eQHealth AdviseWell, Inc. v. Homeland Ins. Co. of N.Y.

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EQHEALTH ADVISEWELL, INC. f/k/a EQHEALTH SOLUTIONS, INC. v. HOMELAND INSURANCE COMPANY OF NEW YORK

Civil Action No. 22-50-BAJ-EWD

United States District Court, M.D. Louisiana

May 2, 2023

RULING AND ORDER

ERIN WILDER-DOOMES, UNITED STATES MAGISTRATE JUDGE.

Before the Court is the Motion to File Revised Second Amended Complaint for Damages (“Motion”), filed by eQHealth AdviseWell, Inc. (“Plaintiff').^[1] The Motion, which is untimely under the Scheduling Order,^[2] is opposed by Defendant Homeland Insurance Company of New York (“Homeland”).^[3] Because Plaintiff has not shown good cause to revise the Scheduling Order under Fed.R.Civ.P. 16 to assert additional facts in its Complaint based on information Plaintiff had years before suit was filed, the Motion will be denied.

I. Background

Plaintiff provides “medical management services” to commercial and governmental entities. This suit involves an alleged breach of an Errors and Omissions (“E&O”) insurance policy issued by Homeland to Plaintiff. Under Plaintiff's contract with Florida's Agency for Health Care Administration (“AHCA”), Plaintiff had to determine whether Florida Medicaid patients could be treated outside of Florida.^[4] If so, the patient's out-of-state treatment cost would be borne by AHCA as part of Medicaid benefits available to Florida residents. AHCA and Brookhaven Hospital, a provider in Tulsa, Oklahoma, entered into an agreement for the care of Florida resident B.N.^[5] because Plaintiff says that it mistakenly determined that B.N. was permitted to receive treatment at Brookhaven.^[6] According to Plaintiff, Brookhaven ultimately demanded payment for the care of B.N. Plaintiff paid $262,500 in settlement with Brookhaven,^[7] for which Plaintiff says Homeland owes coverage under the E&O policy. Homeland has denied insurance coverage for the claim on various bases and the parties have filed cross-motions involving the question of coverage (among others).^[8]

As relevant to this Motion, the E&O policy is a “claims made” policy. In its First Amended Complaint, Plaintiff alleged that it provided a “written ‘claim' triggering Homeland's duty to defend” on June 17, 2019.^[9] Plaintiff now seeks amendment claiming that it has learned through Homeland's responses to discovery that Plaintiff reported the claim in writing to Homeland on May 3, 2019-earlier than originally alleged.^[10] Homeland argues that this reporting involved the transmission of a letter from Brookhaven, dated February 28, 2019, demanding arrangements for B.N.'s care and a written timeline. Plaintiff also now seeks to assert that, to the extent Homeland claims it did not receive the February 28, 2019 letter that was purportedly attached to and referenced in, the May 3, 2019 correspondence Homeland did receive, Homeland failed to fulfill its contractual duty to further investigate why Homeland did not receive the letter.^[11]

II. Law and Analysis

A. Applicable Legal Standards

Fed. R. Civ. P. 15(a) provides that leave to amend pleadings “shall be freely given when justice so requires.” As acknowledged by all parties, because Plaintiff seeks leave to amend its Complaint after the deadline for filing amendments and adding parties has passed,^[12] the Court must first analyze the Motion under Fed.R.Civ.P. 16. “Rule 16(b) governs amendment of pleadings after a scheduling order deadline has expired. Only upon the movant's demonstration of good cause to modify the scheduling order will the more liberal standard of Rule 15(a) apply to the district court's decision to grant or deny leave.”^[13] “The Fifth Circuit has held that Rule 16 gives trial courts ‘broad discretion to preserve the integrity and purpose of the pretrial order' in making the ‘good cause' determination.”^[14] “The good cause standard requires the ‘party seeking relief to show that the deadlines cannot reasonably be met despite the diligence of the party needing the extension.'”^[15]In determining “good cause,” a court must consider the following four factors: (1) the explanation for the failure to timely move for leave to amend; (2) the importance of the amendment; (3) potential prejudice in allowing the amendment; and (4) the availability of a continuance to cure such prejudice.^[16] If the movant demonstrates good cause, then the more liberal standard of Fed.R.Civ.P. 15(a) applies; however, “leave to amend is by no means automatic” and the “decision lies within the sound discretion of the district court.”^[17]

