Fremont Indem. Co. v. Cal. Nat. Physician's Ins.

• Decision Date: 08 January 1997
• Docket Number: No. 96-7724 JGD (SHx).,96-7724 JGD (SHx).
• Citation: 954 F.Supp. 1399
• Parties: FREMONT INDEMNITY COMPANY, INC., Plaintiff, v. CALIFORNIA NATIONAL PHYSICIAN'S INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Central District of California

954 F.Supp. 1399

FREMONT INDEMNITY COMPANY, INC., Plaintiff, v. CALIFORNIA NATIONAL PHYSICIAN'S INSURANCE COMPANY, Defendant.

No. 96-7724 JGD (SHx).

United States District Court, C.D. California, Western Division.

January 8, 1997.

Kroll & Tract, Los Angeles, CA, for Plaintiff.

Roland C. Colton and Grant Puleo, Del Mar, CA, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

DAVIES, District Judge.

On December 9, 1996, defendant's Motion to Dismiss pursuant to Federal Rule 12(b)(6) came on for hearing. During oral argument, counsel for both parties acknowledged that all of the facts were before the court and requested that the Motion to Dismiss be treated as a Motion for Summary Judgment. Considering the Motion as such, the Court hereby GRANTS the Motion for Summary Judgment for the reasons set forth below.

Factual Background

On November 4, 1996, this case was removed pursuant to 28 U.S.C. § 1441 from the Superior Court of the State of California for the County of Los Angeles because of diversity of citizenship.

On October 2, 1996, Plaintiff Fremont Indemnity Company ("Fremont") filed a Complaint for Declaratory Relief, Equitable Indemnity, and Contribution. Fremont is a corporation authorized to conduct insurance business in California. Defendant California National Physician's Insurance Company ("CNP") is also authorized to conduct insurance business in California.

The Complaint makes the following allegations. Fremont issued a claims-made medical professional liability policy to Dennis R. Gumm, D.P.M., a podiatrist. The policy was in force for one year, from November 1, 1991 until November 1, 1992. Then, on November 1, 1992, CNP issued a similar claims-made policy to Dr. Gumm, which was in force for two years, from November 1, 1992 until November 1, 1994. Both policies carried a retroactive date of November 1, 1977.

In January 1992, while the Fremont policy was in force, Dr. Gumm received a ninety day "notice of intent to sue" letter from Ashtonell Smith ("Smith"), a patient. Smith sent the letter in accordance with section 346 of the California Code of Civil Procedure which governs medical malpractice claims. The letter is in effect notice of a legal claim against a medical practitioner. The letter, dated January 27, 1992, stated Smith's intent to sue in 90 days for alleged medical negligence related to two surgeries performed by Dr. Gumm in January and March of 1991. On January 29, Dr. Gumm forwarded the letter to the broker, Serta Company. Serta Company forwarded the letter to Fremont on February 13, 1992. Fremont received no notice of any further activity with respect to the contents of the letter prior to the termination of the Fremont policy on November 1, 1992.

Nevertheless, on March 25, 1992, Smith had filed suit against Dr. Gumm. However, Dr. Gumm was not served with the summons and complaint until December 27, 1993. At this time, the Fremont policy had terminated and the CNP policy was in force.

Upon receiving notice of the lawsuit, CNP retained counsel to defend Dr. Gumm. Approximately one year later, on November 11, 1994, and again on February 22, 1995, CNP's appointed defense counsel wrote to Fremont, requesting that Fremont assume responsibility for Dr. Gumm's defense. Thereafter, Fremont agreed, and CNP withdrew its defense of Dr. Gumm.

A few months later, on July 12, 1995, Fremont advised CNP by letter that Fremont believed that CNP was obligated to contribute pro-rata to the defense and indemnity of Dr. Gumm. CNP declined to participate. On September 11, 1995, Fremont again wrote to CNP to request contribution. Fremont received no response from CNP. On December 14, 1995, Fremont sent another letter to CNP. With the letter, Fremont enclosed a copy of the Fremont policy and set forth the basis for its request that CNP participate in the defense and indemnification of Dr. Gumm. Again, Fremont received no response from CNP.

