            IN THE SUPREME COURT OF THE STATE OF DELAWARE

THE FIRST HEALTH                              §
SETTLEMENT CLASS,                             §      No. 498, 2013
                                              §
               Defendant Below-               §      Court Below: Superior Court of the
               Appellant,                     §      State of Delaware in and for New
                                              §      Castle County
       v.                                     §
                                              §      C.A. No. 09C-09-027
CHARTIS SPECIALITY                            §
INSURANCE COMPANY,                            §
                                              §
               Plaintiff Below-               §
               Appellee.                      §


                               Submitted: December 3, 2014
                                 Decided: March 6, 2015

Before STRINE, Chief Justice, HOLLAND, VALIHURA, and VAUGHN,
Justices, BOUCHARD,* Chancellor, constituting the Court en Banc.

Upon appeal from the Superior Court. REVERSED and REMANDED.


Kevin G. Abrams, Esquire, John M. Seaman, Esquire, (argued), Steve C. Hough,
Esquire, Abrams and Bayliss LLP, Wilmington, Delaware; Somer G. Brown, Esquire,
(argued), Cox, Cox, Filo, Camel & Wilson LLC, Lake Charles, Louisiana, for
Appellant.

Timothy Jay Houseal, Esquire, (argued), Jennifer M. Kinkus, Esquire, William E.
Gamgort, Esquire, Young Conaway Stargatt & Taylor LLP, Wilmington, Delaware;
Matthew J. Fink, Esquire, (argued),Charles A. Hafner, Esquire, Nicholaides Fink
Thorpe Michaelides Sullivan LLP, Chicago, Illinois, for Appellee.

__________________
* Sitting by designation under Del. Const. art. IV, § 12.
VAUGHN, Justice, for the Majority:

         Defendant Below/Appellant, The First Health Settlement Class (“The First

Health Class”), appeals from an order of the Superior Court granting partial summary

judgment in favor of Plaintiff Below/Appellee, Chartis Specialty Insurance Company

(“Chartis”). The case arises from a class action filed against First Health Group

Corporation (“First Health”) and others in the State of Louisiana. In that action,

medical service providers alleged that First Health violated notice provisions

contained in a Louisiana statute known as the Preferred Provider Organizations Act.1

The plaintiff class obtained a judgment against First Health. First Health then

negotiated and paid a settlement of the judgment.

         First Health was insured under an errors and omissions insurance policy issued

by Chartis. The policy had a number of exclusions, one of which was an exclusion

for “penalties.” The issue in this case is whether the amount First Health paid to

settle the Louisiana litigation was a “penalty,” and, therefore, not a covered loss

under the insurance policy. The Superior Court concluded that the amount paid was

a “penalty.” We have concluded that it was not, and that the policy’s exclusion for

“penalties” does not apply.




1
    The act is also known as the “Any Willing Provider Act.”

                                                 2
                I. FACTUAL AND PROCEDURAL HISTORY

      First Health is a provider of medical service plans, including Preferred Provider

Organization (“PPO”) networks.        Under the PPO network, First Health had

agreements with medical providers in Louisiana in which the medical providers

agreed to discount rates regarding certain medical services. First Health also entered

into agreements with group workers’ compensation payers, such as employers, who

utilized First Health’s discounted PPO rates when paying for workers’ compensation

services.

      By statute, the State of Louisiana has approved PPO networks and their

discounted rates, but has imposed certain statutory requirements. One requirement

is that the PPO give notice to a medical provider when a discount is to be applied.

The notice provisions of the Louisiana statute can be satisfied in either one of two

ways. One way is by issuing a benefit card to a patient that the patient can then

present to the medical provider. The other way is by issuing a written notice to the

medical provider that a certain group purchaser is a PPO participant.

      Failure to comply with the notice requirements subjects a PPO to financial

consequences under La. R.S. § 40:2203.1(G), which reads as follows:

             Failure to comply with the [notice provisions] of this
             Section shall subject a group purchaser to damages payable
             to the provider of double the fair market value of the

                                          3
                 medical services provided, but in no event less than the
                 greater of fifty dollars per day of noncompliance or two
                 thousand dollars, together with attorney fees to be
                 determined by the court.2

          In April 2004, a group of Louisiana health care providers brought a class action

against First Health and others in Louisiana state court alleging that First Health had

failed to comply with the statutory notice provisions. The action was captioned

Gunderson v. F.A. Richard & Associates, Inc.3 (the “Gunderson Litigation”). The

plaintiff class sought damages from First Health under La. R.S. § 40:2203.1(G). As

mentioned, the plaintiffs were successful in obtaining a judgment against First Health.

          First Health settled the judgment for the amount of $150,500,000, which

included attorneys’ fees paid to plaintiff class counsel. As part of the settlement, First

Health assigned to the plaintiff class its rights under the insurance policy issued by

Chartis. The class is now known as The First Health Settlement Class, the Appellant

in the instant case.

          On September 9, 2009, Executive Risk Specialty Insurance Company

(“Executive Risk”), First Health’s primary insurer, filed an action against First Health

in the Delaware Superior Court seeking, among other things, declaratory relief that

any amount paid by First Health to the plaintiff class in the Gunderson Litigation was


2
    La. R.S. § 40:2203.1(G).
3
    No. 2004-2417 (14th Jud. Dist. Ct. Parish of Calcasieu).

                                                  4
a penalty under La. R.S. § 40:2203.1(G) and not a covered loss under an insurance

policy it had issued to First Health. The Executive Risk policy provided that

penalties were excluded from coverage. Executive Risk named as defendants First

Health’s excess insurers, including Chartis. The First Health Class was subsequently

added as a defendant.4

       The policy that Chartis issued to First Health also excludes penalties. It

provides, in pertinent part, as follows:

               “Loss” means Defense Expenses and any monetary amount
               which an Insured is legally obligated to pay as a result of
               a Claim. Loss shall include, up to the amount listed in
               ITEM 3(b) of the Declarations (which sum shall be part of
               and not in addition to the Limit of Liability stated in ITEM
               3(a) of the Declarations), any fines assessed, penalties
               imposed, or punitive, exemplary or multiplied damages
               awarded in Claims for Antitrust Activity, but only if such
               fines, penalties or punitive, exemplary or multiplied
               damages are insurable under applicable law. This
               paragraph shall be construed under the applicable law most
               favorable to the insurability of such fines, penalties, and
               punitive, exemplary or multiplied damages. Loss shall not
               include:

               (1) Except as expressly set forth above, fines, penalties,
               taxes or multiplied damages . . . .5

       While the policy initially excluded punitive or exemplary damages from the


4
  Executive Risk and the other insurers, except Chartis, have entered into settlement agreements with
The First Health Class.
5
  Appellant’s Op. Br. App. at A0366.

