North American Specialty Ins. v. Correc. Med. Ser.

• Citation: 527 F.3d 1033
• Decision Date: 28 May 2008
• Docket Number: No. 05-8082.,No. 05-8038.,05-8038.,05-8082.
• Parties: NORTH AMERICAN SPECIALTY INSURANCE COMPANY, a New Hampshire corporation, Plaintiff-Appellant, v. CORRECTIONAL MEDICAL SERVICES, INC., a Missouri corporation; Bruce Kahn, J.D., M.D., a Utah resident; Stephen Goldman, a Wyoming resident, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

527 F.3d 1033

NORTH AMERICAN SPECIALTY INSURANCE COMPANY, a New Hampshire corporation, Plaintiff-Appellant, v. CORRECTIONAL MEDICAL SERVICES, INC., a Missouri corporation; Bruce Kahn, J.D., M.D., a Utah resident; Stephen Goldman, a Wyoming resident, Defendants-Appellees.

No. 05-8038.

No. 05-8082.

United States Court of Appeals, Tenth Circuit.

May 28, 2008.

Russell F. Watters of Brown & James, P.C., Saint Louis, MO (T. Michael Ward of Brown & James, P.C., Saint Louis, MO; and Peter J. Young of Schwartz, Bon, Walker & Studer, L.L.C., Casper, Wyoming with him on the briefs), for Plaintiff-Appellant.

Dennis E. O'Connell (Thomas C. Walsh with him on the brief), of Bryan Cave LLP, Saint Louis, MO, for Defendants-Appellees.

Before LUCERO, McCONNELL and HOLMES, Circuit Judges.

HOLMES, Circuit Judge.

The Estate of Orlando Patrick Roan Eagle ("Roan Eagle") sued Correctional Medical Services, Inc., Bruce Kahn, J.D., M.D. and Stephen Goldman (collectively "CMS") for alleged medical malpractice. National American Specialty Insurance Company ("NAS"), CMS's insurer, declined to defend or indemnify CMS, but nonetheless agreed to settle the matter on CMS's behalf. NAS then filed this action seeking a declaratory judgment that it had no duty to defend or indemnify CMS, and to recoup the settlement proceeds. CMS filed a counterclaim for, among other things, breach of contract.

On cross-motions for summary judgment, the district court determined that the NAS policy provided coverage for the Roan Eagle claim, denied NAS's claim for reimbursement of the settlement proceeds, and found NAS liable for CMS's defense costs and attorney's fees. The district court, by later order, required NAS to pay CMS $118,219.82 in damages. NAS appealed from both orders.

We conclude that, although the district court's order resolving the cross-motions for summary judgment was not a final order pursuant to 28 U.S.C. § 1291, the district court's order awarding damages is a final order subject to our review. We further conclude that the district court properly determined that NAS was liable, under the terms of its policy, for CMS's defense costs and attorney's fees in the Roan Eagle litigation. We therefore AFFIRM.

I.

A. Factual Background

CMS provided health care and staffing to the Wyoming State Penitentiary ("Penitentiary"). On July 3, 2000, while CMS was insured by PHICO Insurance Company ("PHICO"), Mr. Roan Eagle, a Penitentiary inmate, committed suicide while under the care of a CMS doctor. Subsequently, on July 20, 2000, Lawyers and Advocates for Wyoming ("LAW"), a not-for-profit public interest law firm, sent a letter to the Wyoming Department of Corrections requesting records, including medical records, related to Mr. Roan Eagle's death. Specifically, LAW asked for "a complete copy of all city, county, state and/or federal records . . . pertaining to" Mr. Roan Eagle's death. Aplt.App. at A-309. LAW further advised that the letter was intended to put the Wyoming Department of Corrections "on notice that all materials related to this incident shall not be destroyed, tampered with or lost." Id.

The Wyoming Attorney General's office forwarded the LAW records request ("LAW request") to a law firm that represented CMS in several matters. On July 31, 2000, the law firm responded to the LAW request. And, on the last day of August 2000, it notified Medical Claims Management Group ("MCMG"), CMS's third party administrator, of a "possible claim" by Roan Eagle. Aplt.App. at A-517.

On October 31, 2000, NAS issued a claims-made insurance policy¹ for health care liability to CMS. The NAS policy offered coverage from October 1, 2000 until October 1, 2001, subject to CMS's $100,000.00 self-insured retention.

The policy defined a "claim" as follows:

(1) an express demand for damages arising from a medical incident or a staff privileges incident to which this insurance applies; an express demand for damages shall be deemed to include a civil action in which damages to which this insurance applies are alleged and an arbitration proceeding to which the insured is required to submit by statute or court rule or to which the insured has submitted with Company's consent; or

(2) an act or omission which the insured reasonably believes will result in an express demand for damages to which this insurance applies.

Aplt.App. at A-38.

