Atlantic Specialty Insurance Company v. Lexington Insurance Company

Background

Atlantic Specialty Insurance Company sued Lexington Insurance Company and BCS Insurance Company. The dispute concerns insurance coverage for settlements arising from a data and security breach of Premera Blue Cross’s computer network. Atlantic Specialty alleged that Lexington and BCS had duties to indemnify Premera for the settlements and that Atlantic Specialty did not have such duties. It sought reimbursement for payments it made toward the settlements.

BCS moved under 28 U.S.C. § 1404(a) to transfer the case from the District of Minnesota to the Western District of Washington. Lexington joined the motion. Section 1404(a) permits transfer for the convenience of the parties and witnesses and in the interest of justice when the proposed district is one where the case could have been brought.

Court’s Analysis

The court held that the Western District of Washington was a proper venue because a substantial part of the events or omissions giving rise to the dispute occurred there. The case involved insurance policies issued to Premera, which the court described as a Washington-based entity, and a data breach arising from allegedly inadequate security protocols in Washington. Atlantic Specialty also pursued contractual and equitable subrogation theories on behalf of Premera, which the court stated was headquartered and maintained its principal place of business in Washington.

The convenience-of-the-parties factor weighed slightly against transfer because Atlantic Specialty’s principal place of business was in Minnesota. The court nevertheless noted that all parties were large, sophisticated insurers with resources to litigate in either forum.

The convenience-of-the-witnesses factor favored transfer. Atlantic Specialty identified only one potential third-party witness in Minnesota and did not explain why that person’s testimony would be material. By contrast, the defendants identified multiple important nonparty witnesses in Washington, including Premera and its representatives, who could provide testimony and documents about Premera’s insurance program, the underlying claims, the settlements, and coverage negotiations. The Washington court would also have subpoena power over those witnesses.

The interests of justice also favored transfer. The Western District of Washington had handled an earlier related action involving the same ASIC policies, some of the same policy language and coverage issues, and the same underlying occurrence and later litigation. Although that earlier court had addressed the duty to defend rather than the duty to indemnify, the Minnesota court found a risk of inconsistent interpretations of the policies. The court also considered that a possible dispute over whether an endorsement was issued by mistake could involve reformation, a legal remedy for changing a written instrument to reflect an alleged agreement, and that discovery issues involving Washington witnesses might arise regardless of the forum.

The court gave Atlantic Specialty’s choice of its home forum some deference but less weight because the events underlying the dispute occurred primarily in Washington. It further found that litigation costs favored transfer because most relevant events, witnesses, and documents were located in Washington and nearby states. The parties could enforce a judgment and obtain a fair trial in either forum. Finally, Atlantic Specialty did not dispute the defendants’ position that Washington law applied, and the court found that factor favored litigating in the forum familiar with that law.

Disposition

Judge Michael J. Davis concluded that transfer to the Western District of Washington was warranted. The court granted BCS Insurance Company’s motion to transfer venue and ordered that the case be transferred to the United States District Court for the Western District of Washington. The order addressed venue only; it did not resolve the parties’ underlying insurance-coverage dispute.