                                                 5
definition of Loss, an endorsement amended the Loss definition to specifically

include coverage for punitive and exemplary damages.

      The First Health Class and Chartis filed cross motions for partial summary

judgment. On May 7, 2013, the Superior Court issued its opinion finding that the

settlement paid by First Health in the Gunderson Litigation was a penalty. It

therefore denied The First Health Class’ motion and granted Chartis’ motion.

      When the Superior Court issued its May 7, 2013, opinion, other litigation was

occurring in the State of Louisiana in the case of George Raymond Williams M.D. et

al., v. SIF Consultants of Louisiana, Inc., et al. (the “Williams Litigation”).     The

Williams Litigation, like the class action brought in the Gunderson Litigation, was

a class action in which medical providers alleged that a PPO network failed to comply

with the notice provisions of Louisiana’s Preferred Provider Organizations Act. The

plaintiff class sought damages under La. R.S. § 40:2203.1(G).

      Executive Risk, the same insurer that filed this declaratory judgment action,

was an insurer of a defendant in that case, CorVel Corporation (“CorVel”).

Executive Risk was made a party to the Williams Litigation under La. R.S. § 22:1269,

which provides that under certain conditions an “injured person . . . shall have a right

of direct action against the insurer within the terms and limits of the policy; and, such




                                           6
action may be brought against the insurer alone.”6 The Executive Risk policy

involved in the Williams Litigation also excluded penalties from covered losses.

          On July 23, 2011, CorVel agreed to settle the Williams Litigation. Thereafter,

the plaintiff class in Williams filed a motion for partial judgment against Executive

Risk contending that damages under La. R.S. § 40:2203.1(G) were statutory damages

and not penalties. Executive Risk contended, as Chartis does here, that the damages

under La. R.S. § 40:2203.1(G) were penalties. Because the insurance policy

excluded penalties from the definition of Loss, Executive Risk argued that the

settlement amount paid by CorVel was not a covered loss.

          On July 29, 2013, the Louisiana trial court issued an opinion in the Williams

Litigation granting the plaintiff class’ motion for partial summary judgment and

holding that damages under La. R.S. § 40:2203.1(G) are statutory damages, not

penalties.7 Thus, according to the Louisiana trial court, the insurance policy issued

to CorVel covered the amount paid to the plaintiff class in the Williams Litigation.

          Executive Risk appealed the trial court’s decision to the State of Louisiana

Court of Appeals for the Third Circuit. The appellate court affirmed the trial court’s

judgment. It also found that damages under La. R.S. § 40:2203.1(G) are statutory



6
    La. R.S. § 22:1269.
7
    Williams v. SIF Consultants of Louisiana, Inc., 2013 WL 7330225 (La. Dist. Ct. Jul. 29, 2013).

                                                  7
damages, or damages punitive in nature, but not penalties.8 Based on these findings,

the appellate court concluded that the settlement paid by CorVel was a covered loss

under the policy issued by Executive Risk. Executive Risk subsequently settled, and

no appeal was taken to the Louisiana Supreme Court from the decision of the

appellate court.

       On August 23, 2013, the Superior Court entered a final order and judgment.

On September 3, 2013, The First Health Class filed a Motion to Alter or Amend the

Judgment under Superior Court Rule 59(d), or alternatively, for Relief from the

Judgment under Rule 60(b). On September 20, 2013, while the motion was still

pending before the Superior Court, The First Health Class filed a notice of appeal in

this Court from the May 7, 2013, opinion and August 23, 2013, final order of the

Superior Court.

       The Superior Court denied The First Health Class’ motions on September 25,

2013. The First Health Class filed an amended notice of appeal on October 3, 2013.

On December 10, 2013, Chartis filed a Motion to Dismiss the appeal on the ground

that The First Health Class failed to file a timely notice of appeal. On January 6,

2014, this Court denied the motion without prejudice.



8
 Williams v. SIF Consultants of Louisiana, Inc., 133 So.3d 707 (La. Ct. App. 2014), reh’g denied
(Apr. 9, 2014).

                                               8
                                     II. DISCUSSION

       Chartis has renewed its Motion to Dismiss. It relies upon an order issued by

this Court in McElroy v. Shell Petroleum, Inc.9 In McElroy, the Court of Chancery

entered an order on June 18, 1992, and McElroy filed a timely motion for reargument.

