United States District Court, D. Arizona
G. Campbell United States District Judge.
parties have filed cross-motions for summary judgment. Docs.
189, 191. The motions are fully briefed, and the Court heard
oral argument on November 18, 2016. The Court will deny
Plaintiff's motion and grant Defendant's motion.
case involves a dispute over insurance coverage for a
physician, Dr. Anthony Schwartz, who was sued for medical
negligence. Dr. Schwartz had a professional liability policy
through Plaintiff Admiral Insurance Company
(“Admiral”). Dr. Schwartz was employed by the
Bullhead City Clinic (the “Clinic”), and the
Clinic had its own liability policy through Defendant
Community Insurance Group SPC Limited (“CIG”).
Dr. Schwartz's Employment and Insurance
September 1, 2007, Dr. Schwartz entered into an employment
agreement with the Clinic. Docs. 192, ¶ 1; 196, ¶
Dr. Schwartz applied for professional malpractice liability
insurance with Admiral, and Admiral issued him a primary
Physicians, Surgeons & Dentists Professional Liability
Policy, EO000009373 (the “Admiral Policy”). Doc.
192, ¶¶ 6, 9.
Clinic is owned by Community Health Systems, Inc.
(“CHS”), a corporation that owns hundreds of
hospitals and clinics in 22 states. Doc. 191 at 2-3. CIG is a
captive insurer owned by CHS. Id. Every physician
employed at a CHS-affiliated hospital or clinic is required
to have primary professional liability insurance.
Id. CHS entities like the Clinic offer their
physicians two means of obtaining liability insurance: (1)
CHS procures and maintains the insurance, in which case it
uses its captive insurer CIG as the primary insurer, or (2)
the physician obtains insurance from an outside commercial
carrier, in which event CHS pays the premiums. Id.
Dr. Schwartz chose the second option and obtained his
insurance from Admiral.
also issued a single master policy to all CHS entities,
naming each clinic or hospital as a named insured.
Id. at 4. The Clinic was covered by such a policy in
this case, Policy No. 274/CIG10 (the “CIG
Policy”). Id. The CIG Policy insured the
Clinic, and also provided coverage to already-insured
employees like Dr. Schwartz. Id.
argues that the CIG Policy and the Admiral Policy are both
primary liability policies for Dr. Schwartz. Doc. 189 at
11-12; Doc. 195 at 2. CIG asserts that its policy provides
only excess coverage for Dr. Schwartz, and applies only after
the limits of his primary policy - the Admiral Policy - are
exhausted. Doc. 192, ¶¶ 20-23.
The Underlying Litigation.
2010, Gale and Earl Radmall filed a medical negligence suit
against Dr. Schwartz (the “underlying
litigation”). Id., ¶ 24. Admiral retained
counsel to defend Dr. Schwartz and provided coverage without
a reservation of rights. Id., ¶ 27. In October
2010, the Radmalls learned that Dr. Schwartz was a Clinic
employee with an additional insurance policy through the
Clinic. Id., ¶¶ 31-32. In early 2011, the
Radmalls added the Clinic as a defendant in the underlying
litigation, and CIG retained counsel to defend the Clinic.
Id., ¶¶ 34-36.
September 2012, Admiral settled the underlying litigation
against Dr. Schwartz for $425, 000. Id., ¶ 49.
In November 2012, CIG settled the underlying litigation
against the Clinic in a separate, confidential settlement
agreement. Id. Admiral filed this action against CIG
on August 14, 2014, seeking equitable contribution for
payments it made on behalf of Dr. Schwartz. Doc. 1. Following
discovery, the parties briefed extensive cross-motions for
summary judgment. Docs. 121, 122, 128, 129, 130, 148, 149,
150, 153, 154, 155. On August 26, 2016, the Court held a
conference with the parties and directed that the motions be
briefed in a more focused manner. Doc. 160. All pending
motions were denied as moot and the parties were instructed
to brief cross-motion for summary judgment on two issues: (1)
is the CIG Policy primary or excess, and (2) if the CIG
Policy is primary, is Admiral's recovery barred by the
selective tender rule or for failure to reserve rights?
Id. The Court will resolve this case on the first
seeking summary judgment “bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a
genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). Summary judgment is
appropriate if the evidence, viewed in the light most
favorable to the nonmoving party, shows “that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). Both parties move for summary judgment, and neither
suggests that a factual dispute precludes summary judgment in
parties agree that Arizona law governs this case. Doc. 189 at
6; Doc. 191 (citing Arizona law throughout). In Arizona, the
interpretation of an insurance contract is a question of law
to be determined by the court. Sparks v. Republic
National Life, 647 P.2d 1127, 1132 (Ariz. 1982). The
provisions of an insurance contract are interpreted according
to their plain and ordinary meaning. Nat'l Bank of
Ariz. v. St. Paul Fire and Marine Ins. Co., 975 P.2d
711, 713 (Ariz.Ct.App. 1999). “[T]o determine the
meaning of a clause which is subject to different
interpretations or constructions, [courts] examin[e] the
purpose of the clause, public policy considerations, and the
transaction as a whole.” Ariz. Prop. & Cas.
Ins. Guar. Fund v. Helme, 735 P.2d 451, 456-57 (Ariz.
1987); see also Transamerica Ins. Group v. Meere,
694 P.2d 181, 185 (Ariz. 1984).
‘contribution theory is based upon the equitable
principle that where two companies insure the same risk and
one is compelled to pay the loss, it is entitled to
contribution from the other.'” Virginia Sur.
Ins. Co. v. RSUI Indem. Co., No. 09-cv-928-PHX-JAT, 2009
WL 4282198, at *4 (D. Ariz. Nov. 25, 2009) (quoting
Indus. Indem. Co. v. Beeson, 647 P.2d 634, 637
(Ariz.Ct.App. 1982)). “Equitable contribution ‘is
not derivative from any third person, but exists as an
independent action by one insurer against
another.'” Navigators Specialty Ins. Co. v.
Nationwide Mut. Ins. Co., 50 F.Supp.3d 1186, 1194 (D.
Ariz. 2014) (quoting Am. Cont'l Ins. Co., Inc. v. Am.
Cas. Co. of Reading, Pa., 903 P.2d 609, 610
(Ariz.Ct.App. 1995)). “The doctrine applies only when
co-insurers have covered the same insured and the same
particular risk at the same level of coverage.”
Virginia, 2009 WL 4282198 at *4 (quoting U.S.
Fid. & Guar. Co. v. Fed. Rural Elect. Ins. Corp., 37
P.3d 828, 832 (Okla. 2001)).
insurance generally has the first duty to indemnify and
defend the insured. Am. Family Mut. Ins. Co. v.
Cont'l Cas. Co., 23 P.3d 664, 666 (Ariz.Ct.App.
2001). An excess insurer normally is not obligated to
indemnify or defend until all applicable primary insurance
has been exhausted. Id. No right to equitable
contribution generally exists between a primary and excess
insurer because “they are covering separate and clearly
defined layers of risk.” Virginia, 2009 WL
4282198 at *4.
moves for summary judgment on its claim that CIG is a primary
insurer and must equitably contribute to the defense and
indemnity costs of Dr. Schwartz in the underlying litigation.
Doc. 189 at 2. CIG asks the Court to rule that it is not a