Opinion
Case No. CIV-02-1687-F.
May 24, 2004
ORDER
This matter comes before the court on American Casualty Company's Motion for Summary Judgment filed March 30, 2004 (docket entry no. 89). Plaintiffs have responded, American Casualty has replied, and the matter is before the court for determination.
Standard
Under Federal Rule of Civil Procedure 56(c), summary judgment shall be granted if the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The moving party has the burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). A genuine issue of material fact exists when "there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In determining whether a genuine issue of a material fact exists, the evidence is to be taken in the light most favorable to the non-moving party. Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). All reasonable inferences to be drawn from the undisputed facts are to be determined in a light most favorable to the non-movant. United States v. Agri Services, Inc., 81 F.3d 1002, 1005 (10th Cir. 1996). Once the moving party has met its burden, the opposing party must come forward with specific evidence, not mere allegations or denials, demonstrating that there is a genuine issue for trial. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir. 1983).Background
In January 1998, while employed by Duncan Regional Hospital, Drucilla Nettles, R.N. (Nurse Nettles) was allegedly involved in the care and treatment of Lisa and Morgan Mayes during Morgan Mayes's birth. A medical malpractice suit involving that birth was originally brought by the Mayes family in the District Court of Stephens County, Oklahoma. That action named Duncan Regional Hospital, Inc., Dr. Miguel Sabredra and Nurse Nettles as defendants. That action, referred to in this order as the state court Mayes action, was dismissed without prejudice by the Mayes family in 1999. Hospital Casualty states that while that action was pending, the cost of Nurse Nettles' defense was shared by Hospital Casualty and American Casualty.
The Mayes family then filed suit in the United States District Court for the Western District of Oklahoma, again naming Duncan Regional Hospital and Dr. Sabreda as defendants, but not naming Nurse Nettles as a defendant although the Complaint in that action referred to Nurse Nettles' alleged culpable acts. That action is referred to in this order as the earlier federal court Mayes action. Duncan Regional Hospital and Dr. Sabreda also did not allege any claims against Nurse Nettles in that action.
In December of 2000, Duncan Regional Hospital and Dr. Sabreda entered into an agreement settling the earlier federal court Mayes action. Although Nurse Nettles was not a defendant, as part of the settlement, she was released from any liability to the Mayes family. Neither Nurse Nettles nor American Casualty participated in the settlement discussions or agreement, although Hospital Casualty contends that it requested American Casualty to participate.
The instant action was filed in November, 2002 by Duncan Regional Hospital and its insurer Hospital Casualty Company against Nurse Nettles and her insurer American Casualty Company. Nurse Nettles' policy with American Casualty was an individual Healthcare Providers Professional Liability Insurance Policy. It is this policy, and the obligations which this policy does or does not place upon American Casualty with respect to the earlier federal court Mayes action, which is the focus of American Casualty's motion for summary judgment.
Hospital Casualty states that it afforded general liability coverage and umbrella coverage under separate policies to Duncan Regional Hospital, and that under the terms of these policies, coverage was also afforded to employees and nurses, including Nurse Nettles, for claims based on professional malpractice. Thus, Hospital Casualty is also an insurer of Nurse Nettles.
Counterclaims which are not pertinent to this motion are also alleged in this action, and there are additional counterclaim defendants not otherwise mentioned in this order.
By its motion, American Casualty seeks judgment in its favor with respect to all claims alleged against it in this action. According to the plaintiffs' own understanding of their claims, the only claims now alleged against American Casualty in this action are those alleged in the Second Cause of Action of the Complaint. This is because, although as originally pleaded plaintiffs Duncan Regional Hospital and Hospital Casualty both appeared to seek judgment against American Casualty in the Second Cause of Action, Duncan Regional Hospital has now abandoned any direct claim it might have originally alleged against American Casualty and has agreed that any claim which it might have alleged against American Casualty may be dismissed with prejudice. Also, although as originally pleaded the First Cause of Action appeared to allege claims by both plaintiffs against Nurse Nettles, Hospital Casualty has now voluntarily dismissed any claims it might have against Nurse Nettles, so that plaintiffs agree the First Cause of Action now only alleges claims by Duncan Regional Hospital against Nurse Nettles. Thus, the parties further agree that the First Cause of Action is not affected by American Casualty's motion for summary judgment as no claims are now alleged against American Casualty in the First Cause of Action.
