburgh v. Ambassador Grp., Inc., 691 F.Supp. 618, 623 (E.D.N.Y. 1988) (stating in dicta that claims aren’t interrelated just because when “[b]roadly construed, the claims are interrelated to the extent that they all involve allegations of wrongdoing of one sort or another and relate, in some way, to the demise of” the entity)).

DiFalco Compl. ¶¶ 234-84. Id. See Glascoff, 2014 WL 1876984, at *7 (“Here, Plaintiffs admit the FDIC and Kingsley Claims do not share parties, legal theories, or requests for relief, yet they want this Court to find the two Interrelated Wrongful Acts because both Claims ostensibly relate to Plaintiffs’ oversight of Antonucci. Without more, there simply is not a sufficient factual nexus between the FDIC Claim and the Kingsley Claim.”) (cleaned up).

- 30 - action cites to completely different evidence, such as the 2017 10-K and 2018 10-Q filing, to highlight different claims of wrongdoing, and the Keippel action also had no allegations directed at any individuals.167 What’s more, Simple Health—an integral non-party in the Keippel action—isn’t discussed in the Daniels, DiFalco, or Rector actions.168 Simply put, such pleadings just don’t establish “numerous logically connected facts and circumstances” Lloyd’s must demonstrate.169 “[A]ny specific common fact, event or circumstance” shared by the various actions’ claims were used only to bolster the broad, generalized allegation of wrongdoing.170 As such, the Keippel action and the 2017-2018 Actions lack a factual nexus to make them interrelated.

So Keippel is not interrelated to any of the 2017-2018 Actions and shouldn’t be deemed made in the 2017-2018 policy period. The Court finds that the Keippel action properly falls within the 2018-2019 policy period. And with this, Lloyd’s recoupment argument fails as a matter of law because the Keippel action doesn’t implicate Lloyd’s coverage liability limit for the 2017-2018 primary policy.

B. THE BELIN ACTION DOES NOT FALL WITHIN EITHER PRIMARY POLICY’S COVERAGE PERIOD For the Belin claim, the Court finds that it is not covered by the 2018-2019 See generally Keippel Compl.

See generally DiFalco Compl.

See Seneca Ins. Co., 133 F. App’x at 772.

Weaver, 2014 WL 5500667, at *12.

- 31 - policy, and it is not interrelated with any covered claims. Additionally, Benefytt failed to provide a proper Notice of Circumstances for the Belin action.

1. The Belin action is not a covered by the 2018-2019 policy.

The Belin complaint was filed on June 7, 2019, which is in the 2018-2019 policy period.171 The original complaint only sought recovery from Benefytt.172 The complaint was subsequently amended three times, all of which were outside the 2018-2019 policy period window.173 The first amended complaint added Mr. Kosloske as a defendant.174 Recall that if the claim involves the same wrongful act or interrelated acts as a prior covered claim, the earlier date is deemed the first-made date and the later claims are covered as if they were filed within the original policy period.175 Under this Policy provision, Benefytt argues that the Belin Claim was first made in the 2018-2019 policy period because the original complaint made allegations against Michael Kosloske even though he was not named as a defendant yet.176 So, Benefytt says “the Belin Claim triggers Defendants’ coverage obligations because: (1) there

See generally First Belin Compl.

Id. ¶¶ 14-15, 182-209.

See Belin First Am. Compl.; JA Ex. 11 (Belin Second Am. Compl.); Belin Third Am. Compl.

See Belin First Am. Compl.

2017-2018 primary policy § IV.C; 2018-2019 primary policy § IV.C.

Benefytt’s Omnibus Answer at 49 (stating that the original complaint “still included allegations of wrongful acts by officers of Benefytt” (citations omitted)).

- 32 - is a Claim against an Insured Person, Mr. Kosloske, (2) the Claim alleges Mr. Kosloske committed ‘Wrongful Acts’ in his then-official capacity with Benefytt; (3) and those acts resulted in ‘Loss’ to Benefytt for defense and settlement of the Belin Claim exceeding $30 million.”177 Not so. The original claim is not covered because it doesn’t make a claim against an insured person. Here, the language of the contract is clear; it only requires coverage of “any Claim first made against the Insured Persons . . . .”178 For there to be coverage, the claim must be specifically pled against the insured person and demand relief from them.179 Without such a claim, there is no covered claim within the coverage period.180 The original Belin action only makes allegations about an insured person, Mr. Kosloske, and his activity;181 that’s not enough here.

Mr. Kosloske wasn’t a named defendant in the original complaint, nor was any relief sought from him individually via that complaint.182 In fact, he wasn’t even listed as

Id. at 22 (citations omitted).

2017-2018 primary policy § II.