On July 15, 1992, while the motion for reargument was still pending in the Court of

Chancery, McElroy filed a notice of appeal in this Court. On July 23, 1992, this

Court directed McElroy to file an amended notice of appeal to comply with Rule 7

and Official Form A. On July 29, 1992, McElroy filed a first amended notice of

appeal. At that time, the motion for reargument was still pending in the Court of

Chancery. On August 19, 1992, after the Court of Chancery denied the motion for

reargument and its June 18, 1992, order had become final, McElroy filed a second

amended notice of appeal. This Court concluded in McElroy that the first notice of

appeal was filed prematurely because the motion for reargument was still pending in

the Court of Chancery, that both the first amended notice of appeal and the second

amended notice of appeal related back to the original, prematurely filed notice of

appeal, and that no effective notice of appeal had been filed. Accordingly, we

dismissed the appeal.10


9
  1992 WL 279112 (Del. Sep. 2, 1992).
10
   On the same day that McElroy filed his second amended notice of appeal, he filed a new notice
of appeal, which was given a new appeal number. He was able to proceed with his appeal under the

                                               9
       We are not persuaded that McElroy should be followed here. In Tomasetti v.

Wilmington Sav. Fund Soc’y, this Court held that a timely filed Motion for New Trial

or a Motion for Reargument in a civil case suspends the finality of the trial court

judgment and tolls the time for filing an appeal.11 Under Tomasetti, a notice of appeal

filed in this Court before such post-trial motions are decided in the trial court fails to

confer jurisdiction upon this Court and is a nullity. A notice of appeal filed in a

timely manner after post-trial motions have been decided in the trial court is the filing

that confers jurisdiction in this Court, and it cannot relate back to an ineffective

notice of appeal that failed to confer jurisdiction upon the Court. The same rule

applies to a Motion to Alter or Amend the Judgment filed under Superior Court Civil

Rule 59(d). We find that the notice of appeal filed on October 3, 2013, after the

Superior Court denied The First Health Class’ Motion to Alter or Amend the

Judgment, was timely and effective. Accordingly, we will consider the merits of the

Appellant’s claim here.

       We review a grant of summary judgment de novo.12 Interpretation of a statute

is a question of law, which we also review de novo.13



new number.
11
   672 A.2d 61 (Del. 1996).
12
   Kelty v. State Farm Mut. Auto. Ins. Co., 73 A.3d 926, 929 (Del. 2013) (citing E. Sav. Bank, FSB
v. CACH, LLC, 55 A.3d 344, 347 (Del. 2012)).
13
    Id.

                                               10
       “Comity permits one state to give effect to the laws of a sister state, not out of

obligation, but out of respect and deference.”14                  We have acknowledged that

“important and novel issues of other sovereigns are best determined by their courts

where practicable.”15 Where a foreign statute has been interpreted by courts of the

state of its origin, such interpretation should be followed in other states where the

statute is applied.16 Pursuant to the doctrine of comity, the courts of a sister state

should adopt the decision of the highest tribunal of the enacting state concerning

construction of the statute.17

       The First Health Class argues that, in accordance with the doctrine of comity,

we should show deference to the Court of Appeals of Louisiana, and adopt its

interpretation of La. R.S. § 40:2203.1(G). We agree. The Louisiana appellate court

considered the same Louisiana statute and analyzed almost identical insurance policy


14
    Columbia Cas. Co. v. Playtex FP, Inc., 584 A.2d 1214 (Del. 1991) (citing 16 Am. Jur. 2d,
Conflict of Laws § 10, at 28 (1979)).
15
   Martinez v. E.I. DuPont de Nemours and Co., Inc., 86 A.3d 1102, 1110 (Del. 2014).
16
   2 Sutherland Statutory Construction § 37:3 (7th ed.) (internal citations omitted). See, e.g., Kahn
v. Pony Express Courier Corp., 20 P.3d 837, 849 (Or. Ct. App. 2001) (examining decisions of the
Montana appellate courts interpreting and applying a Montana statute to determine its intent);
Peterson v. Ely, 569 P.2d 1059 (Or. 1977) (construing Washington statute in accordance with
decisions of Washington Supreme Court); People ex rel. Shults v. Lombard, 398 N.Y.S.2d 932 (Co.
Ct. 1977) (“The decision of the foreign court of last resort is controlling on the question to be
decided by a court of this State, and this is especially true when a question arises with respect to the
statute and constitution of the foreign state.”) (internal citations omitted); King v. Klemp, 57 A.2d
530, 533 (N.J. Ch. 1947) (“[W]here the construction of a foreign statute is involved, our courts will
accept as controlling the interpretation placed thereon by the courts of that state.”).
17
   See 2 Sutherland Statutory Construction § 37:3 (7th ed.) (internal citations omitted).

                                                  11
language as that involved in this case. Because the Louisiana appellate court in the

Williams Litigation is the highest Louisiana appellate court to construe La. R.S. §

40:2203.1(G), we adopt its reasonable interpretation as our own. We find that La.

R.S. § 40:2203.1(G) provides for statutory damages, not penalties. Thus, we find that

the amount that First Health paid to settle the Gunderson Litigation, including

attorneys’ fees, is not excluded from the definition of “Loss” by the provision that

excludes “penalties.”

       In our view, the Dissent is based upon several flawed premises. The Dissent

maintains that the Superior Court rendered its decision well before the Louisiana trial

court issued its ruling. In other words, it takes to task the District Court of Louisiana

for the 27th Judicial District for not deferring to the Delaware Superior Court. The

fact is that the litigation in Louisiana had been in progress for many years prior to the

filing of the Delaware suit.18 The center of this litigation has been in Louisiana and

the dispute underlying the Delaware declaratory action arises out of the Louisiana

Litigation.

18
   As mentioned, the Gunderson Litigation was brought against First Health in 2004. In addition,
in 2004 and 2005, CorVel and Lake Charles Memorial Hosital (“LCMH”) were embroiled in legal
action in Louisiana. On December 22, 2006, LCMH instituted a putative class arbitration against
CorVel (Sw. La. Hosp. Ass’n. d/b/a Lake Charles Mem’l Hosp. v. CorVel). LCMH claimed that
CorVel violated Louisiana law, and sought coverage from an insurance policy issued by Homeland
Insurance Company of New York (“Homeland”), which also contained an exclusion for penalties.
On September 30, 2009, the Williams Litigation was filed. The lawsuit claimed the same violation
of Louisiana law as claimed by LCMH against CorVel (and against Homeland).

