St. Luke’s insurer ordered to cover legal fees

The insurance company that St. Luke’s Health System sued more than a year ago, alleging breach of contract, has been ordered by a judge to cover St. Luke’s legal costs from a 2013 federal antitrust lawsuit.

St. Luke’s legal costs may total more than $25 million.

The insurance company is appealing the judge’s order. No hearing has been scheduled.

St. Luke’s argued that Allied World National Assurance Co. and Darwin National Assurance Co. — together called “Allied” in the lawsuit — broke a contract by cutting off coverage and demanding St. Luke’s pay back its previously covered costs, as the Boise-based hospital system’s legal fees mounted.

St. Luke’s legal costs for that case now total about $17 million. In addition, the plaintiffs who successfully sued St. Luke’s over its 2012 purchase of Saltzer Medical Group want St. Luke’s to reimburse them for more than $10 million in legal fees.

U.S. District Judge B. Lynn Winmill ruled in January 2014 that the health system broke antitrust laws when it bought Saltzer, based in Nampa. St. Luke’s appealed and lost.

Winmill recently gave St. Luke’s and Saltzer a year to unwind their relationship and for Saltzer to find new owners.

The complaint against Allied says the insurer paid St. Luke's defense costs through November 2013, then stopped. Allied declined coverage for claims in March 2014, saying St. Luke’s had been found by the court to have profited in a way that “was improper or illegal.”

The policies provided up to $25 million in liability coverage. The chief attorney for St. Luke’s said the hospital system has a second line of insurance that it expects to cover costs beyond $25 million.

Winmill in September ruled in favor of St. Luke’s, saying Allied “has a duty to reimburse all defense costs that St. Luke’s incurred prior to and during the appeal of the underlying litigation.”

St. Luke’s also is seeking about $300,000 of legal costs incurred in the Allied World case to be paid by the insurer.

This story was originally published January 6, 2016 at 10:25 AM with the headline "St. Luke’s insurer ordered to cover legal fees."