Hospital Casualty moved to voluntarily dismiss its claims against Nurse Nettles, without specifying whether any dismissal would be with prejudice. Nurse Nettles then requested that any dismissal be with prejudice and the court entered an order requiring any party who objected to Nurse Nettles being dismissed with prejudice to state their objections. No objections or other responses were filed, and Hospital Casualty's motion to voluntarily dismiss Nurse Nettles was granted with all parties essentially agreeing that the dismissal should be with prejudice to re-filing. (Order, December 2, 2003, docket entry no. 49.)
Other than matters of record (such as the dismissal of Nurse Nettles by Hospital Casualty) the other matters included in the paragraph of text associated with this footnote were proposed to the parties for comment in the court's Enter Order of May 11, 2004 (docket entry no. 106). Only the plaintiffs responded (plaintiffs' response, docket entry no. 108) with any comments either to the proposed preliminary findings, or to any other matters suggested by American Casualty in its reply brief at p. 2, n. 1. Matters suggested by American Casualty in the referenced footnote of its reply brief included the fact that only Hospital Casualty is now making claims against American Casualty, and that only Duncan Regional Hospital is now making claims against Nurse Nettles. Although plaintiffs' response to the court's Enter Order did not dispute American Casualty's interpretations of its claims, plaintiffs' response did object to certain other interpretations of plaintiffs' First Cause of Action alleged by the Hospital. While plaintiffs' response to the Enter Order confirmed plaintiffs' understanding that the First Cause of Action now alleges only claims by the Hospital against Nurse Nettles so that the First Cause of Action is not affected by American Casualty's motion, (see the statement by plaintiffs' in their response brief at p. 2, that "[i]n the first claim, which is not affected by American Casualty's Motion for Summary Judgment, Duncan seeks recovery from Nettles. . . ."; reiterated in American Casualty's reply brief at p. 2, n. 1, and not objected to in plaintiffs' response to the court's Enter Order), plaintiffs' response to the Enter Order went on to indicate that in certain respects, plaintiffs' interpretation of the First Cause of Action is broader than American Casualty's interpretation of that claim. Specifically, plaintiffs maintain that through the First Cause of Action asserted by the Hospital against Nurse Nettles: 1) the Hospital can recover "the full amount of the settlement of the underlying action" (although the Hospital recognizes that any amount it recovers would be subject to reimbursement to the Hospital's insurer, Hospital Casualty Company); 2) that the Hospital's claim against Nurse Nettles is not just for statutory contribution but is also based upon a common law indemnity theory of liability; and 3) that as a result of this claim, the Hospital has a "right to an indirect remedy against the Nurse's insurer American Casualty in the event it prevails on its claim against Nurse Nettles." (Plaintiffs' response to Enter Order of May 11.) As these issues involve the First Cause of Action alleged against Nurse Nettles and not the Second Cause of Action which is the claim alleged against American Casualty and which the parties agree is the only claim affected by American Casualty's motion, the court merely identifies these issues here, notes that they are contested, and declines to further address them at this juncture. Nurse Nettles has filed her own motion for summary judgment, challenging the claims alleged against her and implicating these same issues. Therefore, to the extent it is necessary to do so, the court will likely address these issues when it rules on Nurse Nettles' motion.
In the interest of stating all pertinent findings in one document, and given plaintiffs' qualified acceptance of some of the matters referred to in the court's Enter Order of May 11, 2004, the preliminary findings stated by the court in its May 11 Enter Order are VACATED. The court's findings regarding the posture of plaintiffs' claims, as understood by the plaintiffs themselves, are now as stated in this order.
From these recitals, it follows that the only claim remaining in this action which is currently alleged against American Casualty is the claim brought by Hospital Casualty against American Casualty in the Second Cause of Action. In that claim, Hospital Casualty seeks compensation from American Casualty "for any appropriate share of cost of defense and litigation in the previous [federal court Mayes action] case." (Complaint, pp. 3-4.) Accordingly, this order addresses the viability of that claim.
