United States District Court, M.D. Florida, Tampa Division
AKSHAY M. DESAI, Plaintiff,
NAVIGATORS INSURANCE COMPANY, Defendant.
WILLIAM F. JUNG, UNITED STATES DISTRICT JUDGE
matter comes before the Court on the parties' cross
motions for summary judgment (Dkts. 49-50, 52), as well as
their respective responses and replies (Dkts. 58-59, 62, 65).
The Court also received briefing from amicus curiae
(see Dkt. 41), the Florida Department of Financial
Services (Dkts. 51, 60, 64), and heard oral argument from
counsel for the parties and the amicus curiae. Upon
consideration, the Court grants Defendant's motion for
summary judgment and denies Plaintiff's motion for
Dr. Desai and the Universal Entities
Akshay M. Desai, M.D. (“Dr. Desai”) is an officer
and director of a number of companies, including parent
company Universal Health Care Group, Inc.
(“UHCG”), and subsidiaries Universal Health Care
Insurance Company, Inc. (“UHCIC”), Universal
Health Care, Inc. (“UHC”), and American Managed
Care, LLC (“AMC”). Dkt. 52-1 ¶¶ 3-4
(Desai affidavit). Dr. Desai had an employment agreement with
UHCG. Dkt. 52-4. The agreement provided him with a base
annual salary of $900, 000 to serve as Chairman of the Board,
Chief Executive Officer, and President of UHCG and each of
its subsidiaries (that is, UHCIC, UHC, and AMC) and to be
responsible for “the general management of the affairs
of [UHCG] and its subsidiaries.” Id. at 2. In
2012, Dr. Desai received $2, 475, 000 in bonus compensation,
as well as $62, 580 in other compensation. Dkt. 52-1 ¶
7. The payments were made by AMC for services that Dr. Desai
rendered under the employment contract. Id. The
Board of Directors (of which Dr. Desai was the Chairman)
approved the payments. Id.; Dkt. 52-4 at 2.
Indemnity Company (“RSUI”) issued Directors and
Officers Liability Policy No. HP648986 to UHCG effective
November 1, 2012 to November 1, 2013 (“RSUI
Policy”), affording $5 million in limits. Dkt. 17-2.
Defendant Navigators Insurance Company
(“Navigators”) issued NAVEXCESS Policy No.
PT12DOL301885NV for the same period (“Navigators
Policy”). Dkt. 17-1 . The Navigators Policy is a
“follow form” excess policy under which the RSUI
Policy is the designated “followed
policy.” Id. at 2. The Navigators Policy
affords an additional $5 million in coverage after the limits
of the RSUI Policy have been exhausted. Id.
RSUI Policy (the terms of which are incorporated into the
Navigators Policy, see Dkt. 17-2 at 2) states:
[T]he Insurer agrees . . . [w]ith the Insured Person that if
a Claim for a Wrongful Act is first made against any Insured
Person during the Policy Period and reported in accordance
with SECTION V.-CONDITIONS, C. Notice of Claim or
Circumstance of this policy, the Insurer will pay on behalf
of such Insured Person all Loss such Insured Person is
legally obligated to pay, except and to the extent that the
Insured Organization is required or permitted to indemnify
such Insured Persons.
Dkt. 17-2 at 23. “Insured Person” means any
“past, present or future director, officer, or
Employee, management committee members or members of the
Board of Managers” of UHCG and its subsidiaries.
Id. at 1, 25. “Insured Organization”
means UHCG and its subsidiaries. Id. at 1, 25.
“Wrongful Act” means:
any actual or alleged act, error, omission, misstatement,
misleading statement, neglect or breach of duty . . . by:
1. An Insured Person acting in his or her capacity as such
and on behalf of the Insured Organization or any matter
claimed against them solely by reason of their status as an
Insured Person; or
2. The Insured Organization.
Id. at 26. “Loss” means:
damages (including back pay and front pay), settlements,
judgments (including pre- and post-judgment interest on a
covered judgment) and Defense Expenses.
Id. at 25. The policy also provides that “Loss
(other than Defense Expenses) shall not include” a
number of items, including “[m]atters that may be
uninsurable under the law pursuant to which this policy shall
be construed.” Id.
policy also includes a number of exclusions, including an
exclusion for “Loss in connection with any Claim made
against any Insured” that is
[b]ased upon, arising out of or attributable to any
remuneration received by an Insured, or the granting of any
remuneration to any Insured, without the previous approval of
the stockholders or the Board of Directors, which
remuneration is found to have been illegal; provided, this
EXCLUSION shall not apply unless a judgment or other final
adjudication adverse to any Insured in the Claim shall
establish that such Insured received remuneration to which
such Insured was not legally entitled.
Id. at 26 (the “Illegal Remuneration
Exclusion”). There is also an exclusion for a loss that
[b]ased upon, arising out of, directly or indirectly
resulting from or in consequence of, or in any way involving
the gaining of any profit or advantage to which an Insured
was not legally entitled; provided, this EXCLUSION shall not
apply unless a judgment or other final adjudication adverse
to any Insured in the Claim shall establish that such Insured
gained profit or advantage to which such Insured was not
(the “Illegal Advantage Exclusion”).
Insolvency Proceedings and DFS's Claim
February 2013, the Florida Department of Financial Services
(“DFS”) began receivership proceedings in the
Circuit Court for the Second Judicial Circuit of Florida in
and for Leon County against UHCIC and UHC (the
“Receivership Entities”) pursuant to Florida
Statutes §§ 631.031 and 631.061. Dkt. 52-1 ¶
8. Soon after, UHCG and AMC filed for Chapter 11 bankruptcy
protection. Id. ¶ 9. On March 22, 2013, the
state court placed the Receivership Entities into
receivership and appointed DFS as receiver. Dkt. 50-7.
Statutes § 631.261(1)(b) makes certain transfers of the
property of an insurer voidable:
Any transfer of . . . the property of an insurer . . . which
is made or created between 4 months and 1 year prior to the
commencement of any delinquency proceeding under this chapter
is void if such transfer . . . inured to the benefit of a
director, officer, employee, stockholder, member . . ., or
insider . . . .
Statutes § 631.154(1), in turn, provides:
If the receiver determines that funds, assets, or property in
the possession of another person are rightfully the property
of the estate, the receiver shall deliver to such person a
written demand for immediate delivery of the funds, assets,
or property to the receiver . . . . Any person who holds
funds, assets, or other property belonging to an entity
placed in receivership under this chapter shall deliver the
funds, assets, or other property to the receiver on demand.
April 4, 2013, DFS (as receiver for the Receivership
Entities) sent Dr. Desai a letter invoking Fla. Stat.
§§ 631.154(1) and 631.261(1)(b) and demanding the
return of $2, 537, 580:
As Receiver of UHCIC and UHC, the Department hereby demands
the return of $2, 537, 580.00 received by you from the funds
of UHCIC and/or UHC within one year of the Department's
successful application for delinquency proceedings. According
to the 2012 Supplemental Compensation Report filed by UHCIC,
this amount consists of a “bonus” of $2, 475,
000.00 and “other compensation” in the amount of
$62, 580.00 . . . . Pursuant to section 631.261, Florida
Statutes, the $2, 537, 580.00 which you received from UHCIC
and/or UHC in 2012 is a voidable transfer, which the
Department, as Receiver of UHCIC and UHC, is entitled to
Dkt. 50-8 at 1-3. This letter from DFS is the claim that is
at the center of the dispute between the parties in this
action (the claim is referred to as the “DFS Claw Back
Claim” and the payment demanded is ...