See Checkrite Ltd., Inc. v. Illinois Nat. Ins. Co., 95 F. Supp. 2d 180, 190 (S.D.N.Y. 2000) (“The term “claim” as used in liability insurance policies has generally been found by courts to be an unambiguous term that means a demand by a third party against the insured for money damages or other relief owed.”).

See id. at 191 (“[S]ome but not all claims are judicial proceedings and some but not all judicial proceedings are claims. These terms should not be conflated.”).

See generally Belin First Am. Compl. Id. - 33 - a “relevant nonparty.”183 As such, there was no covered claim within the contracted coverage period. Accordingly, the Belin amended complaint cannot be covered— the original complaint didn’t contain a triggering claim, so there is nothing to relate back to that could gain coverage.184 To permit coverage to extend to the amended complaint that was filed after the coverage period expired “would be to grant the insured more coverage than [it] bargained for and paid for.”185 Accordingly, the Belin action does not fall within the 2018-2019 policy period and does not give rise to a claim covered by the Policies.

2. The Belin action is not interrelated to any covered claim.

The Belin action could also be covered if it was interrelated to the 2017-2018 Actions or the Keippel claim. But it’s not.

The Belin action was filed by a class of consumers alleging they were tricked by Simple Health into thinking they were buying comprehensive medical insurance from Benefytt when they really weren’t.186 While the Keippel plaintiffs brought

Id. ¶¶ 16-24.

It would seem that under New York law an amended complaint is considered a “new claim” when there is “a new and distinct group of claimants”. See Checkrite, 95 F. Supp. 2d at 190. But it’s a bit murkier whether an amended complaint that adds a new defendant should be also considered a “new claim” or if it should be related back to an earlier pleading or proceeding for insurance purposes. No matter. The plain language of the at-issue coverage provision alone is sufficient for the Court to find extension of coverage to the amended complaint impermissible. As is the inadequate Notice of Circumstance explained later.

Zunenshine, 1998 WL 483475, at *5 (citation omitted).

Belin Third Am. Compl. ¶¶ 242-257.

- 34 - claims for violation of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5.187 The 2017-2018 Actions, on the other hand, were securities class actions asserting Benefytt omitted material information and made false statements to investors regarding a Florida TPA Application.

The Belin action isn’t interrelated to the Keippel action because the ties between the two are just too feeble. Even though Benefytt’s misconduct related to Simple Health is central to all the claims, there are insufficient factual overlaps between the consumers’ and shareholders’ claims. The alleged wrongful acts are separated by multiple years and involve different transactions—e.g. insurance policy sales as compared to shareholder disclosures.188 There must be a reasonable limit when interpreting the term “any” as used in the interrelated coverage provision.189 To say the ties between the actions from 2015 and actions from 2017 to 2019 with different classes and causes of action are a “series of casually or logically connected facts”—as would be required here—is to say too much.190 The various actions’ pleadings instead read as general allegations of wrongdoing over a long period of time that indeed share similarities or even complement each other. But that’s it. The

Keippel Compl. ¶¶ 242-257; Keippel also, in part, alleged that Benefytt conspired with Simple Health to sell Benefytt products to customers who falsely believed they were buying comprehensive health insurance.

Id. ¶ 228, 49-69, 70-114; First Belin Compl. ¶¶ 172, 261.

See Weaver, 2014 WL 5500667, at *12.

See id. - 35 - Court cannot say these bestrewn claims rise to the required level of interrelatedness.

The Belin action also isn’t interrelated to the Daniels, DiFalco, or Rector actions. There just aren’t the “numerous logically connected facts and circumstances” between the Belin action and the 2017-2018 Actions to support the necessary interrelatedness.191 Lloyd’s says the Belin action is interrelated with the 2017-2018 Actions “[f]or the same reasons” as the Keippel claim.192 But as already mentioned, the Keippel claim itself isn’t interrelated with the 2017-2018 Actions.

So, to the extent Lloyd’s relies on Keippel as the needed bridge to the 2017-2018 Actions, it fails.

Independently, while the Belin action and the 2017-2018 Actions both assert wrongful conduct by Benefytt, their relation to each other is also solely based on general allegations of wrongdoing. While all the claims may have a single overarching bad actor, the relationship between the schemes at issue “are tenuous at best.”193 Accordingly, the Belin action is not interrelated with any covered claim.

3. The Belin action is not a covered 2018-2019 policy period claim via any Notice of Circumstances.

For coverage, there must be a proper reporting of the claim or possibility of

See Seneca Ins. Co., 133 F. App’x at 772 (noting the use of this construction by the district court when affirming dismissal of coverage complaint because claims were interrelated).

Lloyd’s MSJ at 35.

Glascoff, 2014 WL 1876984, at *6.

