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National Fire & Marine Insurance Co. v. Infini PLC

United States District Court, D. Arizona

October 24, 2017

National Fire & and Marine Insurance Company, Plaintiff,
v.
Infini PLC, et al., Defendants. Infini, PLC, et al., Counterclaimants,
v.
National Fire & Marine Insurance Company, Counterdefendant. Infini PLC, et al., Third-Party Plaintiffs,
v.
AIG Claims, Inc., et al., Third-Party Defendants.

          ORDER

          Honorable G. Murray Snow United States District Judge.

         Pending before the Court is Plaintiff/Counterdefendant National Fire & Marine Insurance Company's (NF&M) Motion for Judgment on the Pleadings. (Doc. 73). For the following reasons, the Court grants the motion in part and denies the motion in part.

         BACKGROUND

         Defendant/Counterclaimant, Dr. William Hall, provides cosmetic procedures and surgeries through his company, Infini, PLC (collectively, “Infini”). (Doc. 1 ¶ 9; Doc. 25 ¶ 6). On August 12, 2014, Dr. Hall performed a liposuction procedure on Defendant Donna Willis. (Doc. 1 ¶ 10; Doc. 25 ¶ 6). Subsequent to the liposuction, Ms. Willis required hospitalization and additional surgeries. Ms. Willis filed a complaint against Infini in Maricopa County Superior Court. (Doc. 1 ¶¶ 11-13; Doc. 25 ¶ 7). The case before this Court principally concerns whether the Plaintiff is obliged to provide the Defendants with coverage and/or a defense for Ms. Willis's claims in the Maricopa County Superior Court.

         At the time of Ms. Willis's surgery, Infini was insured against malpractice claims by Lexington Insurance Company (produced by Wells Fargo Insurance Services). (Doc. 1 ¶ 16; Doc. 25 ¶ 9). On September 4, 2014, Ms. Willis's husband requested Ms. Willis's medical records from Infini. Upon receiving this request, Infini notified Wells Fargo of Ms. Willis's hospitalization and her husband's request for medical records. (Doc. 25 Counterclaim ¶ 20-21). By September 17, 2014, Ms. Willis retained an attorney, John Brewer. Mr. Brewer requested Ms. Willis's medical records from Infini. (Doc. 1 ¶ 18; Doc. 25 ¶ 9). Again, Infini notified Wells Fargo of the request. (Doc. 1 ¶ 19; Doc. 25 ¶ 9).

         Around the same time, Infini applied for medical malpractice insurance for the upcoming year. Wells Fargo submitted an application to NF&M on behalf of Infini on September 17, 2014. Infini did not provide any information about Ms. Willis's injury on the application. (Doc. 1 ¶¶ 35-40; Doc. 25 ¶¶ 10-11). On October 1, 2014, Infini and Dr. Hall submitted an insurance renewal application to Lexington. The Lexington application asked: “Are you aware of any circumstance, accident or loss which has occurred after the retroactive date, which may result in a claim under this insurance coverage that has not been reported to your current or prior insurer?” Dr. Hall answered this question by noting that a lawyer had requested medical records, presumably in reference to Ms. Willis's case. (Doc. 1 ¶¶ 22-23; Doc. 25 ¶ 9). Infini ultimately decided to renew the insurance policy with Lexington, and thus did not sign a contract with NF&M. (Doc. 1 ¶ 24; Doc. 25 ¶ 9).

         On January 29, 2015, Mr. Brewer sent a letter to Infini asking for Infini's insurance information. Infini informed Wells Fargo and Lexington of the request. (Doc. 1 ¶¶ 29-31; Doc. 25 ¶ 9). By May 19, 2015, however, Lexington informed Infini that the new insurance policy did not cover injuries caused by liposuction procedures. Therefore, they would not defend any claim brought by Ms. Willis. (Doc. 1 ¶ 33; Doc. 25 ¶ 9). Since liposuctions are a significant part of Dr. Hall's practice, he sought a new insurance policy that would cover these procedures. Infini again applied for insurance from NF&M.[1] This application asked: “[H]ave you or anyone from your practice received a written request from an attorney for treatment records concerning any of your current or former patients that might reasonably result in a claim or suit against you?” Dr. Hall noted that Ms. Willis's attorney had requested records but that no suit had yet been filed. He also noted that this matter had been reported to his current insurer. (Doc. 25 Counterclaim ¶ 42).

