        IN THE SUPREME COURT OF THE STATE OF DELAWARE

HOMELAND INSURANCE                      §
COMPANY OF NEW YORK,                    §     No. 60, 2018
                                        §
       Defendant Below,                 §     Court Below: Superior Court
       Appellant,                       §     of the State of Delaware
                                        §
       v.                               §     C.A. Nos. N11C-01-089 and
                                        §               N15C-05-069
CORVEL CORPORATION,                     §            (Consolidated)
                                        §
       Plaintiff Below,                 §
       Appellee.                        §
                                        §


                          Submitted: September 26, 2018
                           Decided: November 20, 2018

Before STRINE, Chief Justice; VALIHURA, VAUGHN, SEITZ, and
TRAYNOR, Justices, constituting the Court en Banc.

Upon appeal from the Superior Court. REVERSED.

David Newmann, Esquire, and Catherine E. Stetson, Esquire (Argued), Hogan
Lovells US LLP, Washington, D.C., Timothy Jay Houseal, Esquire, Jennifer M.
Kinkus, Esquire, and William E. Gamgort, Esquire, Young Conaway Stargatt &
Taylor, LLP, Wilmington, Delaware, Michael J. Rosen, Esquire and Peter F. Lovato,
III, Esquire, Skarzynski Black, LLC, for Appellant, Homeland Insurance Company
of New York.

John M. Seaman, Esquire (Argued), and April M. Kirby, Esquire, Abrams & Bayliss
LLP, Wilmington, Delaware, for Appellee, CorVel Corporation.




VAUGHN, Justice:
                              I. INTRODUCTION

       Homeland Insurance Company of New York appeals from a Superior Court

judgment entered against it in the amount of $13.5 million plus pre-judgment

interest.     The litigation that led to the judgment was initiated by CorVel

Corporation. CorVel is a Delaware company that operates a national Preferred

Provider Organization (PPO) network. Homeland issued CorVel a claims-made

errors and omissions liability policy with limits of $10 million and a policy period

of October 31, 2005 to October 31, 2006. Thereafter, Homeland issued renewal

policies, which were the same in all material respects.

       CorVel’s PPO network included agreements with medical providers in

Louisiana. In late 2004 and early 2005, Louisiana medical providers began filing

claims (the “PPO claims”) asserting that CorVel had improperly discounted medical

payments without providing proper notice in violation of a Louisiana statute (the

“Louisiana PPO Statute”).      Litigation ensued in Louisiana which ultimately

involved millions of dollars of claims against CorVel. In 2011, CorVel entered into

a settlement of the litigation. As part of the settlement consideration, CorVel paid

$9 million.

       In 2015, CorVel filed its complaint in this case, alleging that Homeland owed

it damages and penalties under another Louisiana statute. The statute in question,

                                          1
La. R.S. 22:1973 (“Louisiana’s Bad Faith Statute”), provides, in relevant part, that

an insurance company that knowingly misrepresents “pertinent facts or insurance

policy provisions” shall be liable for any damages sustained by the insured “as a

result of” the misrepresentation and may, in addition, be held liable for penalties.1

CorVel alleged that Homeland knowingly misrepresented facts or policy provisions

in a complaint that Homeland filed in a declaratory judgment action in Delaware in

2011. The alleged misrepresentation was an averment that CorVel had not timely

reported the PPO claims in accordance with the policy’s requirements.                       The

damages CorVel sought were the $9 million that it paid to settle the Louisiana

litigation, penalties, attorneys’ fees, and pre-judgment interest. The Superior Court

agreed with CorVel’s claim and awarded it $9 million in damages, $4.5 million in

penalties, and pre-judgment interest.

       Homeland makes three arguments on appeal.                   First, it argues that the

allegation in its declaratory judgment complaint, that CorVel had not timely reported

the claims, was a statement of a coverage position that could not give rise to a finding

of bad faith under either Delaware or Louisiana law. Next, it argues that no causal

connection exists between the allegation in the declaratory judgment complaint and



1
  This statute was previously codified at La. R.S. 22:1220, but was renumbered, effective January
1, 2009, to R.S. 22:1973. See 2008 La. Act No. 415.

                                               2
CorVel’s decision to settle the PPO claims. Finally, it argues that the applicable

statute of limitations bars CorVel’s claim.         The Superior Court, Homeland

contends, committed errors by ruling against it on each of these three points.

      We have concluded that the statute of limitations does bar CorVel’s claim and

that the Superior Court erred by ruling that it did not. Because the statute of

limitations bars CorVel’s claim, we find it unnecessary to address Homeland’s first

two arguments.