                                              12
       As early as 2007, the Louisiana trial court in the Gunderson Litigation issued

a ruling from the bench that had negative implications for insurance carriers. The

trial court stated the following:

              This Court notes from a very basic standpoint that [the
              Louisiana statute § 40:2203.1(G)] makes no mention of
              fines or penalties . . . I believe from a very basic standpoint
              that damages are covered by the Columbia policy. No one
              is arguing that point.

              Now, as to whether or not the quote, “damages” being
              sought by the plaintiffs are in fact civil fines and penalties
              this Court is of the position that they are not.19

       Moreover, there is very little connection to the State of Delaware in this

litigation. The only nexus with the State of Delaware is First Health’s situs of

incorporation. The First Health Class is a group of Louisiana medical providers.

First Health’s principal place of business is Illinois. Chartis is an Illinois corporation,

with its principal place of business in New York. Executive Risk is a Connecticut

corporation, with its principal place of business in New Jersey.

       The connection this litigation has with the State of Louisiana is much stronger.

This litigation first began in 2004 in the Gunderson Litigation. Another class action

began about a decade ago when Lake Charles Memorial Hospital filed suit against


19
  Gunderson v. F.A. Richard & Associates, Inc., No. 2004-2417 (14th Jud. Dist. Ct., Parish of
Calcasieu, La. Jul. 20, 2007), aff’d, 44 So.3d 779 (La. App. 2010); Appellant’s Op. Br. App. at
A987.

                                              13
CorVel in Louisiana.20 The cases alleged a violation of Louisiana law, which by its

own terms has no application outside that state’s boundaries.21 Moreover, the parties

agree that there is no difference between Delaware and Louisiana regarding

construing contracts. For example, they agree that all potentially applicable state

laws provide that coverage provisions should be construed broadly and exclusions

should be construed narrowly.

       The Dissent maintains that Delaware law applies notwithstanding the absence

of a choice of law provision in the insurance policy. While the parties may have

agreed for purposes of this appeal that Delaware law applies to the construction of the

policy, they disagree on which state’s law controls the central question of how to

characterize the judgment obtained in the Gunderson Litigation.

       The Appellants contend that the Louisiana statute controls how the judgment

is characterized. The Delaware Superior Court agreed as evidenced by its statement

that “while the Court will apply Delaware law to interpret the insurance contracts,



20
    See CorVel Corp. v. Sw. La. Hosp. Ass’n, 2007 WL 594904 (W.D. La. Feb. 21, 2007) (ordering
the parties to enter arbitration for statutory claims under La. R.S. § 40:2203.1, and discussing the
filing of Sw. La. Hosp. Ass’n. d/b/a Lake Charles Mem’l Hosp. v. CorVel).
21
    La. R.S. § 40:2203.1(A) (“Except as otherwise provided in this Subsection, the requirements of
this Section shall apply to all preferred provider organization agreements that are applicable to
medical services rendered in this state and to group purchasers as defined in this Part. The provisions
of this Section shall not apply to a group purchaser when providing health benefits through its own
network or direct provider agreements or to such agreements of a group purchaser.”).


                                                  14
Louisiana law will be applied regarding the penalty issue, as this Court must examine

a Louisiana Statute.”22       However, the Superior Court erred when it then applied

common law principles in answering this question, rather than Louisiana’s civil law

approach that was foreshadowed by the Gunderson trial court’s bench ruling. Under

civil law, priority is given to statutes and codes over common law jurisprudence.23

“Civil law codes provide the core of the law-general principles[, which] are

systematically and exhaustively exposed in codes[,] and particular statutes complete

them.”24 Quite simply, in Louisiana, if the statute does not characterize the damage

award entered as a “penalty,” then it is not a “penalty” under Louisiana law.25

       The Dissent refuses to accept the Louisiana court’s construction of its own

statute. It rejects Louisiana’s civil law approach as tautological, and instead, applies

common law interpretation to the Louisiana statute to determine whether damages

under La. R.S. § 40:2203.1(G) constitute “penalties.” We submit that we should defer

to the Louisiana court’s civil law approach in the construction of its own statute.

       Finally, we acknowledge that the Superior Court did not have the benefit of the


22
   Homeland Ins. Co. v. CorVel Corp., 2013 WL 3937022, at *10 (Del. Super. Jun. 13, 2013).
23
   See generally William Tetley, Mixed Jurisdictions: Common Law v. Civil Law (Codified and
Uncodified), 60 La. L. Rev. 677, 701-05 (2000).
24
   Id. at 703 (internal citations omitted).
25
   See Williams v. SIF Consultants of Louisiana, Inc., 133 So.3d 707, 714 (La. Ct. App. 2014) (“The
language of La. R.S. § 40:2203.01 denotes that a violator is subject to pay ‘damages’ and includes
no language regarding penalties.”).

                                                15
Louisiana trial and appellate court’s decisions in the Williams Litigation when it

rendered its May 7, 2013, opinion and order. But given our de novo review, we will

exercise comity in favor of our sister state, Louisiana, and, accordingly, hold that

Louisiana’s interpretation of its own statute is the correct interpretation.

                                III. CONCLUSION

      Accordingly, the matter is REVERSED and REMANDED for further

proceedings consistent with this Opinion.




                                          16
STRINE, Chief Justice, dissenting, with BOUCHARD, Chancellor, joining:

       We share the Majority Opinion’s desire to respect principles of comity and to

avoid conflicting rulings. We respectfully dissent, however, from the Majority

Opinion’s view that by reversing the Superior Court’s careful determination of the

insurance coverage issues properly before it, our Court would be failing to accord

comity to our esteemed judicial colleagues in Louisiana. The record is clear that the

Superior Court rendered its decision on coverage well before the Louisiana trial court

issued its ruling on that same issue.26 And unlike the Louisiana Court or the Majority

Opinion, the Superior Court recognized that the proper analysis to determine

coverage under a contract starts with the language of the contract itself. This case

thus does not depend principally on the interpretation of a Louisiana statute, but

instead turns on the meaning of a contract that the parties to this appeal do not dispute

should be interpreted based on Delaware contract law principles.

