GTT&C client Virginia Mason Medical Center sued its D&O insurer, Chubb company Executive Risk Indemnity, Inc., in a coverage dispute arising out of a consumer class action asserted against Virginia Mason.  The underlying plaintiffs claimed that Virginia Mason had violated the Washington Consumer Protection Act in connection with “facility charges” assessed to patients at certain Virginia Mason hospital-based facilities.  The facility charges were lawful and, indeed, expressly permitted by federal law, but the class action claimed that Virginia Mason inadequately disclosed the existence of the charges and thereby deprived certain patients of the option to avoid the charges by seeking care at another Virginia Mason facility.  Virginia Mason settled the class action and sought coverage from Chubb for its defense costs and settlement liability.

Chubb denied coverage, claiming, among other things, that the settlement payments were excluded from coverage because they constituted disgorgement of funds to which Virginia Mason was never entitled.  Virginia Mason sued Chubb in the U.S. District Court for the Western District of Washington.  Judge Pechman ruled in favor of Virginia Mason and entered a $1.8 million judgment against Chubb.  The insurer appealed.

On May 26, 2009, a panel of the Ninth Circuit affirmed the judgment in all respects.  A copy of the unpublished opinion may be viewed here.  Virginia Mason was represented by GTT&C partners Franklin D. Cordell and Mark A. Wilner.