                  II. FACTS AND PROCEDURAL HISTORY

      As mentioned, the earliest PPO claims against CorVel were filed in late 2004

and early 2005.    Those claims included claims filed by Lake Charles Memorial

Hospital (“LCMH”) with the Louisiana Department of Labor, Office of Workers’

Compensation.2 In July 2005, CorVel filed an action in a federal district court in

Louisiana seeking to compel arbitration of the claims.       The federal district court

agreed with CorVel, and on November 6, 2006, ordered that the parties submit their

disputes to arbitration.    On or about December 22, 2006, LCMH submitted a

demand for arbitration to the American Arbitration Association (the “LCMH




2
  Apparently CorVel’s alleged improper discounting created underpayments of medical bills
below a Louisiana fee schedule adopted under Louisiana’s workers’ compensation law.

                                           3
arbitration”). CorVel notified Homeland in writing of the arbitration proceeding

on March 28, 2007.

      By letter dated June 4, 2007, Homeland informed CorVel that it declined

coverage of all the PPO claims.     As grounds for denial, Homeland relied upon

provisions in the policy that excluded (1) claims made against CorVel prior to the

inception date of CorVel’s claims-made policy, (2) claims made during the policy

period but which were related to claims made prior to the inception date, and (3)

claims not reported within 90 days of the end of the policy period.

      On September 3, 2010, the American Arbitration Association issued an Order

holding that LCMH’s arbitration demand against CorVel could proceed as a class-

wide arbitration. On September 24, 2010, CorVel wrote to Homeland informing it

of the arbitration order.   CorVel’s letter also stated that CorVel would look to

Homeland for full defense and indemnity of the arbitration claims. In December

2010, CorVel requested that Homeland commit itself to funding a settlement of the

LCMH arbitration up to the policy limits.

      Homeland did not agree to fund a settlement of the LCMH arbitration and, on

January 10, 2011, filed the above-mentioned declaratory judgment action in the

Delaware Superior Court seeking a declaration that it had no obligation under the

policy to provide defense or indemnity coverage to CorVel for the PPO claims.

                                         4
One of the grounds given for such relief was that “CorVel did not report the [LCMH

arbitration] or any subsequent related actions to Homeland in accordance with the

[policy’s] reporting requirements.”3

       Not long thereafter, on March 24, 2011, CorVel and Homeland were named

as defendants in a class action filed in 2009 in Louisiana state court known as the

Williams action.4 The plaintiffs in the Williams action alleged the same violations

of the Louisiana PPO Statute by CorVel, on behalf of the same group of medical

providers, as were asserted in the LCMH arbitration.

       On June 23, 2011, CorVel settled with the plaintiff class in the Williams action

for $9 million plus a partial assignment of CorVel’s Homeland policy. 5                   This

settlement also resolved the LCMH arbitration.

       On May 8, 2015, CorVel commenced this action in the Superior Court,

alleging breach of the policy for Homeland’s refusal to indemnify and defend

CorVel in the Louisiana actions.          An amended complaint (dated June 9, 2015)

added the specific allegation that Homeland violated Louisiana’s Bad Faith Statute




3
  App. to Appellant’s Opening Br. at 242, ¶ 41.
4
  Homeland was named a defendant under a Louisiana Direct Action Statute, La. R.S. 22:1269.
5
  Although CorVel assigned to the plaintiff class any and all of its rights under the policy, it
retained the right to reimbursement for legal fees and litigation costs up to $1 million.

                                               5
by knowingly misrepresenting that CorVel failed to report the PPO claims in

compliance with the policy’s reporting requirements.

       In the meantime, the plaintiff class in the Williams action was litigating the

policy coverage issues against Homeland. On January 21, 2016, the Louisiana trial

court granted summary judgment to the class, finding that the policy covered the

plaintiff class’s claims. It rendered a policy-limits judgment in the amount of $10

million against Homeland in favor of the plaintiff class. The Louisiana Court of

Appeals affirmed the grant of summary judgment in an opinion dated December 29,

2016, and the Louisiana Supreme Court denied certiorari on April 13, 2017.6 These

developments effectively mooted Homeland’s declaratory judgment action in

Delaware.

       On January 5, 2018, the Superior Court granted summary judgment in favor

of CorVel on its bad faith claim. The court found that Homeland committed bad

faith under Louisiana’s Bad Faith Statute by knowingly misrepresenting in its

declaratory judgment action that CorVel failed to comply with the reporting

requirements of the policy. The court further found that CorVel suffered $9 million

in damages (the amount it paid to settle the Williams action and the LCMH



6
 Williams v. SIF Consultants of La., Inc., 209 So. 3d 903 (La. Ct. App. 2016), cert. denied, 218
So. 3d 629 (La. 2017) (mem.).