Discussion
Considered as a whole, this case involves several factual disputes. For example, the parties dispute whether Nurse Nettles was negligent, and if so, whether her negligence caused any damage. Also at issue is the extent to which Nurse Nettles' alleged conduct caused injury to the Mayes, and what portion of the amount paid by Hospital Casualty to settle the federal court Mayes action is properly attributed to Nurse Nettles' conduct.
These disputes, however, play no part in the issue placed before the court by American Casualty's motion. All of the material facts which American Casualty asserts in support of its motion are undisputed, in fact, they are expressly admitted by Hospital Casualty. Accordingly, the court concludes that the issue presented by American Casualty's motion is a purely legal one.
That specific issue is whether, in the circumstances of this case, Hospital Casualty can recover from another insurer, American Casualty, for Hospital Casualty's payments and costs incurred when Hospital Casualty settled a prior action in which American Casualty's insured was not named as a party.
American Casualty argues that it cannot be liable to Hospital Casualty for essentially three reasons:
First, because under Oklahoma law, Hospital Casualty cannot assert a direct action against American Casualty;
Second, because Hospital Casualty cannot prevail on an equitable subrogation claim against American Casualty as the subrogated insurer has no greater rights than the insured, and here, Nurse Nettles, as the insured, has no rights against American Casualty as a result of the earlier federal court Mayes action since no claim was ever asserted against her in that litigation and she did not agree to the settlement of that action; and
Third, because American Casualty cannot be liable pursuant to an equitable contribution theory as there is only a right to equitable contribution where insurers cover the same obligation and the same risk at the same level of coverage, and here there is no such common obligation as between American Casualty and Hospital Casualty.
Hospital Casualty's response to these arguments is that American Casualty is mistaken as to the proper resolution of these three legal issues. Hospital Casualty also contends that by declining to participate in the settlement of the earlier federal court Mayes action, American Casualty waived any objection it might otherwise have to what Hospital Casualty now asserts Hospital Casualty is entitled to from American Casualty as a result of that litigation and settlement.
Before taking up these issues, this order sets out some of the material undisputed provisions contained in the professional liability policy issued to Nurse Nettles by American Casualty. The language of the policy is undisputed. The policy, which is attached to American Casualty's motion as Exhibit "F," provides as follows.
[American Casualty] [w]ill pay all amounts up to the limit of liability which you [Nurse Nettles] become legally obligated to pay as a result of injury or damage. In addition to the limit of liability, we will also pay claim expenses. (Occurrence coverage part, I.)
We [American Casualty] have the right and will defend any claim. We will: A. do this even if any of the charges of the claim are groundless, false or fraudulent; and B. investigate and settle any claim as we feel appropriate. (Occurrence coverage part, III.)
You [Nurse Nettles] may not bring any legal action against us concerning this policy until . . . the amount of your obligation to pay has been decided. Such amount can be set by judgment against you after actual trial or by written agreement between you, us and the claimant. Any entity, or their legal representative, is entitled to recover under this policy after they have secured a judgment or written agreement. (Common policy provisions, XI.)
"Claim" means a demand for money or services. Claim also means the filing of a suit or the starting of arbitration proceedings naming you and alleging injury or damages. (Common policy provisions, XVIII.)
Any loss resulting from any claim insured under any other insurance policy or risk transfer instrument . . . which applies to this loss, shall be paid first by those instruments policies, or other arrangements. This insurance will not serve as primary insurance where there is other applicable insurance. (Common policy provisions, VIII.)
American Casualty relies mainly on the above-quoted provision which indicates that any obligation to pay arises only with regard to amounts which Nurse Nettles becomes "legally obligated to pay." Based on that language, American Casualty's argument goes generally along the following lines:
Nurse Nettles was never sued in the earlier federal court Mayes litigation and was not a party to the settlement agreement in that litigation;
therefore, Nurse Nettles cannot have ever become "legally obligated to pay" any amount as a result of that litigation;
therefore, American Casualty has never had any obligation to Nurse Nettles with respect to the earlier federal court Mayes litigation, including no obligation to defend her and no obligation to participate in the settlement discussions or agreements on her behalf;
therefore, American Casualty's failure to participate in the settlement of that litigation, or to share in the defense or costs of the litigation or the settlement, cannot possibly constitute a waiver on its part of any of its objections or defenses to Hospital Casualty's claims now asserted against it, which are claims that American Casualty should compensate Hospital Casualty for Nurse Nettles' purported share of the Hospital Casualty's costs incurred in litigating and settling the earlier federal court Mayes action.
