Medpace, Inc. v. Darwin Select Insurance Company

Filing 21

ORDER: (1) DENYING DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS (Doc. 16 ); AND (2) GRANTING PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS (Doc. 17 ). Signed by Judge Timothy S. Black on 3/31/2014. (mr1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

MEDPACE, INC.
Plaintiff,
vs.
DARWIN SELECT INSURANCE CO.,
Defendant.

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Case No. 1:13-cv-784
Judge Timothy S. Black

ORDER: (1) DENYING DEFENDANT’S MOTION FOR JUDGMENT ON THE
PLEADINGS (Doc. 16); AND (2) GRANTING PLAINTIFF’S MOTION FOR
JUDGMENT ON THE PLEADINGS (Doc. 17)
This civil action is before the Court on the parties’ cross-motions for judgment on
the pleadings (Doc. 16, 17) and responsive memoranda (Docs. 17, 18). 1
I.

BACKGROUND FACTS

This case arises out of Darwin’s refusal to defend and indemnify its insured,
Medpace, in the Underlying Lawsuit. 2 In the Underlying Lawsuit, Defendant Biothera
asserted a counterclaim against Medpace for conversion of certain data and information
which Medpace generated and prepared (collectively, the “Trial Property”) for Biothera
under a Master Services Agreement (“MSA”) between those two parties. (Doc. 3 at ¶ 4).

1

Medpace’s opposition, which was filed on February 28, 2014, was styled as an “Opposition
and Cross-Motion for Judgment on the Pleadings.” (Doc. 17). However, motions directed at the
pleadings were to be filed by February 17, 2014. (Doc. 15). Accordingly, Darwin argues that
Medpace’s cross-motion was not timely filed. This Court agrees. However, this Court prefers to
decide cases on their merits and not upon procedural defaults, and, accordingly, will consider
Medpace’s cross-motion. Foman v. Davis, 371 U.S. 178 (1962).
2

The Underlying Lawsuit is currently pending before this Court. See Medpace, Inc. v. Biothera,
Inc., 1:12-cv-179 (S.D. Ohio).

Medpace tendered the counterclaim to Darwin for defense and indemnification pursuant
to a Clinical Research Professional Liability Insurance Policy that Darwin had issued to
Medpace (the “Policy”). (Id. at ¶ 3). Darwin refused to defend or indemnify Medpace,
claiming that the undefined term “research activities” in the Policy does not include a
claim based on Medpace’s alleged wrongful refusal to turn over the Trial Property to
Biothera. (Id. at ¶ 5).
A. The Policy
Darwin issued Clinical Research Professional Liability Insurance Policy No. 03071632 to Medpace for the policy period from December 3, 2011 to December 3, 2012.
(Doc. 3 at ¶ 3). In relevant part, the Policy states:
I.

INSURING AGREEMENTS
A. CLINICAL RESEARCH PROFESSIONAL LIABILITY COVERAGE
The Insurer will pay on behalf of the Insured, and subject to the Limit of
Liability set forth in ITEM 3(a) of the Declarations, Loss and Defense Expenses
in excess of the Retention stated in ITEM 4(a) of the Declarations which the
Insured becomes legally obligated to pay as a result of a Claim for an act, error
or omission by the Insured committed on or after the Retroactive Date in the
Insured’s rendering of or failure to render Research-Related Services, provided
always that such Claim is first made against the Insured and reported to the
Insurer during the Policy Period or any applicable Extended Reporting Period.
...

III. DEFINITIONS
...
B. “Research-Related Services” means the following, when conducted by
an Insured on behalf of the Named Insured: research activities, or consulting or
advisory services performed for third parties for a fee or other consideration, in
the fields of biomedical, behavioral, or veterinary research that is conducted in
2

accordance with formal written protocols or procedures and is part of a controlled
and regulated research study.
(Doc. 12-1 at §§ I.A and III.BB).
B. The Claim
The Underlying Lawsuit arises out of a MSA between Medpace and Biothera
pursuant to which Medpace agreed to perform certain clinical trial and research activities
for Biothera. (Doc. 16 at 3). On February 29, 2012, Biothera terminated the Master
Services Agreement. (Id.) On March 2, 2012, Medpace initiated the Underlying
Lawsuit, alleging breach of contract and unjust enrichment based on Biothera’s refusal to
pay the money it owed Medpace under the MSA and the related Task Orders and
Consulting Agreement. (Id.) Biothera filed a counterclaim for conversion, which alleged
that: (1) Biothera owns the Trial Property generated by Medpace under the MSA;
(2) Medpace had the Trial Property in its custody, control, and possession; and
(3) Medpace refused Biothera’s request to turn over the Trial Property. (Doc. 3 at ¶ 4).
Darwin argues that the Underlying Conversion Count has nothing to do with
Medpace’s rendering or failing to render professional services. Rather, it is about
Medpace’s alleged wrongful conduct in attempting to force a former client into paying its
fees, following the termination of its professional relationship with that client. Darwin
claims that the Policy does not afford coverage for such a claim. Specifically, Darwin
argues that the Underlying Conversion Count arises out of alleged conduct by Medpace
committed after it had been removed from managing the Imprime clinical drug trials, at a
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point in time when Medpace necessarily had ceased rendering or failing to render any
“research activities…performed for [Biothera] for a fee.” (Doc. 12-1 at § III.BB).
II.