                                               6
arbitration) as a result of Homeland’s bad faith.        The Superior Court rejected all of

the arguments Homeland now makes on appeal. As to the statute of limitations,

the court held that “CorVel could not have had a claim for damages under the

Louisiana Bad Faith Statute until it had a valid claim for coverage,” which the court

viewed as having occurred when the Louisiana trial court found coverage in its

decision on January 21, 2016.7

                           III. STANDARD OF REVIEW

       We review a “grant of summary judgment de novo to determine whether,

viewing the facts in the light most favorable to the nonmoving party, the moving

party has demonstrated that there are no material issues of fact in dispute and that

the moving party is entitled to judgment as a matter of law.”8

                                   IV. DISCUSSION

       The Superior Court determined, and the parties agree, that Delaware’s three-

year statute of limitations (10 Del. C. § 8106) applies to CorVel’s bad faith claim.9

Under Delaware’s statute of limitations, CorVel was required to bring this claim

within three years “from the accruing of the cause of such action.”10 The Superior


7
   Homeland Ins. Co. of N.Y. v. CorVel Corp., 2018 WL 317283, at *12 (Del. Super. Jan. 5, 2018).
8
   GMG Capital Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012) (en
banc) (internal quotation marks omitted).
9
   See Appellant’s Opening Br. at 44; Appellee’s Answering Br. at 40.
10
    10 Del. C. § 8106(a).

                                               7
Court found that CorVel’s bad faith claim did not accrue until the Louisiana trial

court found coverage under the policy on January 21, 2016, “because CorVel could

not incur damages until there was a determination on coverage.” 11                      Homeland

contends that this finding was error and that the claim accrued when CorVel could

plead damages, which was June 23, 2011, the date on which CorVel settled the

Williams action and the LCMH arbitration. CorVel, by contrast, contends that “the

Superior Court correctly held that CorVel did not have a viable bad faith claim, and

could not plead damages to support that claim, until there was first a finding of

coverage and CorVel incurred damages.”12

       We agree with Homeland that CorVel’s bad faith claim accrued no later than

June 23, 2011. Once CorVel could plead the necessary elements of a prima facie

claim under Louisiana’s Bad Faith Statute, the cause of action accrued for purposes

of Delaware’s statute of limitations.13          Where, as here, the plaintiff is the insured


11
   Homeland, 2018 WL 317283, at *12.
12
   Appellee’s Answering Br. at 41.
13
   The parties have dueled over the choice of law for CorVel’s bad faith claim, with CorVel
arguing for Louisiana law and Homeland contending for Delaware. In reality, it might be that
neither party is correct, given the centrality of California to the nationwide insurance relationship
set up between CorVel, as a California-based business, and Homeland, an insurer incorporated in
New York with its principal place of business in Massachusetts. See Certain Underwriters at
Lloyds, London v. Chemtura Corp., 160 A.3d 457, 459–60 (Del. 2017); Travelers Indem. Co. v.
CNH Indus. Am., LLC, 191 A.3d 288, 2018 WL 3434562, at *6–10 (Del. 2018) (TABLE). In
other words, there is a litigable issue over whether CorVel may even proceed under the Louisiana
statute, or must press any claim for bad faith denial of its claim under another state’s law. For
purposes of this appeal, we accord CorVel the benefit of assuming, for the sake of our timeliness

                                                 8
party, a prima facie claim for damages under subsection (B)(1) of Louisiana’s Bad

Faith Statute requires the following elements: (1) the insured has “a valid,

underlying, substantive claim upon which insurance coverage is based”;14 (2) the

insurer knowingly misrepresented pertinent facts or insurance policy provisions

relating to that coverage;15 and (3) the insured suffered damages “as a result of” that

misrepresentation.16

       CorVel could plead the three elements of the prima facie case immediately

after it settled the Williams action and the LCMH arbitration on June 23, 2011.

First, CorVel could plead that it had a valid claim upon which the insurance coverage

was based—a claim for indemnification for all loss, including defense costs,

resulting from the PPO claims asserted against it in Louisiana, claims for which it

previously sought coverage under the policy.               Second, CorVel could plead that

Homeland’s alleged knowing misrepresentation had been made earlier in 2011 when

it filed its declaratory judgment complaint alleging that the PPO claims had not been

properly reported and therefore were not covered. Third, CorVel could plead that


analysis, that its position is correct, and we confine ourselves to addressing whether, assuming that
is the case, CorVel made a timely claim.
14
    Clausen v. Fid. & Deposit Co. of Md., 660 So. 2d 83, 85 (La. Ct. App. 1995).
15
    La. R.S. 22:1973(B)(1).
16
    Id. 22:1973(A); see also Durio v. Horace Mann Ins. Co., 74 So. 3d 1159, 1170-71 (La. 2011).
The Louisiana Supreme Court has held that one may recover a penalty under subsection (C) of the
statute without pleading or proving any actual damages. Sultana Corp. v. Jewelers Mut. Ins. Co.,
860 So. 2d 1112, 1118-19 (La. 2003). Here, however, CorVel seeks to recover actual damages.

