United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
L. HORAN, UNITED STATES MAGISTRATE JUDGE
Great Northern Insurance Company has filed a Motion to Abate
[Dkt. No. 8] this lawsuit until Plaintiff Total Rx Care, LLC
has fully complied with the conditions precedent, as spelled
out in Total Rx's insurance policy with Great Northern.
See Dkt. No. 8 at 1-2. Total Rx filed a response,
see Dkt. No. 16, and Great Northern filed a reply,
see Dkt. No. 19.
States District Judge Jane J. Boyle referred the motion to
the undersigned United States magistrate judge for hearing,
if necessary, and recommendation or determination.
See Dkt. No. 40.
Court DENIES Great Northern's motion for the reasons
December 26, 2015, a tornado caused damage to Total Rx's
pharmacy facility (the “Pharmacy”). Total Rx
notified its insurer, Great Northern, of the damage. Total
Rx's policy with Great Northern (the
“Policy”) covers losses due to tornado damage,
including up to $25 million of Business Income and Extra
January 2016, Great Northern requested and received
information from Total Rx, including its financial
Northern also retained a forensic accounting firm, Hagen,
Streiff, Newton & Oshiro, Accountants, PC
(“HSNO”), to estimate the amount of Business
Income Total Rx lost due to the tornado. HSNO prepared
reports in January and March 2016 to determine Total Rx's
Business Income loss. Both reports concluded that Total
Rx's Business Income Loss exceeded $35 million through
adjusting the claim, Great Northern learned that Total Rx
lost its ability to process prescriptions insured through
Blue Cross/Blue Shield (“BC/BS”). Total Rx's
contract with BC/BS accounted for 50% of Total Rx's
income in 2015.
Northern subsequently asked to conduct an examination under
oath (“EUO”) of Steve Solomon to help it process
the claim. In a letter to Mr. Solomon and Total Rx's
then-CEO, Michael Nguyen, Great Northern argued that Total Rx
was required to make Mr. Solomon and Mr. Nguyen available
because the Policy allows it to take an EUO of any
“insured.” Mr. Solomon is an outside consultant
who advises Total Rx with the preparation and adjustment of
the claim at issue and has a financial interest in the
resolution of the claim. At the time that the tornado hit, he
also owned an interest in Messorio Healthcare Services, LLC,
which was the sole owner of Total Rx, and was more involved
in processing the claim.
Rx elected to make its current CEO, Kevin Kuykendall
available for an EUO instead. His EUO took place on September
9, 2016. There, Mr. Kuykendall explained that the revenue
from BC/BS would be easily replaced and that anticipated 2016
revenues would not diminish from 2015. See Dkt. No.
16 at 10 (citing Dkt. No. 16-7 at 29). He then explained
that, to his knowledge, Total Rx's 2016 projected
revenues did not deduct the revenue it received from BC/BS -
although he conceded that Mr. Solomon was
“[p]robably” the better person to ask. See
Id. at 16.
and after the EUO, Great Northern also requested a copy of
BC/BS's termination letter, “all documents that
reflect how Total Rx planned to replace the revenue from
[BC/BS] that it had lost, ” and “all documents
that support the financial summaries produced [by Total Rx]
on September 8, 2016.” Dkt. No. 8 at 8. It contends
that the Policy also requires Total Rx to turn over these
documents. The Policy provides that, in the event of loss or
damage, the insured must “[p]ermit [Great Northern] to
inspect the property and [the insured's] books and
records.” Id. at 5.
Rx filed this lawsuit before fully complying with Great
Northern's requests. It explains that “[t]he only
requested information that has not been produced to Great
Northern is confidential in nature and requires a Protective
Order” - either because those documents are subject to
a confidentiality clause or because they contain third-party
protected health information (“PHI”) that is
protected by the Health Insurance Portability and
Accountability Act (“HIPAA”).
Rx had asked Great Northern to enter into a Protective Order,
but Great Northern refused. Total Rx then filed a motion for
a protective order governing the production of confidential
information in the case, see Dkt. No. 7, which the
Court has granted, see Dkt. Nos. 22 & 23.
its Motion to Abate, Great Northern asks “the Court to
abate this lawsuit until 45 days after Total Rx has made
available for examination under oath Steve Solomon and anyone
else whose examination is reasonably required and after Total
Rx provides any and all documents reasonably requested by
Great Northern.” Dkt. No. 19 at 6-7. It argues that
Total Rx was obligated to do so as a condition precedent to
filing this lawsuit, pursuant to Total Rx's Policy.
Rx disagrees. It contends that it has already satisfied the
conditions precedent to filing this lawsuit, which do not
include either making Steve Solomon available for an EUO or
producing the documents at issue without a protective order.
Court now concludes that Great Northern's Motion to Abate
should be denied for the reasons explained below.
Insurance policy provisions that set out conditions precedent
to sustaining a suit on the policy are valid. See Wofford
v. Allstate Ins. Co., No. 3:04-cv-2699-M, 2005 WL
755761, at *3 (N.D. Tex. April 4, 2005) (citing State
Farm General Ins. Co. v. Lawlis, 773 S.W.2d 948, 949
(Tex. App.- Beaumont. 1989)). As such, “the proper
remedy for failure to satisfy an insurance policy's
conditions precedent is abatement of the lawsuit.”
“[a] ‘motion to abate' is not expressly
authorized by federal statute or rule, ” “federal
courts have authority to entertain such preliminary
motions.” PJC Bros., LLC v. S&S Claims
Servs., Inc., 267 F.R.D. 199, 200 n.2 (S.D. Tex. 2010).
The decision to abate an action is “largely a matter of
judicial discretion, ‘which must be exercised in light
of the policy against unnecessary dilatory
motions.'” Id. (quoting 5C Wright &
Miller, Fed. Prac. & Proc. § 1360 (3d ed. 2004);
see also 28 U.S.C. § 2105 (precluding appellate
reversal for error in ruling upon matters in abatement which
do not involve jurisdiction).
deciding whether Total Rx has complied with the conditions
precedent under the Policy, the Court is guided by Texas'
rules of interpretation. See Forbau v. Aetna Life Ins.
Co., 876 S.W.2d 132, 133 (Tex. 1994)
(“Interpretation of insurance contracts in Texas is
governed by the same rules as interpretation of other
contracts.”). “[T]he [C]ourt's primary
concern is to give effect to the written expression of the
parties' intent.” Id. The Court will
consider the entire instrument so that none of the provisions
will be rendered meaningless. R & P Enters. v.
LaGuarta, Garvel & Kirk, Inc., 596 S.W.2d 517, 518
(Tex. 1980). “When a contract is unambiguous [the
Court] will enforce it as written.” Lopez v. Munoz,
Hockema & Reed, L.L.P., 22 S.W.3d 857, 862 (Tex.
2000) (citing Heritage Resources, Inc. v.
NationsBank, 939 S.W.2d 118, 121 (Tex. 1996)). But if a
contract is ambiguous - that is, if it is reasonably
susceptible to conflicting interpretations - the ambiguity is
“construed against the drafter.” Liberty