In response, Hospital Casualty contends that American Casualty's obligations under the policy are triggered whenever there is a "claim" against one of its insureds and that there was a claim pending at the time of the earlier federal Mayes action. It is undisputed that the term "claim" is defined in the American Casualty policy as "a demand for money or services." Although Hospital Casualty might argue otherwise, the court finds that it is an established fact that, as Nurse Nettles was never sued in the earlier federal court action, there was no "demand for money or services" from Nurse Nettles in that action.
Faced, therefore, with the inherent difficulties of its position, Hospital Casualty is reduced to arguing one of two things: either the claim which gives rise to American Casualty's obligations in the earlier federal court Mayes litigation is the claim which was asserted and then voluntarily dismissed by the Mayes family in the earlier state court Mayes litigation, or, the fact that Nurse Nettles' culpable acts are described in the earlier federal court Mayes action is enough to constitute a claim against her, or at least enough to show that some other, unwritten and presumably unspoken claim at least existed at that time. The court rejects both arguments.
The first argument requires a finding that because there was once a claim against Nurse Nettles for money or services due to the Mayes family, American Casualty's obligations to defend that claim survived the Mayes family's abandonment of that claim and continued to obligate American Casualty to participate in a subsequent lawsuit brought by the Mayes family in which American Casualty's insured was not sued. It would seem to follow from Hospital Casualty's position that, short of securing a release of an apparently abandoned or formally dismissed claim, or else litigating the abandoned claim or the intention to abandon it, or else waiting for the limitations period to expire, the insurer against liability potentially arising from such a previously asserted claim could never be certain of its obligations.
To bolster the obvious weakness of its first argument based on the earlier state court claim, Hospital Casualty offers its second argument, pointing to the fact that, although Nurse Nettles was not a defendant in the earlier federal court action, she and her alleged culpable actions were described in the text of the Complaint filed in that action. The recitals in the earlier federal court complaint establish that the Mayes family knew about, and continued to believe in the culpability of, Nurse Nettles as a participant in the medical incident which gave rise to both the earlier state court action and the earlier federal action. In spite of this knowledge and belief, the Mayes family chose not to allege any claim against her in their federal action. Thus, far from helping Hospital Casualty's position that there was an actual claim pending against Nurse Nettles, either because it survived dismissal of the state court action or because it was implicit in the description of Nurse Nettles' actions in the federal court Complaint, the court finds that the mention of Nurse Nettles in the federal court Complaint only underscores the Mayes family's abandonment of their claim against Nurse Nettles.
The court finds and concludes that Hospital Casualty's arguments stretch the meaning of the term "claim" beyond both its express meaning, as defined and used in the American Casualty policy, and beyond its logical meaning. The illogic of Hospital Casualty's position is demonstrated by the fact that even if the court were to adopt Hospital Casualty's proposed interpretation of a claim as a once-made-forever surviving-even-formal-abandonment-demand-for-money-or-services, that meaning would never give rise to any obligation on American Casualty's part to actually pay such a claim. This is because, under the policy language, American Casualty's obligation to pay is only triggered when there is "a legal obligation to pay" and such an obligation cannot arise from the undisputed facts surrounding the disposition of the earlier federal court Mayes action. The court concludes that the interpretation which Hospital Casualty tries to ascribe to the term "claim" is, for purposes of this policy, an essentially meaningless one.
Accordingly, the court rejects the Hospital Casualty's argument that American Casualty had an obligation to participate in the settlement of the earlier federal court Mayes action even though its insured was not named in that action. The court also rejects Hospital Casualty's argument that by not participating in the earlier federal court Mayes action, American Casualty waived or is now estopped to assert that it has no obligation to pay part of that settlement or the costs incurred by Hospital Casualty in litigating or settling that action.
