National Fire and Marine Insurance Co. v. Infini PLC

          ORDER

          G. Murray Snow Chief United States District Judge.

         Pending before the Court are Lexington Insurance Company's Motion for Summary Judgment (Doc. 171), AIG Claims Incorporated's Motion for Summary Judgment (Doc. 178), Wells Fargo Insurance Services USA's Motion for Summary Judgment (Doc. 226), and William Hall and Infini PLC's Cross Motion for Summary Judgment (Doc. 210), and Motion to Strike (Doc. 250).^[1]

         BACKGROUND

         Defendant/Counterclaimant, Dr. William Hall, provides cosmetic procedures and surgeries through his company, Infini, PLC (collectively, “Infini”). Since at least 2011, Lexington Insurance Company (“Lexington”) has provided coverage insurance to Dr. Hall for the medical procedures he performs in his practice. To obtain insurance coverage, Infini worked with an insurance broker, Wells Fargo Insurance Services USA (“Wells Fargo”). Lexington uses an independent third-party to adjust its claims, AIG Claims Incorporated (“AIG Claims”), and has an underwriter Smith Bell & Thompson (“SBT”).

         On July 24, 2014, Wells Fargo sent a renewal application to Infini. (Doc. 228-4 at 4). Several weeks later, on September 4, 2014, Infini returned the application. In the application, Infini crossed out certain kinds of liposuction-specifically liposelection and lipodissolve-because Infini did not perform those procedures. (Doc. 228-4 at 22). On the same page, the application noted that Infini performed large quantities of “local anesthesia lipo.” (Id.). CRC Services and Wells Fargo relayed this handwritten application to SBT, Lexington's underwriter. (Doc. 171, Ex. 30). On September 29, SBT sent CRC Services an email that stated “Attached you will find a renewal quote. The premium increase is due to the significant increase in exposures.” (Doc. 173-33 at 2). But the coverage that SBT produced for CRC and Wells Fargo did not ultimately contain coverage for liposuction. (“2014-2015 Policy”) (Doc. 171 Ex. 11). In the communications between CRC, Wells Fargo and SBT, the parties all referred to the policy as a “renewal.” (Doc. 172, Ex. 33) (“Attached you'll find the renewal quote.”). And the 2014-2015 Policy from Lexington specifically stated that it was a renewal policy. (Doc. 173, Ex. 34).

         On October 1, 2014, when filling out additional forms related to the application to renew coverage for Dr. Hall, a representative of Wells Fargo Insurance Services noted that she was “aware of [a] circumstance accident or loss . . . which may result in a claim under the insurance coverage.” (Doc. 173-12 at 51). This document specifically noted that there had been a records request to Infini from a lawyer. (Id.).

         While Infini was corresponding with Wells Fargo about its policy renewal, Dr. Hall performed a liposuction procedure on Donna Willis. After this procedure, Ms. Willis was hospitalized and required additional surgeries. (Doc. 211-1 at 3). In September 2014, Dr. Hall received two requests for medical records from Ms. Willis-first from her husband, and then from a lawyer on her behalf. (Doc. 211-1 at 4). He was also notified that Ms. Willis had been hospitalized about a week after her liposuction procedure. (Doc. 211-1 at 3).

         On January 29, 2015, counsel for Ms. Willis requested the contact information of Infini's insurance carrier. (Doc. 228-1 at 17). Infini forwarded this to Wells Fargo and Lexington. (Id. at 16). Ms. Willis later filed suit against Dr. Hall and Infini in Maricopa County Superior Court. (Doc. 228-1 at 2). But in May 2015, Lexington informed Infini that the new insurance policy did not cover injuries caused by liposuction, and it would not defend any claim brought by Ms. Willis. Dr. Hall and Infini filed a third-party complaint in this suit arguing that Lexington wrongfully denied coverage for the Medical Incident. It is on that complaint that the various parties bring their motions for summary judgment.

         DISCUSSION

         I. Legal Standard

         The purpose of summary judgment is “to isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows “that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248.