Consequently, Fremont filed the instant action against CNP seeking declaratory relief regarding the respective rights and obligations of the parties in connection with the Smith claim. Specifically, Fremont requests that the Court make a binding determination regarding CNP's duty to contribute to the cost of defending Dr. Gumm and to any settlement or judgment that Fremont may be required to pay on behalf of Dr. Gumm. Fremont also requests equitable indemnity and equitable contribution from CNP relating to the same.

Discussion

I. Declaratory Relief

Initially, the Court must determine whether declaratory relief is appropriate in the instant action.

The Declaratory Judgment Act provides in relevant part:

In a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

28 U.S.C. § 2201.

In declaratory judgment actions, the parties' dispute must be of "sufficient immediacy and reality" to constitute a "controversy" in the constitutional sense and justify exercise of federal judicial power under the Declaratory Judgment Act. Societe de Conditionnement v. Hunter Engineering, 655 F.2d 938, 942 (9th Cir.1981). "The Act permits parties so situated to forestall the accrual of potential damages by suing for a declaratory judgment once the adverse positions have crystallized and the conflict of interest is real and immediate." Id. at 943.

In the instant action, the Complaint states Fremont's allegation that CNP is obligated by the terms of the policy it issued to Dr. Gumm to defend Dr. Gumm and to pay any judgment or settlement in relation to the Smith claim. In response to this allegation, CNP takes the position that the terms of its policy are clear, and no coverage exists in relation to the Smith claim. Thus, an actual controversy exists between the parties making declaratory relief appropriate.

II. Summary Judgment Standard

The Federal Rules of Civil Procedure provide for summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The Supreme Court clarified the standard for summary judgment in three important cases. See Celotex Corporation v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Electric Industry Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514. Whether a fact is material is determined by looking to the governing substantive law; a fact is material if it may affect the outcome of the suit. Id. at 248, 106 S.Ct. at 2510. If the moving party seeks summary adjudication with respect to a claim or defense upon which it bears the burden of proof at trial, its burden must be satisfied by affirmative admissible evidence. By contrast, when the non-moving party bears the burden of proving the claim or defense, the moving party can meet its burden by pointing out the absence of evidence from the non-moving party. The moving party need not disprove the other party's case. See Celotex, 477 U.S. at 325, 106 S.Ct. at 2553-54; see also Schwarzer, Tashima & Wagstaffe, Federal Civil Procedure Before Trial §§ 14:123-141 (1993).

When the moving party meets its burden, the "adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. Rule 56(e). Summary judgment will be entered against the non-moving party, when appropriate, if that party does not present these specific facts. Id.

In assessing whether the non-moving party has raised a genuine issue, its evidence is to be believed, and all justifiable inferences are to be drawn in its favor. Anderson, 477 U.S. at 255, 106 S.Ct. at 2513-14 (citing Adickes v. S.H. Kress and Company, 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)). Nonetheless, "the mere existence of a scintilla of evidence" is insufficient. Id. at 252, 106 S.Ct. at 2512. As the Court explained in Matsushita, 475 U.S. at 586-87, 106 S.Ct. at 1355-56:

When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.... Where the record taken as a whole could not lead rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial."

However, an alleged "genuine issue" will not defeat summary judgment where the factual context makes the non-movant's allegations implausible. See California Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987), cert. denied, 484 U.S. 1006, 1006, 108 S.Ct. 698, 699, 98 L.Ed.2d 650 (1988). Consequently, where the factual context makes the non-movant's claim implausible, the non-movant "must come forward with more persuasive evidence to support their claim than would otherwise be necessary" to show that there is a genuine issue for trial. Id.

III. Claims-made Insurance Policies

Both the Fremont and CNP policies are claims-made insurance policies. In general, a claims-made professional liability insurance policy covers claims brought against the insured while the policy is in effect. Homestead Ins. Co. v. American Empire Surplus Lines Ins. Co., 44 Cal....