Allied World Surplus Lines Ins. Co. v. Day Surgery Ltd.
| Decision Date | 31 March 2020 |
| Docket Number | CIVIL ACTION NO. 2:17-cv-04286 |
| Citation | 451 F.Supp.3d 577 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | ALLIED WORLD SURPLUS LINES INSURANCE COMPANY, et al., Plaintiffs, v. DAY SURGERY LIMITED LIABILITY COMPANY, et al., Defendants. |
Brent Heber Olson, Pro Hac Vice, Lewis K. Loss, Pro Hac Vice, Dykema Gossett, Washington, DC, Charles R. Bailey, Josef A. Horter, Bailey & Wyant, Charleston, WV, for Plaintiffs.
Evan R. Kime, Thomas J. Hurney, Jr., William J. Aubel, Jackson Kelly, Charleston, WV, for Defendant Day Surgery Limited Liability Company.
Marvin W. Masters, The Masters Law Firm, Charleston, WV, for Defendant J. L.
David H. Carriger, L. Dante DiTrapano, W. Stuart Calwell, Calwell Luce Ditrapano, Charleston, WV, for Defendant A. G.
Cheryl A. Fisher, Tiano & O'Dell, James R. Akers, II, Akers Law Offices, William M. Tiano, Tiano O'Dell, Charleston, WV, for Defendants Je. W., Ja. W.
Robert V. Berthold, Jr., Berthold Law Firm, Charleston, WV, for Defendants D. C., R. L., T. W., R. C., R. W.
David H. Carriger, L. Dante DiTrapano, W. Stuart Calwell, Calwell Luce Ditrapano, P. Rodney Jackson, Law Office of P. Rodney Jackson, Charleston, WV, for Defendant P. P.
Evan R. Kime, Jackson Kelly, Charleston, WV, for Defendant DS Holdings, Inc.
Before the Court are cross-motions for summary judgment filed by Plaintiffs Allied World Surplus Lines Insurance Company and Allied World Assurance Company (collectively, " Allied World"), (ECF No. 250 ), Defendants Day Surgery Center, LLC ("Day Surgery") and DS Holdings, Inc. ("DS Holdings") (collectively, "the DS Entities"), (ECF No. 267 ), and Defendants Je. W., Ja. W., (ECF No. 270 ), joined by Defendants J.L., Y.T., D.C., T.C., R.L., T.W., R.W., A.G., and P.P. (collectively, "Claimants"), (ECF Nos. 269, 272, 273, 277, 278). For the reasons provided herein, Allied World's motion, (ECF No. 250 ), is GRANTED IN PART and DENIED IN PART and the DS Entities and Claimants' motions, (ECF Nos. 267, 269, 270, 272, 273, 277, 278), are GRANTED IN PART and DENIED IN PART .
Allied World filed this to determine the scope of coverage afforded under two policies issued to Day Surgery in connection to several state civil actions. (ECF No. 115 at 1 ¶ 1 (Allied World Compl.).) Claimants have filed separate lawsuits in the Circuit Court of Kanawha County, West Virginia, asserting various theories of liability and allegations of wrongdoing against Day Surgery and others. (Id. ¶¶ 36–76.) DS Holdings also is named as a defendant in some of these civil actions. (Id. ¶¶ 58, 61, 65, 69.) Although the specific facts giving rise to each alleged instance of misconduct vary from claimant to claimant, each underlying state court action arises from medical procedures that Steven R. Matulis, M.D. ("Matulis") performed on Claimants while they were under anesthesia at a facility operated or managed by the DS Entities. The causes of action asserted against the DS Entities include vicarious liability for alleged sexual abuse by Matulis, negligent and reckless retention and supervision, failure to intervene and protect, failure to report, lack of informed consent, invasion of privacy, fraud, and negligence for breach of the applicable standard of care. (ECF No. 270-7 (J.W. Compl.) ; ECF No. 115-2 (J.L. Compl.) ; ECF No. 115-6 (A.G. Compl.) ; ECF No. 115-10 (D.C. Compl.) ; ECF No. 115-12 (R.L. Compl.) ; ECF No. 115-14 (T.W. Compl.) ; ECF No. 115-15 (Y.T. Notice of Claim) ; ECF No. 115-18 (P.P. Notice of Claim).)
Allied World issued a professional liability and general commercial insurance policy, Policy Number 0303-3351, to Day Surgery for coverage from February 1, 2016 through February 1, 2017 (the "Primary Policy"). (ECF No. 115-19.) The Primary Policy provides coverage under three separate insuring agreements: (1) Claims Made Professional Liability, (2) Occurrence-Based General Liability, and (3) Claims Made Employee Benefits Liability. Each insuring agreement has a limit of liability of $1 million per claim and $3 million in the aggregate. (Id. at 2, 16–17.) Further, the Primary Policy contains language excluding coverage for "actual or alleged sexual misconduct or sexual abuse," (id. at 25), but Allied World issued an endorsement to the policy that provides coverage for claims that allege "sexual misconduct or sexual abuse." (Id. at 8.)