B. Plaintiff Has Not Shown Good Cause to Amend Under the Fed.R.Civ.P. 16 Factors

The Motion was filed nearly fourth months after the expiration of the amendment deadline and three weeks after the close of fact discovery.^[18] “The first factor under Rule 16(b)'s good-cause standard is the justification for the delay, which courts within this circuit have described as the ‘most important factor.'”^[19]As explanation for its failure to timely seek amendment Plaintiff states: “Until written discovery responses to eQH's discovery were submitted by Homeland on July 29, 2022, eQH did not know that additional reasons exist for arguing that coverage under Homeland's policy was triggered.^[20] Plaintiff contends that, on April 30, 2019, its insurance broker, Marsh USA, Inc., submitted a “First Report of Loss” (hereinafter, “Notice of Circumstances”) to Homeland on Plaintiff's behalf.^[21] The Notice of Circumstances allegedly attached a timeline regarding B.N. that was created by Plaintiff.^[22] The timeline referred to, and the Notice of Circumstances allegedly attached, a February 28, 2019 letter from Brookhaven to AHCA, on which Plaintiff was copied, demanding that action be taken regarding B.N.'s care.^[23] Plaintiff alleges that Homeland's May 3, 2019 internal correspondence and May 7, 2019 claim notes show that Homeland received the Notice of Circumstances and the timeline, and was aware (or should have been aware) of the letter.^[24] Plaintiff, therefore, seeks to amend the Complaint to allege that it filed a claim on May 3, 2019-rather than the June 17, 2019 date originally alleged.^[25]

According to Plaintiff, while Homeland received the timeline, Homeland claims it did not receive the February 28, 2019 letter.^[26] However, Plaintiff argues that, even if Homeland did not receive the letter, Homeland's internal correspondence shows that Homeland was aware that a letter was supposed to be attached to the documents Plaintiff submitted but Homeland failed to take steps to obtain the letter. Plaintiff alleges that Homeland was under a duty to investigate why it did not receive the February 28, 2019 letter, and that Homeland's failure to investigate, “constitutes a waiver of all powers of privileges which a reasonable search would have uncovered,” and “[c]onstructive notice of the content of the letter should therefore be deemed to exist.”^[27] Furthermore, Plaintiff contends that Homeland's failure to investigate was not known to Plaintiff until it received Homeland's July 29, 2022 discovery responses, and “[t]hus, the first factor of the FRCP 16 ‘good cause' is met.”^[28] In response, Homeland contends that it did not receive the February 28, 2019 letter until Plaintiff's December 2019 formal tender of a claim.^[29] Homeland also argues that its discovery production to Plaintiff of the timeline and the letter^[30] is not grounds justifying Plaintiff's delay in seeking amendment because the timeline was created by Plaintiff; Plaintiff was copied on the February 28, 2019 letter from Brookhaven to AHCA; and Plaintiff produced both these documents with its June 20, 2022 discovery responses to Homeland so Plaintiff had these documents and was aware, or should have been aware, of the timeline and the letter well before the amendment deadline expired.^[31] Furthermore, Homeland contends that Plaintiff was also aware that the April 30, 2019 Notice of Circumstances that Plaintiff's broker submitted to Homeland did not attach a copy of the February 28, 2019 letter because Plaintiff's Vice President Christine G. Gatlin was copied on the email,^[32] yet Plaintiff failed to insure that Homeland received the information.

Plaintiff seeks to amend its Complaint to change the date it reported to Homeland the claim at issue. Plaintiff's argument--that it did not know the correct date until it received discovery responses from Homeland--fails since Plaintiff originally provided the information (some of which was prepared by Plaintiff) to Homeland.^[33] For years, Plaintiff has had the information (both what was contained in the timeline and the February 28, 2019 letter) and the knowledge that in May 2019 Homeland received or should have received that information, which Plaintiff now says constitutes earlier notice of the claim at issue.^[34] Under these facts, there is no viable justification for Plaintiff's delay as it relates to the failure to originally allege the correct date it first reported the claim at issue to Homeland.^[35] For the same reasons, the fact that Plaintiff waited so long to seek leave to amend, despite having the information it now uses as a basis for the amendments more than two years before suit was filed, also weighs against a finding of importance.^[36]

Consideration of prejudice also weighs against Plaintiff. As noted by Homeland, Plaintiff's amendments raise new factual allegations that would require additional discovery, which was closed before the Motion was filed, resulting in additional costs to Homeland. Further, even if the additional costs to Homeland were not prejudicial, a continuance to conduct additional discovery is not available given the Court's recent summary judgment briefing order, which sets dispositive motion deadlines that may not be extended.^[37]

After conducting the applicable four-factor...