       The issues at stake in this case and its companion, CorVel v. Homeland, make

little sense without understanding the full context behind this appeal. The underlying

claims for which insurance coverage was sought arise of the so-called PPO industry.


26
   Indeed, the Louisiana trial court’s ruling referenced the earlier Delaware decision. Compare
Executive Risk Specialty Ins. Co. v. First Health Group Corp., 2013 WL 1908664 (Del. Super. May
7, 2013) [hereinafter Superior Court Opinion], and Homeland Ins. Co. and Executive Risk Specialty
Ins. Co. v. CorVel Corp., 2013 WL 3937022 (Del. Super. June 13, 2013), with Williams v. SIF
Consultants of Louisiana, Inc., 2013 WL 7330225 (La. Dist. Ct. July 29, 2013).

                                               17
A PPO, short for Preferred Provider Organization, essentially acts as an intermediary

between health insurance companies and medical providers, including hospitals and

individual doctors. The PPO creates a network of providers who agree to receive a

reduced payment for treating patients covered by the insurers.

          This case and CorVel’s arose from litigation brought by multiple groups of

medical providers in Louisiana alleging that a number of PPO owners and operators,

including First Health and CorVel, were violating La. R.S. § 40:2203.1., the “PPO

Act,” by improperly discounting payments for medical services without providing

adequate notice to providers. The Act requires that before PPOs can discount

payments to health care providers, either the patient must present a benefit card

identifying the PPO at the time of service or the provider must agree in writing to

receive the discounted rate.27 The provider plaintiffs alleged that the PPOs had failed

to provide the required notice for services provided to workers’ compensation

patients. The plaintiffs sought the remedies established in Section G of the Act:

“damages payable to the provider of double the fair market value of the medical

services provided, but in no event less than the greater of fifty dollars per day of

noncompliance or two thousand dollars, together with attorney fees to be determined



27
     La. R.S. § 40:2203.1(B)-(C).


                                          18
by the court.”28

       The cases now before us are one step removed from those underlying claims.

They focus on a different but related issue; namely, whether the PPOs’ insurers owe

the PPOs reimbursement for the medical providers’ claims.

       A class of medical service providers brought suit against a group of PPO

owners and operators, including First Health, in 2004.29 First Health eventually

settled with that plaintiff class (the “Settlement Class”) for $150.5 million and an

assignment of its insurance rights.30 That is, the PPO defendant paid money and then

gave the medical provider plaintiffs the right to go directly against their insurers as

an assignee. As a result, First Health is no longer involved in this litigation.

       Separately, CorVel faced legal action for allegedly discounting payments in

violation of the PPO Act from two sets of providers. First, Lake Charles Memorial

Hospital brought a class arbitration against CorVel in 2006. While that case was

pending, another plaintiff, George Raymond Williams, M.D., sued PPO owners and

operators on behalf of the same class of providers in a Louisiana trial court (the




28
   La. R.S. § 40:2203.1(G).
29
   Gunderson v. F.A. Richard & Assoc., 2005 WL 5468586 (La. Dist. Ct., June 23, 2005).
30
   See Gunderson v. F.A. Richard & Assoc., No. 2004-2417 (14th Jud. D.C., Parish of Calcasieu,
State of La., May 27, 2011).


                                             19
“Williams litigation”).31 CorVel was eventually added as a defendant to that suit.

Under Louisiana law, plaintiffs can pursue claims directly against insurers in certain

circumstances.32 Accordingly, CorVel’s two insurers, Homeland and Executive Risk,

were also named as defendants. Because the Lake Charles arbitration and the

Williams litigation involved identical claims on behalf of the same class of providers

(the “Provider Plaintiff Class”), CorVel was able to resolve both actions with a global

settlement for $9 million and an assignment of its insurance rights, which the

Louisiana District Court approved in November 2011. But both Homeland and

Executive Risk remained parties to the litigation. Put plainly, what CorVel did was

to pay $9 million and then unleash the Provider Plaintiff Class to proceed directly

against its insurers, Homeland and Executive Risk, as if the Provider Plaintiff Class

had the same contractual rights as an insured as CorVel.

       Both First Health and CorVel had multiple layers of insurance coverage under

Errors & Omissions policies at the time of the alleged wrongdoing that they contend

should cover the underlying claims. As noted, CorVel’s coverage was provided by

Executive Risk and Homeland; First Health’s by four different companies, including

31
   George Raymond Williams, MD. v. SIF Consultants of Louisiana, Inc., Dkt. No. 09-C-5244-C,
27th Judicial District Court, Parish of St. Landry.
32
   See La. R.S. § 22:1269(B)(1). That is, Louisiana law subjects an insurer who has no contractual
relationship with the tort plaintiffs to a lawsuit based on the insurance company’s policy with the tort
defendant.


                                                  20
Chartis. In September 2009, one of First Health’s insurers filed suit in the Delaware

Superior Court, seeking a declaration that it had no duty to indemnify First Health

under its policy for any claims related to the Louisiana litigation. After First Health

settled that litigation, in part by unleashing the plaintiff class to sue its insurers under

an assignment, the Settlement Class was added to the Delaware action against First

Health as the real party in interest.

       The Settlement Class moved for partial summary judgment on the issue of

coverage on April 3, 2012, contending that the underlying claims constituted

damages, which were covered under the contract. Chartis agreed that there were no

material issues of fact to be decided, and cross-moved for partial summary judgment,

contending that the claims were instead for penalties, which were excluded.33 The

Superior Court held a hearing on the motions on June 13, 2012, and issued an opinion

denying the Settlement Class’s motion and granting Chartis’ motion for partial

summary judgment on May 7, 2013. After conducting a thorough analysis of the

insurance contract at issue, the Superior Court found that the policies were

unambiguous, and the providers’ claims under the PPO Act constituted penalties, not




33
  At that point, Chartis was one of three defendant insurance companies, but the other two
eventually settled with the Settlement Class.