STANDARD OF REVIEW

The standard of review for a Rule 12(c) motion is the same as for a motion under
Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Fritz v.
Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir. 2010). AFor purposes of a motion
for judgment on the pleadings, all well-pleaded material allegations of the pleadings of
the opposing party must be taken as true, and the motion may be granted only if the
moving party is nevertheless clearly entitled to judgment.@ Id. (citing JPMorgan Chase
Bank v. Winget, 510 F.3d 577, 581 (6th Cir. 2007)).
III.

ANALYSIS

A. Interpretation of Insurance Policies
The interpretation of an insurance contract is a question of law for the Court.
Skinner v. Guarantee Trust Life Ins. Co., 813 F. Supp. 2d 865, 868 (S.D. Ohio 2011). A
court construing insurance policies “must enforce the contract as written and give the
words their plain and ordinary meaning.” Cincinnati Indem. Co. v Martin, 710 N.E.2d
677, 679 (Ohio 1999). Where the provisions of an insurance policy are clear and
unambiguous, courts may not rewrite the contract to expand coverage beyond that agreed
to by the parties. Gomolka v. State Auto. Mut. Ins. Co., 436 N.E.2d 1347, 1348 (Ohio
1982). Furthermore, any ambiguities in insurance policies are “interpreted against the
insurer and in favor of the insured.” Skinner, 813 F. Supp. 2d at 868.
4

The party seeking to recover under an insurance policy bears the burden of
establishing that the particular loss falls within the policy’s insuring agreement. State
Farm Fire & Cas. Co. v. Hiermer, 720 F. Supp. 1310, 1314 (S.D. Ohio 1988), aff’d 884
F.2d 580 (6th Cir. 1989). It is well-settled law in Ohio that “where a term in an insurance
contract is not defined by the policy, the term is to be given its ordinary meaning.”
Morner v. Giuliano, 857 N.E.2d 602, 607 (Ohio App. 2006). Similarly, “[u]nder black
letter Ohio law, an undefined exclusionary term must be narrowly construed against the
insurer.” Encore Receivable Mgmt., Inc. v. Ace Property & Cas. Ins. Co., No.
1:12cv297, 2013 U.S. Dist. LEXIS 93513, at *38 (S.D. Ohio July 3, 2013).
B. Duty to Defend
An insurance company must pay for the defense of actions brought against its
insured as long as the underlying complaint contains at least one potentially covered
claim.
An insurer’s duty to defend is broader than and distinct from its duty to
indemnify. The scope of the allegations in the complaint against the
insured determines whether an insurance company has a duty to defend
the insured. The insurer must defend the insured in an action when the
allegations state a claim that potentially or arguably falls within the
liability insurance coverage.
Ohio Gov’t Risk Mgmt. Plan v. Harrison, 874 N.E.2d 1155, 1160 (Ohio 2007).
Ohio follows the “one claim – all claims” rule. That is, when a complaint against
an insured asserts several claims for relief, some – but not all – of which are potentially
covered under the terms and conditions of the insurance policy, the insurer is
5

contractually obligated to defend the insured against all claims in the lawsuit, regardless
of the ultimate outcome of the lawsuit or the insurer’s ultimate liability to the insured.
Sharonville v. Am. Employees Ins. Co., 846 N.E.2d 833, 837 (Ohio 2006).
As long as the conversion claim against Medpace is potentially covered by the
Policy, it is entitled to a defense unless Darwin can demonstrate that there is no factual or
legal basis whatsoever for such coverage.
To prevail on the issue of the duty to defend, the insured must prove
the existence of a potential for coverage, while the insurer must
establish the absence of any such potential. In other words, the
insured need only show that the underlying claim may fall within
policy coverage; the insurer must prove it cannot. Facts merely
tending to show that the claim is not covered, or may not be covered,
but are insufficient to eliminate the possibility that resultant damages (or
the nature of the action) will fall within the scope of coverage, therefore
add no weight to the scales. Any seeming disparity in the respective
burdens merely reflects the substantive law…Imposition of an immediate
duty to defend is necessary to afford the insured what it is entitled to: the
full protection of a defense on its behalf. Hence, once the insured
establishes the potential of coverage, the insurer must defend the suit
unless it conclusively refutes such potential.
Brush Wellman, Inc. v. Certain Underwriters at Lloyds, No. 03-CVH-089, 2006 Ohio
Misc. LEXIS 387, at *81-82 (Ohio Ct. of Common Pleas Aug. 30, 2006) (emphasis
supplied). In other words, the fact an insurer may ultimately have a defense to coverage
does not relieve it of its obligation to pay defense costs until and unless it can establish
the applicability of that defense as a matter of law and fact. Harrison, 874 N.E.2d at
1161.