With these determinations in mind, the court next addresses the viability of Hospital Casualty's claim based upon the various theories of liability which Hospital Casualty proposes to support it. Hospital Casualty argues that it is entitled to recover from American Casualty based upon three arguments labeled in its response brief as "apportionment," "equitable contribution," and "equitable subrogation."
The arguments set forth in the section of Hospital Casualty's brief which pertains to "apportionment" consist almost entirely of asking the court to begin its analysis by imagining circumstances quite different from the actual circumstances of this case. Hospital Casualty would have the court pretend that Nurse Nettles was named as a party in the federal action, and then argues that, in that pretended event, it would be clear that the settlement of the earlier federal court Mayes action would have to be satisfied by exhaustion of Hospital Casualty's general liability policy and American Casualty's policy, with the balance of the settlement amount coming from Hospital Casualty's excess policy. Hospital Casualty's brief jumps from these imagined facts to the proposition, unsupported by any citation, that "the better view holds, especially under circumstances comparable to those here, that Mayes' decision not to join Nettles as a party to the second action does not permit American Casualty to escape its coverage obligations." (Hospital Casualty's response brief, pp. 11-12.) Hospital Casualty's brief then discusses why it has valid and enforceable claims against American Casualty under the doctrines of equitable contribution and equitable subrogation.
Thus, Hospital Casualty's entire apportionment argument consists of asking the court to imagine-away the critical, distinguishing facts of the very issue presented by American Casualty's motion. The court finds and concludes that Hospital Casualty's apportionment argument presents no basis upon which to deny summary judgment, and that this portion of Hospital Casualty's response brief really only serves as an introduction to Hospital Casualty's two substantive theories of liability, equitable contribution and equitable subrogation.
American Casualty posits that it is in an effort to avoid the effect of Oklahoma's prohibition of a direct action against the insurer of an alleged tortfeasor, that Hospital Casualty relies on the theories of equitable subrogation and equitable contribution. American Casualty argues that Oklahoma has held that absent a statutory edict specifically permitting a direct action against the insurer of an alleged tortfeasor, there is no right to assert a direct action against an insurer, and that while the Oklahoma legislature has provided for direct actions in some limited circumstances, there is no statute authorizing a direct action against the insurer of a nurse who was allegedly negligent in providing medical care. Hospital Casualty does not contest or otherwise respond to this proposition and the court finds that the proposition has been confessed and is correct. See, Daigle v. Hamilton, 782 P.2d 1379, 1383 (1989) ("We have never before recognized the right of a plaintiff to bring a direct action against the insurer of an alleged tortfeasor absent statutory edict [and] [w]e do not recognize this right now.").
With regard to Hospital Casualty's equitable subrogation theory, the court finds and concludes that the right of subrogation is purely derivative, a point which is also conceded by Hospital Casualty in its response brief. See, United States Fid. Guar. Co., 37 P.3d 828, 831 (2001) (distinguishing equitable subrogation and equitable contribution and stating that in the "insurance context" "a claim based on equitable subrogation allows an insurer who has paid coverage to stand in the shoes of the insured and pursue recovery from a third party primarily responsible for the insured's loss which the insurer both insured and reimbursed.").
Pursuant to its equitable subrogation argument, Hospital Casualty states that it "is entitled to stand in the shoes of Nettles" to recover from Nettles' insurer, American Casualty. (Response brief, p. 16.) Having already found that American Casualty has no obligations to Nurse Nettles as a result of the earlier federal court Mayes action, however, it necessarily follows that even if Hospital Casualty is correct that it now stands in Nurse Nettles' shoes with respect to any claim she might have against her insurer, this standing avails Hospital Casualty of nothing since the earlier federal court Mayes action gave rise to no obligations by American Casualty to Nurse Nettles. Accordingly, Hospital Casualty's equitable subrogation theory is not a viable theory of recovery against American Casualty. See also, Univ. of Utah Hosp., 2004 WL 793226 at *2 (rejecting an equitable subrogation claim because there was neither a judicial determination of the nurse's liability nor a settlement in which she personally participated).