                                            21
damages, and were therefore not covered.34

       Litigation between CorVel and its insurers moved along a parallel track. In

January 2011, Homeland brought a claim in the Delaware Superior Court seeking a

declaration that the underlying claims for violations of the PPO Act were not

insurable losses under its policy because they were penalties, not damages. Executive

Risk was granted leave to intervene. Both insurers moved for partial summary

judgment, arguing that there were no material facts in dispute.35 Unlike in First

Health’s case, CorVel opposed both motions and argued that there were material facts

remaining to be decided. Focusing on the terms used by the PPO Act rather than the

language of the policies at issue, CorVel argued that under Louisiana law, the medical

providers’ claimed remedies were damages, not penalties. But CorVel claimed that,

at a minimum, the policy exclusions were ambiguous, and thus summary judgment

was inappropriate. The Superior Court heard arguments on January 31, 2013, and

issued its opinion granting the insurance companies’ motions on June 13. Just as in

First Health’s case, the court carefully analyzed the relevant insurance policies and

determined they were unambiguous in excluding the underlying claims as penalties.36

34
   See Superior Court Opinion.
35
   Executive Risk moved for summary judgment “on the issues of penalty, restitution, and contract”
on Aug. 29, 2012; Homeland moved for partial summary judgment in the same action on the same
day.
36
   Homeland Ins. Co. and Executive Risk Specialty Ins. Co. v. CorVel Corp., 2013 WL 3937022 (Del.
Super. June 13, 2013).

                                               22
The Settlement Class and CorVel then both appealed to this Court.

       Back in Louisiana, on May 24, 2014, after the Delaware Superior Court had

issued its decision in First Health’s case, but while the decision in CorVel’s case was

pending, the Provider Plaintiff Class moved for partial summary judgment against

Executive Risk in the Williams litigation. Although technically the Provider Plaintiff

Class is a separate party from CorVel, they share at least some of the same attorneys,

and there is no question that they have acted in coordination throughout this

litigation. Likewise, CorVel and the First Health Settlement Class have the same

attorneys and their briefing on appeal to this Court was substantively identical.

       After the Delaware Superior Court issued its June 13 decision in CorVel’s case,

granting summary judgment to Executive Risk and Homeland, the Louisiana trial

court in Williams held a hearing on the Provider Plaintiff Class’ motion on June 28.

Rather than defer to the Delaware Superior Court’s well-reasoned rulings on the

identical coverage issues, the Louisiana court granted the motion for summary

judgment on July 29, holding that under the PPO Act, the remedies available to

providers were damages, not penalties. The Louisiana Third Circuit Court of Appeal

affirmed the trial court’s ruling on February 26, 2014.37 At that point, Executive Risk


37
 Williams v. SIF Consultants of Louisiana, Inc., 133 So.3d 707 (La. Ct. App. 2014). The Louisiana
Appeals Court’s decision references the earlier Delaware ruling as evidence that the plaintiff class’
motion for partial summary judgment was ripe for adjudication, but does not otherwise address

                                                 23
settled with the Provider Plaintiff Class and was dismissed from CorVel’s appeal then

pending before this Court.

       Without quibbling in any way with the Louisiana Court’s description of the

Louisiana statute that apparently motivated its decision on the relevant coverage

issues, we still find it impossible to reverse the Delaware Superior Court in the appeal

pending before this Court. The reasons for that are simple: the Superior Court did not

ignore principles of comity or commit any error of contract law. As to the first

issue—comity—the Superior Court considered an issue properly put to it in advance

of any requested ruling on that issue by the Louisiana trial court. As to the second,

the Superior Court did not understand the Louisiana statute to operate any differently

than the Williams court did. But the Superior Court, unlike the Williams court or the

Majority Opinion, gave meaning and effect to the core contractual terms the parties

had agreed to.        The Superior Court’s legal conclusions on that score were

well-supported by respected authority,38 applying relevant principles of contract




Executive Risk’s claim that the Louisiana trial court’s ruling directly contradicted a previous
judgment that should have had preclusive effect. See id.
38
   See, e.g., Katz v. Oak Industries, 508 A.2d 873, 880 (Del. Ch. 1986) (quoting Corbin on Contracts
(Kaufman Supp. 1984), § 570) (“If the purpose of contract law is to enforce the reasonable
expectations of parties induced by promises, then at some point it becomes necessary for courts to
look to the substance rather than to the form of the agreement, and to hold that substance controls
over form.”).

                                                24
interpretation that are embraced by our courts and by most jurisdictions.39

       The Superior Court’s analysis was faithful to the text of La. R.S. § 40:2203.1,

but properly recognized that the label the Louisiana statute used did not determine

whether the substance of what the underlying medical provider claimants obtained

were “damages” within the terms of the insurance contract—which would be

covered—or “penalties”—which would not. The meaning of terms in insurance

policies like the one involved here have to govern the operation of companies doing

business in many jurisdictions. As a result, the claims that arise under various

jurisdictions must be analyzed to determine whether they fall within the insurance

contract’s coverage or within excluded categories. That requirement of proper

contract analysis does not change, regardless of whether the jurisdiction takes a

common law or civil law approach in interpreting its statutes.