Allied World also provided an excess insurance policy, Policy Number 0305-4101, to Day Surgery for the same policy period (the "Excess Policy"). (ECF No. 115-20.) The Excess Policy provides coverage under three insuring agreements: (1) Claims Made Professional Liability, (2) Occurrence-Based General Liability, and (3) Excess Follow Form Liability. The Excess Policy, like the Primary Policy, contains a sexual misconduct exclusion. (Id. at 11–12, 27.) Further, both of the policies contain a related claims provision, which provides that "[a]ll Related Claims, whenever made, shall be deemed to be a single Claim" and are deemed to have been made when the earliest of the related claims was made.1 (ECF No. 115-19 at 28–29 ; ECF No. 115-20 at 33.)
On November 7, 2017, Allied World filed the present declaratory action, asserting complete diversity pursuant to 28 U.S.C. § 1332. (ECF Nos. 1, 115.) On August 2, 2019, Allied World moved for summary judgment.2 (ECF No. 250.) On September 10, 2019, the DS Entities filed a joint motion for partial summary judgment, (ECF No. 267 ), and Claimants Ja. W. and Je. W. also filed a motion for partial summary judgment, (ECF No. 270 ), in which other claimants have joined,3 (ECF Nos. 269, 272, 273, 277, 278). The parties' cross-motions for summary judgment are fully briefed and ripe for adjudication.
Rule 56 of the Federal Rules of Civil Procedure governs motions for summary judgment. This rule provides, in relevant part, that summary judgment is appropriate when the moving 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). "A fact is material when it ‘might affect the outcome of the suit under the governing law.’ " Strothers v. City of Laurel , 895 F.3d 317, 326 (4th Cir. 2018) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). "A genuine dispute arises when ‘the evidence is such that a reasonable jury could return a verdict for the non-moving party.’ " Id. (quoting Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ). "Thus, at the summary judgment phase, the pertinent inquiry is whether there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party."
Variety Stores, Inc. v. Wal-Mart Stores, Inc. , 888 F.3d 651, 659 (4th Cir. 2018) (alteration and internal quotation marks omitted).
"The burden is on the nonmoving party to show that there is a genuine issue of material fact for trial ... by offering ‘sufficient proof in the form of admissible evidence’ ...." Guessous v. Fairview Prop. Invs., LLC , 828 F.3d 208, 216 (4th Cir. 2016). In ruling on a motion for summary judgment, this Court "view[s] the facts and all justifiable inferences arising therefrom in the light most favorable to the nonmoving party." Jones v. Chandrasuwan , 820 F.3d 685, 691 (4th Cir. 2016) (quoting Libertarian Party of Va. v. Judd , 718 F.3d 308, 312 (4th Cir. 2013) ).
On the intersection of the standards for summary judgment and contract interpretation, the Fourth Circuit has observed that the matter of "interpretation is a subject particularly suited for summary judgment ...." Bank of Montreal v. Signet Bank , 193 F.3d 818, 835 (4th Cir. 1999) ; see also Murray v. State Farm Fire & Cas. Co. , 203 W.Va. 477, 509 S.E.2d 1, 6 (1998) () (internal citation omitted). However, it has also been observed that "[a]n ambiguous contract that cannot be resolved by credible, unambiguous, extrinsic evidence discloses genuine issues of material fact ... [and] summary judgment is inappropriate." Sempione v. Provident Bank , 75 F.3d 951, 959 (4th Cir. 1996).
In their motion for summary judgment, Allied World seeks the following declarations: (1) that all claims asserted in the underlying civil actions are "related claims" as defined in the Primary Policy, subject to a single $1 million limit of liability; (2) that the Primary Policy's limit of liability is being reduced by Allied World's payment of defense expenses in the underlying civil actions; (3) that there is no coverage under the Excess Policy for the underlying civil actions; (4) that DS Holdings is not a covered insured under either of the policies; and (5) that the DS Entities are not entitled to Hayseeds damages. (ECF No. 251.) The DS Entities and Claimants' motions for partial summary judgment advance many of the same issues. However, in addition, Claimants seek a declaration that Allied World must apply the highest per claim limit of liability afforded under the applicable insuring agreements to the underlying claims. (ECF No. 271.)
In cases grounded in diversity jurisdiction, a federal court is "obliged to apply the substantive law of the state in which it sits." Volvo Constr. Equip. N. Am. v. CLM Equip. Co., Inc. , 386 F.3d 581, 599–600 (4th Cir. 2004) (citing Erie R.R. Co. v. Tompkins , 304 U.S. 64, 79, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ). Under West Virginia law, language in an insurance policy should be given its "plain, ordinary meaning." Syl. Pt. 8, Cherrington v. Erie Ins. Prop. & Cas. Co. , 231 W.Va. 470, 745 S.E.2d 508, 511 (2013) (citations omitted).; Nationwide Mut. Ins. Co. v. Hatfield , 2005 WL 2978046, *2 (S.D. W. Va. Nov. 7, 2005) (...
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