In contrast to the doctrine of equitable subrogation, the doctrine of equitable contribution applies when co-insurers "share common liability with the party seeking contribution," that is, "when co-insurers have covered the same insured and the same particular risk at the same level of coverage." U.S. Fid. Guar. Co., 37 P.3d at 832. Unlike subrogation, "[t]he right of contribution is not derivative of the rights of the insured, but belongs to each insurer independently to seek reimbursement from a coinsurer those sums which were paid in excess of an insurer's proportionate share of the common obligation." Id.
In discussing the differences between equitable subrogation and equitable contribution, the Oklahoma Supreme Court has cited a California case with approval, Fireman's Fund. Ins. Co. v. Md. Cas. C., 65 Cal. App. 4th 1279, 77 Cal. Rptr. 2d 296 (1998).United States Fid. Guar. Co. v. Federated Rural Elect. Ins. Co., 37 P.3d 828, 832 (Okla. 2001) (citing Fireman's Fund California case). The California court of appeals also relied on the Fireman's Fund case in American Continental Insurance Co. v. American Casualty Co., 86 Cal. App. 4th 929, 939, 103 Cal. Rptr. 2d 632 (2001). After quoting Fireman's Fund, id. at 936-97, American Continental held that a hospital's insurer had no equitable contribution right against a nurse's insurer when the nurse was not sued in the underlying action, because in order for the hospital's insurer to maintain an equitable contribution action, the nurse's insurer "must have had a legal obligation to [the nurse] to provide her defense and/or indemnity coverage" in the underlying action." 86 Cal. App. 4th at 938.
As explained in American Continental (a case in which American Casualty was also the nurse's insurer):
[I]f the obligation to provide coverage under the American Casualty policy never arose, then American Casualty never at any time had any contractual obligation with respect to the [underlying] claim or action. And, . . . if there is no contractual obligation, then there can be no successful assertion of a claim for equitable contribution by [plaintiff American Continental] merely because it chose, in the pursuit of its own interests and obligations, to settle the [underlying] action by purchasing the peace of its insureds. . . . Under the facts of this case, American Casualty simply was not a `co-obligor' who shared a liability with [American Continental]. American Casualty never had any liability."Id. at 939 (emphasis in original).
Given the Oklahoma Supreme Court's previous reliance on California case law, and given the California court's holding inAmerican Continental that facts similar to those presented here do not support an equitable contribution theory of liability, this court has no trouble concluding that the Oklahoma Supreme Court would find that in light of the undisputed facts of this case, Hospital Casualty's equitable contribution theory of liability is insufficient as a matter of law.
In summary, the court determines that American Casualty has established its entitlement to judgment as a matter of law with respect to the only claim now asserted directly against it in this action, that claim being the claim alleged by Hospital Casualty against American Casualty in the Second Cause of Action of the Complaint.
One final matter requires comment. The court is aware of American Casualty's request for a finding under Fed.R.Civ.P. 54(b) that there is no reason to delay enforcement or appeal of this judgment. If American Casualty wishes to pursue that request, it is directed to file a separate motion to that effect with a proposed order containing any recitals it deems necessary. Prior to doing so, American Casualty shall confer with opposing counsel to determine whether an agreed proposed order can be presented to the court. Failing agreement, the parties will be allowed to respond to any Rule 54(b) motion which American Casualty may make, pursuant to the usual briefing schedule established by the local rules.
Conclusion
After careful consideration of the parties' submissions, the record, and the relevant authorities, the court determines that American Casualty's motion for summary judgment should be, and hereby is, GRANTED to the following extent: American Casualty is granted summary judgment in its favor on all claims alleged directly against it in this action, those claims being the claims alleged by Hospital Casualty against American Casualty in the Second Cause of Action of the Complaint; additionally, as Duncan Regional Hospital has abandoned any claims which it may have previously intended to allege directly against American Casualty and has agreed that American Casualty is therefore entitled to dismissal with prejudice of any such claims, any claims previously intended to be alleged by Duncan Regional Hospital against American Casualty are hereby DISMISSED with prejudice.