       In conducting the appropriate contractual analysis, it is important that the

nature of the underlying claim and the law governing it be understood. But the

dispositive question of law is what the contractual terms mean, which here the parties

do not dispute is governed by Delaware, not Louisiana, law.40 In other words, the

39
   See, e.g., ConAgra Foods, Inc. v. Lexington Ins. Co., 21 A.3d 62, 68 (Del. 2011) (“This Court has
adopted traditional principles of contract interpretation.”).
40
   The insurance contract at issue did not include a choice of law clause. Although there were several
plausible contenders for which state’s law should govern the interpretation of the contract, the
Superior Court found that there was no conflict between any of the possible state laws and therefore
applied the law of the forum state, Delaware. The Settlement Class did not challenge that

                                                 25
issue is not what a state’s particular statute calls the remedy, or how that state’s courts

would interpret the statute; the question is whether the remedy afforded by the statute

in fact amounts to covered damages or excluded penalties as those terms are used in

the parties’ contract. In all controversies arising under the policy, regardless of the

location of the underlying claim, the contract definition governs. The Williams

decision ignored that reality and made no attempt to give any weight to the contract

or even consider the Superior Court’s careful ruling on that subject. In doing so, the

Louisiana Court failed to give comity to our state.41

       The Majority Opinion, like the Williams court’s decision, does not point to any

errors in the Superior Court’s analysis of the contract at issue. That is because, as the

Superior Court found, the plain language in the contract is unambiguous. First

Health’s policy with Chartis42 defines “loss” as:

            Defense Expenses and any monetary amount which an Insured
            is legally obligated to pay as a result of a Claim. Loss shall
            include . . . any punitive or exemplary damages where insurable


determination on appeal. We note that it would aid in our resolution of coverage issues, which are
frequently before this Court, if insurance contracts more routinely included choice of law provisions
so that the contracting parties themselves could decide upfront whose law should govern
41
   See, e.g., Majority Opinion at 9 (quoting Columbia Cas. Co. v. Playtex FP, Inc., 584 A.2d 1214
(Del. 1991) (“Comity permits one state to give effect to the laws of a sister state, not out of
obligation, but out of respect and deference.”).
42
   First Health’s policy with Chartis is an “excess” policy to its Errors & Omissions policy with
Executive Risk, and it therefore incorporates the same “terms, conditions, exclusions and
limitations” of the original, including the definition of “loss.” The quoted definition is therefore
from the Executive Risk policy. App. to First Health Opening Br. at 441.

                                                 26
            under applicable law and any fines assessed, penalties imposed,
            or punitive, exemplary or multiplied damages awarded in Claims
            for Antitrust Activity. . . . Loss shall not include: except as
            expressly set forth above, fines, penalties, taxes or multiplied
            damages.43

The policy thus makes clear that penalties are not covered, unless they are penalties

related to “Antitrust Activity.”44 The Settlement Class’ arguments about the proper

way to interpret insurance coverage or exclusions of coverage are therefore irrelevant;

the only relevant question is whether the underlying claims are for penalties.

       As the Superior Court properly determined, when the language in a contract is

“clear and unambiguous,” we should give it “its ordinary and usual meaning.”45

Black’s Law Dictionary46 defines penalty as “a sum of money exacted as punishment

for either a wrong to the state or a civil wrong (as distinguished from compensation

for the injured party’s loss). Though [usually] for crimes, penalties are also

sometimes imposed for civil wrongs.”47 A civil penalty is defined as a “fine assessed



43
   App. to First Health Opening Br. at 342 (original policy); 366 (Endorsement No. 7, amending
definition of “loss” to include punitive damages) (emphasis added).
44
   App. to First Health Opening Br. at 342 (original policy); 366 (Endorsement No. 7, amending
definition of “loss” to include punitive damages) (emphasis added).
45
   See O’Brien v. Progressive N. Ins. Co., 785 A.2d 281, 288 (Del. 2001).
46
   As the Superior Court noted, dictionaries are an appropriate aid in discerning ordinary meaning.
See Superior Court Opinion at *8 (citing Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d
728, 738 (Del. 2006)) (“It is well-settled in Delaware that, in ascertaining the meaning of words not
defined in a contract, courts ‘look to dictionaries for assistance in determining the plain meaning of
terms which are not defined in a contract.’”).
47
   Black’s Law Dictionary 562 (4th Pocket Ed. 2011).

                                                 27
for a violation of a statute or regulation.” A statutory penalty is a “penalty imposed

for a statutory violation; [especially], a penalty imposing automatic liability on a

wrongdoer for violation of a statute’s terms without reference to any actual damages

suffered.”48 By contrast, damages are defined as “money claimed by, or ordered to

be paid to, a person as compensation for loss or injury.”49 In the analogous contract

law context, this Court has defined “penalty” as “a sum . . . that serves as a

punishment for default, rather than a measure of compensation for its breach. In other

words, it is an agreement to pay a stipulated sum upon breach, irrespective of the

damage sustained.”50

       Here, it is not disputed that the remedy scheme under the PPO Act bears no

relationship to any actual damages suffered by the medical provider plaintiffs.

Indeed, the Act itself makes no effort to tie the remedy to actual losses; the “damages

payable to the provider” are “double the fair market value of the medical services

provided,”51 not, for example, double the sum of the improper discount. The statute

unambiguously imposes “automatic liability on a wrongdoer for violation of a

statute’s terms without reference to any actual damages suffered,”52 or the dictionary

48
   Id.
49
   Id. at 195.
50
   Delaware Bay Surgical Services, P.C. v. Swier, 900 A.2d 646, 650 (Del. 2006) (quoting S.H.
Deliveries v. TriState Courier & Carriage, 1997 WL 817883, at *2 (Del. May 21, 1997)).
51
   La. R.S. 40:2203.1(G) (emphasis added).
52
   Id.

                                             28
definition of a statutory penalty.