6

C. Research Related Services
Medpace maintains that it is entitled to defense and indemnification of Biothera’s
conversion counterclaim, because Medpace’s allegedly wrongful refusal to turn over the
Trial Property to Biothera fits squarely within the scope of the Policy, and, in particular,
within the definition of “Research-Related Services.” Darwin maintains that the
conversion claim is excluded because it arose after Biothera purported to terminate the
MSA. The Policy states:
Loss and Defense Expenses…which the Insured becomes legally
obligated to pay as a result of a Claim for an act, error or omission by
the Insured committed on or after the Retroactive date in the Insured’s
rendering of or failure to render Research-Related Services.
(Doc. 12-1 at § I.A). 3 Darwin claims that Medpace’s post-contract failure to return the
Trial Property and Clinical Materials to their rightful owner was not committed in the
rendering of, or failure to render, research related services, so Medpace could not have
been performing any services “for a fee” or “as part of a controlled and regulated
research study,” as is required to constitute research-related services.
However, there is no requirement in the Policy that a claim must arise during the
performance of Research-Related Services. The Policy’s insuring agreement only
requires that the claim must be for “the Insured’s rendering of or failure to render
3

The phrase “rendering of or failure to render” is not defined in the Policy. As a result, it must
be given its plain and ordinary meaning. Skinner, 813 F. Supp.2d at 869. Darwin argues that the
“rendering of, or failure to render” language is intended to address a situation where a client pays
the insured professional to render certain services, and the insured fails to do so. However, if
that was in fact what the language was intended to address, the plain language of the contract
should have so stated.
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Research-Related Services.” The fact that Medpace had ceased performing services for
Biothera at the time the conversion claim arose is irrelevant, since there is no time
limitation in the Policy other than that the error must have been “committed on or after
the Retroactive Date[.]” Id. 4 Darwin’s position suggests that Medpace loses its
insurance coverage if, for whatever reason, Medpace suspends or stops providing
research-related services to one of its clients. However, this argument has no support in
the Policy. Moreover, even though the contractual duties may have been suspended,
Medpace had an ongoing legal duty to turn over the Trial Property which survived the
termination of the MSA.
Darwin also contends that the conversion claim did not arise out of the
performance of Research-Related Services, and, therefore, is not covered by the Policy.
However, there is no requirement in the Policy that a claim must arise during the
performance of Research-Related Services. The policy’s insuring agreement only
requires that the claim must be for “the Insured’s rendering of or failure to render
Research-Related Services.” (Doc. 12-1 at § I.A). In other words, Biothera’s conversion
claim is not predicated on Medpace’s breach of the MSA, but on the alleged violation of
its separate obligation to render the Trial Property to Biothera – which is precisely among
the acts, errors, and omissions the Policy insures.

4

If Darwin had intended to provide coverage only for claims which arose while its insured was
performing Research-Related Services, Darwin could easily have done so; instead, Darwin chose
to use the undefined word “render.” (Id.)
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Accordingly, construing the ambiguities against the insurer, the Court concludes
that the “failure to render Research-Related Services” includes Medpace’s failure to
deliver the clinical trial data to Biothera.
D. Professional Services
Next, Darwin argues that the name of the Policy (“Clinical Research Professional
Liability Insurance Policy”) establishes that it is a professional liability policy. Darwin
argues that Medpace effectively seeks to transform the Policy into a generalized liability
coverage that applies anytime Medpace is alleged to have breached any duty.
While the Policy contains the label “Professional Liability,” because the Policy
does not expressly state that coverage is limited to acts, errors, or omissions by Medpace
in its “professional capacity” as a Clinical Research Organization, the professional
liability cases cited by Darwin are inapposite. 5 Relatedly, Clinical Research
Organizations are not licensed professionals in the same way that lawyers and
accountants are, so the term research-related services cannot be interpreted similarly to
the phrases “legal services” and “accounting services.”