- 36 - the claim to the Insurers. This is because “[t]he nature of a claims-made policy is that it protects the insured for claims made against it and reported to the insurer within the policy period or, if applicable, the extended reporting period.”194 In Benefytt’s view, any Notice of Circumstances offered for the FTC and Spiewak actions also gave notice for the Belin action.195 It reasons that under the operable provision196 “the Belin Claim is deemed made and noticed in December 2018 because it arose out [sic] the situation involving the allegations against and involving Simple Health.”197 Benefytt also suggests that the 2018 Notice of Circumstances198 is sufficient to have the action covered by the 2018-2019 period.199 It isn’t.

The notification provision requires the notice to discuss facts that “could reasonably give rise to” a later claim.200 Thus, the proper inquiry is not if the Belin action alleged certain facts also present in the earlier notice, but whether the 2018 Notice of Circumstances discussed facts that later gave rise to the Belin claim. It didn’t.

Checkrite, 95 F. Supp. 2d at 191.

Benefytt’s Belin MSJ at 26-27.

E.g. 2018-2019 primary policy § VI.C.

Benefytt’s Belin MSJ at 28.

Belin Jones Aff. Ex. 3.

Benefytt’s Belin MSJ at 26.

2018-2019 primary policy § VI.C.

- 37 - The 2018 Notice of Circumstances only provided the FTC and Spiewak complaints. The FTC action makes no allegations against Benefytt.201 And the Spiewak action alleges Benefytt breached a managing general agent commission agreement.202 Neither of these related to Belin—a consumer class action alleging Benefytt orchestrated a bait-and-switch regarding certain Benefytt products. So, the FTC and Spiewak complaints gives no adequate notice of facts relevant to or incorporated in the Belin action.

What is more, the 2018 Notice of Circumstances didn’t state that Benefytt expected some future litigation.203 So it can’t be interpreted as giving notice of the Belin action as a possible future consequence, as was required by the Policies.204 In so finding, the Court is mindful to stay “consistent with the rule that exclusion clauses should be construed narrowly and in favor of coverage. Interpreting [such] any other way would stretch the terms of the policy beyond reasonableness.”205 As a last breath effort on notice, Benefytt hints that the Belin Notice of Circumstances itself is sufficient—even though it was filed late—because “[t]he

Belin Jones Aff. Ex. 3, at ENDUR007835-40 (FTC Compl. ¶¶ 55-65).

Id. at ENDUR007847-49 (Spiewak Compl. ¶¶ 30-43).

See generally 2018-2019 primary policy § VI.C.

See 2018-2019 primary policy § VI.C.2(b) (requiring Benefytt to provide notice of “the consequences which have resulted or may result,” from the circumstances noticed in a Notice of Circumstances).

Checkrite, 95 F. Supp. 2d at 196.

- 38 - record is devoid of any indication of prejudice to [the Insurers].”206 But there is no prejudice requirement in the excess policies, such is found only in the primary policy.207 And even that prejudice requirement only prevents Insurers from denying coverage “based solely upon late notice.”208 That doesn’t save Benefytt’s Belin claim here because the denial certainly isn’t “based solely upon late notice.” At bottom, the Belin action wasn’t made during the 2018-2019 policy period and no alternative coverage theory Benefytt has posited saves it.

Given all this, Lloyd’s (and any other insurer’s) attempt to invoke the professional services exclusion is moot, as are its reimbursement, recoupment, and unjust enrichment counterclaims.

V. CONCLUSION To sum up: (1) the Keippel action falls within the 2018-2019 policy period and is properly covered under that Policy; (2) the Belin action falls outside both the 2017-2018 and 2018-2019 policy periods and isn’t interrelated with any covered claim; and (3) as such, Lloyd’s reimbursement, recoupment, and unjust enrichment

Benefytt’s Belin MSJ at 28.

See 2017-2018 primary policy at 57 (“Amended ‘Notification’ Clause”) (“In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause VI.

NOTIFICATION A. is amended by the addition of: In the event that the Insureds fail to provide notice of a Claim or Investigation in accordance with the above, Underwriters shall not be entitled to deny coverage for the Claim or Investigation based solely upon late notice, unless Underwriters can establish that their interests were materially prejudiced by reason of such late notice.”).

Amended ‘Notification’ Clause.

- 39 - counterclaims are moot.

Accordingly, - Benefytt’s Partial Motion for Summary Judgment regarding the Keippel action and Lloyd’s counterclaims (D.I. 246) is GRANTED; - Benefytt’s Partial Motion for Summary Judgment regarding the Belin action (D.I. 249) is DENIED; - XL Specialty Insurance Company’s Motion for Summary Judgment (D.I. 240) is GRANTED; - Endurance’s Motion for Summary Judgment (D.I. 244) is GRANTED; - Executive Risk’s Motion for Summary Judgment (D.I. 243) is GRANTED; and - Lloyd’s Motion for Summary Judgment (D.I. 245) is GRANTED in part, DENIED in part.

IT IS SO ORDERED.

/s/ Paul R. Wallace Paul R. Wallace, Judge

- 40 -