       In making its determination of coverage based on the contract at issue in this

case, the Superior Court was respectful of Louisiana authority, including the

Louisiana Supreme Court and the U.S. Court of Appeals for the Fifth Circuit,53 and

its understanding of the statute accords with how other courts in Louisiana have

viewed the remedies available.54 But contrary to the Majority Opinion, the Superior

Court did not rely on these cases to interpret the statute as a matter of common law;

rather, it cited Louisiana precedent as evidence to support its understanding of how

the statute operated and whether the statute imposed penalties within the meaning of

the term used in the parties’ contract. That is, what the Superior Court properly did

was to interpret an insurance contract’s language, using traditional tools of contract

interpretation. That was the judicial task the case assigned it. As the Superior Court

found by reference to established authority,55 the amount of damages set forth in the


53
   See, e.g., Superior Court Opinion at *10 (citing previous Louisiana decisions referring to the
remedies under the statute as penalties).
54
   See, e.g., Gunderson v. F.A. Richard & Assoc., 44 So.3d 779 (La. Ct. App. 2010); Gunderson v.
F.A. Richard & Assoc., 40 So.3d 418 (La. Ct. App. 2010) (characterizing the remedies under the
PPO Act as “penalties”); see also Cent. La. Ambulatory Surgical Ctr., Inv. v. Rapides Parish Sch.
Bd., 68 So.3d 1041 (La. Ct. App. 2010) (same); Touro Infirmary v. Am. Maritime Officer, 24 So.3d
948 (La. Ct. App. 2009) (same); see also Indian Harbor Ins. Co. v. Bestcomp, Inc., 2010 WL
5471005 (E.D. La. Nov. 12, 2010), aff’d, 452 F. App’x 560 (5th Cir. 2011) (“damages under section
40.2203.1(G) are excluded from the definition of damages under the policy . . . because the damages
more than compensate an injured party for losses incurred due to lack of notice.”).
55
   See Superior Court Opinion at *9 (citing Black’s Law Dictionary 1247 (9th Ed. 2009), and Landis
v. Marc Realty, 919 N.E.2d 300, 307 (Ill. 2009)).

                                                29
statute bears no relationship to the harm suffered by any provider and thus was not

of the kind considered “remedies” in the normal sense in which parties use term in

contracts. Thus, the Superior Court did not rely on the fact that the Act awards

remedies in a manner consistent with what other Louisiana courts have historically

termed to be penalties, including in an important Louisiana Supreme Court case cited

by the Williams court,56 but instead noted that reality to corroborate its own correct

reading of the Louisiana statute in relation to the parties’ contract.

       Had the Louisiana trial court itself showed comity by staying its hand after the

Delaware Superior Court made the first ruling on the coverage issue and letting this

case run its course to finality, the conflict the Majority Opinion is trying to avoid

would not have arisen in the first instance. Because the jurisdiction of our Superior

Court was properly invoked, and the Superior Court issued its ruling first, the

Provider Plaintiff Class’ decision to pursue a new ruling on that same issue in another

forum and the decision of the Louisiana courts to issue that ruling has caused the

current logjam and any awkward comity issue that has arisen as a result. The party

that fairly prevailed on its motion for summary judgment has now lost all benefit from

56
  See Williams v. SIF Consultants of Louisiana, Inc., 2013 WL 7330225 (La. Dist. Ct. July 29, 2013)
(citing International Harvester Credit Corporation v. Seale, 518 So.2d 1039, 1042 (La. 1988)
(describing legislative intent to award penalty or punitive damages “by either denoting the award a
‘penalty,’ modifying the term ‘damages’ with such language as ‘punitive’ or ‘exemplary,’ or
specifically awarding an amount in excess of the claimant’s losses”) (emphasis added)).


                                                30
its trial court victory, and will receive no recompense from the defendant for its costs

in obtaining that victory or for litigating this appeal. Those costs have been sunk for

no purpose.

       Moreover, by reversing on the grounds of comity to the Louisiana court’s

decision as to Executive Risk, we are subjecting Chartis to the additional costs of

litigating the issues anew in Louisiana even though it was not even a party to the

Williams litigation. When Executive Risk lost at the trial court and at the first

appellate level in Louisiana, it settled with the Provider Plaintiff Class and left the

decision in Williams unappealable.57 But the ruling that the Provider Plaintiff Class

obtained in that action should not run against Chartis.58

       Attempting to justify the Louisiana trial court’s decision to render a ruling on

the coverage issues nearly three months after the Superior Court issued its opinion in

this case, the Majority Opinion asserts that litigation involving First Health had been

in progress in Louisiana many years before the Delaware suit was filed against it.

The fact of the matter, however, is that Chartis is not a party in the underlying

Louisiana litigation. This suit was brought in the Delaware Superior Court in

57
   See Joint Motion and Order of Dismissal, Williams v. SIF Consultants of Louisiana, Inc., No. 09-
C-5244-C, 27th Jud. District Court, Parish of St. Landry, La. (July 22, 2014).
58
   See Charles Alan Wright, et al., 18 Fed. Prac. & Proc. Juris. § 4402 (2d ed.) (a non-party who was
not fairly represented in a proceeding cannot justly be bound by principles of claim or issue
preclusion).


                                                 31
September 2009, well before First Health settled with the Settlement Class and

assigned its rights to any insurance proceeds. Even in the related Williams litigation

in Louisiana, Homeland was not named as a party until March 24, 2011—more than

two months after it filed suit in the Delaware Superior Court on January 10, 2011.

The principals may have been embroiled in litigation in Louisiana many years earlier,

but the record plainly shows that the coverage issues under Chartis’ policy were only

ever put in issue in Delaware.

      Although we respect and share the desire expressed in the Majority Opinion to

avoid inconsistent rulings, we cannot embrace its solution. In our view, this is a

situation in which our Superior Court did nothing wrong, but another state’s courts’

failure to show comity to our courts has unnecessarily caused the potential for

inconsistent rulings and inefficiency. That might be a rational reason to stand down,

as the Majority Opinion has concluded, but it is demonstrably unfair to Chartis. At

a minimum, Chartis, as the party who has been victimized by the gamesmanship of

an unrelated party, should be reimbursed for its attorneys’ fees and costs in obtaining

a fair victory in our Superior Court and then having its victory taken away, not by a

traditional reversal on the merits on appeal, but because this litigation had been

rendered useless by collateral litigation to which this Court has now decided to defer.

That compensation should include Chartis’s fees and costs spent arguing this appeal.

                                          32
We also hope for the sake of Chartis that our judicial colleagues in Louisiana will

look favorably upon Chartis’s right to have the important coverage issues it raised

decided on the merits based on what its contract states.

      For all these reasons, we respectfully dissent.




                                         33