5

In the cases Darwin cites, the insurance policies specifically defined the term “professional
services” and contained an explicit requirement that the claim arise from the insured’s activities
performed in its professional capacity. Unlike the insurers in those cases, Darwin did not limit
coverage under the Policy to Medpace’s provision of professional services. For example, in
Davis & Meyer Law, Ltd. v. ProNational Ins. Co., the policy defined “professional services” in
relevant part as: “services rendered by an Insured in a lawyer-client relationship as a lawyer,
mediator, arbitrator, notary public, administrator, conservator, receiver, executor, guardian,
trustee, or in any similar fiduciary capacity.” No. 06AP-730, 2007 Ohio App. LEXIS 3240, at
*11 (Ohio App. July 12, 2007).
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E. Fee Clause
The Underlying Conversion Count arises out of an ongoing billing dispute
between Biothera and Medpace about the fees charged for its services. Accordingly,
Darwin argues that given Ohio law interpreting the scope of coverage available under
professional liability policies, steps that an insured takes to secure compensation cannot
constitute Research-Related Services. 6 (Doc. 12-1 at § I.A).
First, this Court has found, as discussed supra at Section III.D, that a professional
liability policy is not at issue. In this case, the conversion counterclaim arose out of
Medpace’s alleged “rendering of or failure to render Research-Related Services.” If
Darwin wanted to limit the Policy to only provide coverage for claims “during the
performance of Research-Related Services,” “[i]nvolving negligen[ce] in managing the
[clinical] trials,” or “arising out of erroneous advice” provided by Medpace, Darwin
could have done so. Darwin cannot now rewrite the Policy to contain new terms and
conditions. Neal-Pettit v. Lahman, No. 91551, 2008 Ohio App. LEXIS 5547, at *3 (Ohio
App. Dec. 18, 2008) (“Had [the Insurer] intended otherwise, the policy language could
easily have been drafted to reflect that intention.”).
Second, most of the cases Darwin relies on contained explicit exclusionary clauses
relating to legal fees. Darwin could have excluded fee disputes from coverage in the
Policy, as the insurers did in the cases Darwin cites, but it chose not to do so. (Doc. 17 at
6

An insured’s fee dispute with its client is not “the same as rendering ‘professional services’”
and is not “part of the coverage” contemplated by a professional liability policy. Nat’l Union
Fire Ins. Co. of Pittsburg, Pa., v. Shane & Shane Co., L.P.A., 605 N.E.2d 1325, 1329 (Ohio App.
1992).
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9). This deliberate choice is significant because “[w]here exceptions, qualifications or
exemptions are introduced into an insurance contract, a general presumption arises to the
effect that that which is not clearly excluded from the operation of such contract is
included in the operation thereof.” ACE European Group, Ltd. v. Abercrombie & Fitch
Co., No. 2:12cv1214, 2013 U.S. Dist. LEXIS 131269, at *19-20 (S.D. Ohio Sept. 13,
2013). Since Darwin did not explicitly exclude claims relating to billing or fee disputes,
such claims are covered by the Policy.
F. Indemnification
Darwin’s duty to indemnify is not yet ripe for determination, because the
Underlying Conversion Count has not been fully adjudicated. See, e.g., Chemstress
Consultant Co. v. Cincinnati Ins. Co., 715 N.E.2d 208, 212 (Ohio App. 1998) (explaining
that, because “[a]n insurer’s duty to indemnify is separate and distinct from its duty to
defend,” the lower court erred by deciding the issue of indemnification based solely on
the allegations in the underlying complaint). 7 “Although a duty to defend was correctly
determined from the allegations in the complaint, determining that there is also a duty to
indemnify requires additional information. Id. The duty to indemnify is based on
whether there is, in fact, liability under the policy. Id. The trial court could not make a

7

See also AMCO Ins. Co. v. Lauren-Spencer, Inc., 500 F. Supp. 2d 721, 736 (S.D. Ohio 2007)
(noting that “the ultimate realization” of an insurer’s duty to indemnify “depends on disposition
of the underlying litigation”).
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determination without some proof of the actual facts underlying the complaint. Id. 8
IV.

CONCLUSION

Accordingly, for these reasons:
(1) Plaintiff’s motion for judgment on the pleadings (Doc. 17) is GRANTED, but
for the issue of indemnification, which is not yet ripe for determination.
Specifically, the Court determines, as a matter of law, that Darwin has a duty
to defend Medpace in connection with the Underlying Conversion Count ; and
(2) Defendant’s motion for judgment on the pleadings (Doc. 16) is DENIED.
IT IS SO ORDERED.
Date: 3/31/14

s/ Timothy S. Black
Timothy S. Black
United States District Judge

8

See also Erie Ins. Exch. v. Colony Dev. Corp., 736 N.E.2d 941, 946 (Ohio App. 1999) (“once a
duty to defend is recognized, speculation about the insurer’s ultimate obligation to indemnify is
premature until facts excluding coverage are revealed during the defense of the litigation.”).
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