         NF&M issued a policy on June 2, 2015 to cover the policy period of May 29, 2015 to May 29, 2016. (Doc. 1 ¶ 44; Doc. 25 ¶ 15). Under the policy, NF&M covers a loss resulting from “a claim that was first made against the insured facility, or its agent, during the policy period.” (Doc. 1 ¶ 46; Doc. 1 Ex. 1 page 7). NF&M also covers a loss resulting from “a potential claim that was first discovered by the insured facility, or its agent, during the policy period.” (Doc. 1 ¶ 46; Doc. 1 Ex. 1 page 7). The policy specifically excludes coverage, however, of “[a]ny potential claim that was first discovered by any authorized insured prior to the policy period” (the “prior acts policy exclusion”). (Doc. 1 ¶ 49; Doc. 1 Ex. 1 page 8). The policy defined a “claim” as “an express, written demand served upon an Insured for money or services as compensation for civil damages.” (Doc. 1 ¶ 47; Doc. 1 Ex. 1 page 46). A “potential claim” is “an event the Insured knows or reasonably should know is likely to result in a claim.” (Doc. 1 ¶ 48; Doc. 1 Ex. 1 page 48).

         Ms. Willis filed her lawsuit on January 7, 2016. (Doc. 25 Counterclaim ¶ 44). NF&M agreed to defend Dr. Hall under a reservation of rights. (Doc. 25 Counterclaim ¶ 46). On August 2, 2016, NF&M revised its reservation of rights and notified Infini that the claim might not be covered due to the policy exclusion relating to discovery of potential claims prior to the policy period. (Doc. 25 Counterclaim ¶ 53). NF&M brings this suit seeking a declaratory judgment that it is not responsible for covering Ms. Willis's claim against Dr. Hall and Infini. Infini countersued, seeking a declaration that NF&M must cover Ms. Willis's claim and alleging that NF&M was negligent in its dealings with Infini.

         DISCUSSION

         I. Legal Standard

         A motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) is “properly granted when, taking all allegations in the pleading as true, the moving party is entitled to judgment as a matter of law.” Merchants Home Delivery Serv., Inc. v. Frank B. Hall & Co., 50 F.3d 1486, 1488 (9th Cir. 1995); Fajardo v. Cty. Of L.A., 179 F.3d 698, 699 (9th Cir. 1999). The moving party must “clearly establish[ ] on the face of the pleadings that no material issue of fact remains to be resolved.” Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1989). A motion for judgment on the pleadings is “functionally identical” to a Rule 12(b)(6) motion, and so the same standard of review is used in both. Cafasso ex rel. v. General Dynamics C4 Systems, Inc., 637, F.3d 1047, 1054 n. 4 (9th Cir. 2011) (quoting Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989)). The court generally may not consider matters outside the pleadings without converting the motion into a motion for summary judgment. Fed.R.Civ.P. 12(d). However, the court may “consider documents on which the complaint necessar[ily] relies.” Rosa v. Cutter Pontiac Buick GMC of Waipahu, Inc., 120 Fed.Appx. 76, 77 (9th Cir. 2005) (finding that a sales contract and its addendum were documents upon which the complaint necessarily relied).

         II. Discussion

         The parties dispute whether Ms. Willis's claim against Infini falls into NF&M's prior acts policy exclusion. The facts Infini claims are in dispute are actually disagreements over the legal significance of facts that are not in dispute. The parties have included the relevant language from the insurance policy in their complaints, but the Court is also permitted to consider the insurance policy itself as the complaint necessarily relies on it.

         A. The Insurance Policy's ...


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