                                                 9
it suffered damages as a result of Homeland’s misrepresentation because it paid $9

million of its own money to settle the Williams action and the LCMH arbitration to

avoid the risk of a potentially higher judgment.             The limitations period expired

three years later on June 23, 2014.           Therefore, because CorVel did not file this

action until May 8, 2015, its claim is barred by the statute.

         CorVel contends that it could not have pleaded damages and thus could not

have asserted a bad faith claim when it settled the Louisiana litigation because a

court had not yet found that there was coverage under the policy.                  In essence,

CorVel argues, where coverage is disputed, a cause of action under Louisiana’s Bad

Faith Statute does not accrue until a court has first made a judicial determination that

the insurance policy actually covers the underlying claims.               The two Louisiana

cases CorVel relies upon do not support its position.

         CorVel cites Riley v. Southwest Business Corp. as standing for the proposition

that the requirement that the insured “must first have a valid, underlying, substantive

claim upon which insurance coverage is based” is not satisfied, where coverage is

disputed, until a court adjudicates coverage in the insured’s favor.17 Riley, and the

cases cited by it, however, simply establish that an insurer cannot be liable—and

thus an insured cannot prevail—under Louisiana’s Bad Faith Statute unless the

17
     2008 WL 4286631, at *3 (E.D. La. Sept. 17, 2008) (quoting Clausen, 660 So. 2d at 85).

                                                10
insurer was actually obligated to provide coverage.                 In Riley, for example, the

district court dismissed the plaintiff’s bad faith claim because the plaintiff was

neither a party to nor a third-party beneficiary of the insurance contract, meaning he

had no underlying claim for coverage.18 CorVel also cites Magidson v. Lansing in

support of its position, but this case, like Riley, merely provides that an insurer

cannot be liable for bad faith penalties where there is no coverage under the policy.19

       Neither of these cases suggest that there must be a judicial determination of

coverage before a bad faith claim accrues. They simply support the proposition

that the insured must assert its own rights, not a third party’s, to bring a claim under

Louisiana’s Bad Faith Statute. CorVel had a valid claim upon which the insurance

coverage was based, and could plead that claim, when it settled the Williams action

and the LCMH arbitration in June of 2011.                The bad faith action accrued then.

The fact that the Louisiana trial court did not adjudicate the coverage claim until

January 21, 2016, is not relevant.20

       Lastly, we must address CorVel’s argument that Homeland is estopped from

asserting a statute of limitations defense under 18 Del. C. § 3914. Section 3914


18
   See id.
19
   2012 WL 6677912, at *8 (La. Ct. App. Dec. 21, 2012).
20
   Under CorVel’s theory of the statute of limitations, it filed the amended complaint containing
the bad faith claim before its cause of action accrued: it filed its bad faith claim on June 9, 2015,
but argues that this claim did not accrue until January 21, 2016.

                                                 11
requires an insurer “during the pendency of any claim received pursuant to a casualty

insurance policy to give . . . timely written notice to claimant . . . of the applicable

state statute of limitations regarding action for his or her damages.”21 By its terms,

this statute refers to damages that are recoverable “pursuant to” an insurance

contract. The Louisiana Supreme Court, however, has held that the damages and

penalties available under Louisiana’s Bad Faith Statute are separate and distinct

from, and do not include, any damages that may be available under the insurance

contract itself.22 Accordingly, 18 Del. C. § 3914 is inapplicable to the claim for

damages CorVel seeks under Louisiana’s Bad Faith Statute, meaning Homeland was

never required to inform CorVel of the statute of limitations for this claim.

                                    V. CONCLUSION

       For the foregoing reasons, the Superior Court’s grant of summary judgment

and entry of judgment in CorVel’s favor is reversed.




21
  18 Del. C. § 3914.
22
  Durio, 74 So. 3d at 1170 (“Because it is a violation of the statute, not a breach of the insurance
contract, which triggers the penalty provision, it would be inconsistent to hold that contractual
amounts due pursuant to the terms of the contract should be included as ‘damages sustained’ under
[Louisiana’s Bad Faith Statute].”).

                                                12