The policy contained an array of general exclusions. Of particular importance to this litigation is exclusion (h)(3), which barred coverage for any claim against an insured "arising from a demand, summons or other notice received by the insured prior to the effective date of the policy." Aplt.App. at A-37 (emphasis added).

On December 7, 2000, the MCMG litigation administrator completed a Loss Advisory Form — a PHICO-provided form used to report claims — which assigned a claim date of August 11, 2000 for the Roan Eagle matter. However, PHICO did not receive the form. On July 25, 2001, LAW sent a Notice of Claims to the Penitentiary and the Wyoming Department of Health, expressly demanding $15,000,000.00 "for the claims of the Estate of Orlando Roan Eagle for his wrongful death." Aplt.App. at A-332. Almost a year later, Roan Eagle filed a wrongful death action against CMS. When CMS had almost exhausted its self-insured retention, it notified NAS of the claim.

After investigating, NAS determined that the Roan Eagle claim was not covered by its policy, and orally denied coverage. CMS nevertheless continued to request coverage. On June 6, 2003, NAS and CMS agreed that each would pay half of the legal fees and expenses for the Roan Eagle claim, and that they would revisit the coverage issues. On July 15, 2003, NAS formally denied coverage based, as pertinent here, on exclusion (h)(3).

A day after it denied coverage, however, NAS attended a mediation in the Roan Eagle case and agreed to settle the matter. NAS ultimately paid the Roan Eagle settlement.

B. Procedural History

After paying the settlement, NAS filed a complaint against CMS seeking a declaratory judgment that (1) its policy does not provide coverage to CMS, (2) CMS must reimburse NAS for its settlement of the Roan Eagle suit, and (3) CMS may not recoup any defense expenses incurred in the Roan Eagle litigation. NAS alleged that its policy excluded coverage because CMS had knowledge of the Roan Eagle claim prior to the policy's effective date. Conversely, CMS denied that it received notice within the meaning of the policy prior to its effective date.

Both parties moved for summary judgment. On March 23, 2005, the district court granted in part and denied in part both motions. The district court noted that "other notice" was not a defined term and concluded that "giving the term its plain and ordinary meaning does not reveal the parties' intention." Aplt.App. at A-574. Therefore, it declared the language to be ambiguous.

Applying the ambiguity against the insurer, the district court determined that the LAW request was not "other notice" within the meaning of exclusion (h)(3). In reaching this result, the district court relied upon the contractual construction principle known as ejusdem generis,² which led the court to conclude that "`other notice' must be construed to be similar to the more specific terms of `demand' or `summons.'" Aplt.App. at A-575. According to the court, the LAW request was not sufficiently similar to these terms:

The request for medical records did not contain a demand for money, did not mention malpractice, and did not mention the possibility of a future claim or lawsuit. At most, the request implied that there could be a claim in the future. A possibility of a claim, however, does not rise to the level of definitiveness required by the term "other notice" when that term is construed to be similar to a "demand" or "summons."

Id. at A-576. Therefore, the court concluded that NAS's policy did not exclude the Roan Eagle claim from coverage.³

Because the NAS policy covered the Roan Eagle claim, the district court also held that NAS was not entitled to reimbursement of the settlement proceeds. Correspondingly, because NAS was obligated by its policy to pay reasonable defense expenses, CMS was entitled to reimbursement of the attorney's fees and costs it incurred in defending the Roan Eagle action. Although the March 23, 2005 order established NAS's liability for damages, it did not award them. NAS timely appealed that order in appeal no. 05-8038.

Several months after NAS filed appeal no. 05-8038, the parties stipulated to the amount of damages and, on July 14, 2005, the district court entered a judgment. On August 23, 2005, NAS filed a motion for leave to file a supplemental notice of appeal pursuant to FED. R.APP. P. 4(a)(5), which the court granted the following day. NAS filed a supplemental notice of appeal on August 24, 2005. And, on September 7, 2005, NAS filed appeal no. 05-8082.

CMS filed a motion to vacate the district court's August 24, 2005 order, citing the district court's failure to provide notice and an opportunity to respond to NAS's motion. The district court agreed, and, on January 18, 2006, vacated its August 24, 2005 order. After allowing both parties the opportunity to respond, the district court, on February 14, 2006, granted NAS's motion for leave to file a supplemental notice of appeal. The district court purported to make the effective date of the order the date it initially had authorized the filing of a supplemental notice of appeal — that is, August 24, 2005 — "[i]n order to avoid unnecessary filings and needless expense." Aplt.App. at A-623. NAS did not file a new notice of appeal.

II.

A. Appellate Jurisdiction

1. Appeal No. 05-8038

CMS moved to dismiss appeal no. 05-8038 claiming that the district court's March 23, 2005 order was not final and appealable because, although it found NAS liable for CMS's defense costs and attorney's fees, it did not award damages. On the other hand, NAS claims that since the issue...