         “[A] party seeking summary judgment always 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, 477 U.S. at 323. Parties opposing summary judgment are required to “cit[e] to particular parts of materials in the record” establishing a genuine dispute or “show[] that the materials cited do not establish the absence ... of a genuine dispute.” Fed.R.Civ.P. 56(c)(1).

         II. Analysis

         At the summary judgment stage, Plaintiff Infini's evidence is “to be believed, and all justifiable inferences are to be drawn in [his] favor.” See Anderson, 477 U.S. at 255 (1986). Disputed facts are “viewed in the light most favorable to” Infini, the non-moving party. See Scott v. Harris, 550 U.S. 372, 380 (2007).

         A. Lexington Insurance Company's Motion for Summary Judgment

         In Arizona, the interpretation of an insurance contract is a question of law. Liristis v. Am. Family Mut. Ins. Co., 61 P.3d 22, 25 (Ariz.Ct.App. 2002). Insurance policies are “read as a whole, so as to give a reasonable and harmonious effect to all of its provisions.” Charbonneau v. Blue Cross of Washington and Alaska, 634 P.2d 972, 975 (Ariz.Ct.App. 1981). Insurance contracts are interpreted “according to their plain and ordinary meaning.” Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785, 788 (Ariz.Ct.App. 2000). When the insurance policy language is unambiguous, “the court does not create ambiguity to find coverage.” American Family Mut. Ins. Co. v. White, 65 P.3d 449, 452 (Ariz.Ct.App. 2003). The insured party bears the burden of establishing coverage, while the insurer bears the burden of establishing that a policy exclusion is applicable. Keggi, 13 P.3d at 788.

         Lexington moves for summary judgment on six of Infini's claims: (1) breach of contract, (2) bad faith, (3) negligence, (4) breach of fiduciary duty, (5) declaratory relief; and (6) fraud.

         1. Whether the Medical Incident is covered under the 2013-2014 Policy.

         In its Motion for Summary Judgment, Lexington argues that Infini did not provide adequate notice of the Medical Incident to Lexington under the terms of the 2013-2014 Policy, and so it does not have to indemnify Infini. The 2013-2014 Policy outlines Infini's duties if a claim, suit, or medical incident arises:

If during the policy period, [Infini] shall become aware of any medical incident which may reasonably be expected to give rise to a claim being made against any Insured, [Infini] must notify [Lexington] in writing as soon as practicable. To the extent possible, notice should include:

a) How, when, and where the medical incident took place;

b) The named and addresses of any injured persons and witnesses; and

c) The nature and location of any injury or damage arising out of the medical incident.

Any claim arising out of such medical incident which is subsequently made against any Insured and reported to us, shall be considered first made at the time such notice was given to us.

(Doc. 173 Ex. 11).

         On October 1, 2014, when filling out a form related to the renewal of coverage for Infini, a representative of Wells Fargo Insurance Services noted that she was “aware of [a] circumstance accident or loss . . . which may result in a claim under the insurance coverage.” (Doc. 173-12 at 51). This document also specifically noted that a record request had been made by a lawyer. (Id.).

         This information, however, does not constitute notice under the 2013-2014 Policy. It lacks the relevant facts that might be used by Lexington to process the potential claim- information that the 2013-2014 Policy says that notice should provide. The information is also addressed to Lexington's underwriter, SBT, which is not charged with processing claims that are made under Lexington's insurance policy. Lexington offers no evidence to suggest that SBT was its agent for purposes of receiving claims or that Infini had a right to believe that it was. Further, the application does not say “how when and where the medical incident took place, ” the identity of the injured person, or the damages that resulted from the medical incident. In similar situations, many courts have rejected the argument that information in a renewal application could provide sufficient notice under an older policy. See Am. Cas. Co. of Reading, v. Continisio, 17 F.3d 62, 69 (3d Cir. 1994); FDIC v. St Paul Fire & Marine Ins. Co., 993 F.2d 155, 160 (8th Cir. 1993) (“Notice that would cause one to investigate a renewal for insurance must surely be different than notice to investigate potential ...