Interstate Fire & Cas. Co. v. Wash. Hosp. Ctr. Corp.

• Decision Date: 18 July 2014
• Docket Number: No. 13–7024.,13–7024.
• Court: U.S. Court of Appeals — District of Columbia Circuit
• Parties: INTERSTATE FIRE & CASUALTY COMPANY, Appellee v. WASHINGTON HOSPITAL CENTER CORPORATION, doing Business as Washington Hospital Center, Appellee Greenspring Financial Insurance Limited, Appellant Medstar Health, Inc., Appellee.

758 F.3d 378

INTERSTATE FIRE & CASUALTY COMPANY, Appellee

v. WASHINGTON HOSPITAL CENTER CORPORATION, doing Business as Washington Hospital Center, AppelleeGreenspring Financial Insurance Limited, AppellantMedstar Health, Inc., Appellee.

No. 13–7024.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 10, 2014.

Decided July 18, 2014.

Linda S. Woolf argued the cause for appellant. With her on the briefs was Joseph B. Wolf.

Paulette S. Sarp argued the cause for appellee Interstate Fire and Casualty Company. With her on the brief was David Hudgins.

Before: GRIFFITH, KAVANAUGH and SRINIVASAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge SRINIVASAN.

SRINIVASAN, Circuit Judge:

In 2003, Greenspring Financial Insurance Limited, Inc., issued an insurance policy providing coverage to employees of Washington Hospital Center for claims arising out of medical incidents within the scope of their employment. The central question in this case is whether a nurse hired by a staffing agency and assigned to work at the hospital on a temporary basis was a covered “employee” under the policy. The district court concluded that the nurse qualified as an employee of Washington Hospital for purposes of the Greenspring policy. The court therefore ordered Greenspring to pay the cost of defending and settling medical malpractice claims against the nurse. We agree with the district court's construction of the Greenspring policy, and we see no grounds for excusing Greenspring from its obligations under the insurance contract.

I.

In February 2002, Washington Hospital Center and Progressive Nursing Staffers, Inc., entered into a staffing agreement under which Progressive agreed to provide registered nurses to the hospital for long-term and per-diem assignments. Washington Hospital retained the right to terminate the assignment of any Progressive nurse who failed to meet the hospital's reasonable expectations or failed to follow the hospital's patient care policies. Washington Hospital and Progressive also agreed that each would indemnify the other for “any and all claims and expenses arising out of or resulting from the ... negligent acts ... of its employees or agents.”

Washington Hospital is a wholly owned subsidiary of MedStar Health, Inc., which owns and operates several other medical facilities in Maryland and the District of Columbia. Greenspring Financial Insurance Limited, Inc., is also a wholly owned subsidiary of MedStar and is MedStar's “captive insurer.” See Clougherty Packing Co. v. Comm'r, 811 F.2d 1297, 1298 n. 1 (9th Cir.1987) (a captive insurer is “a corporation organized for the purpose of insuring the liabilities of its owner”). In August 2003, Greenspring issued a general liability policy to MedStar under which Greenspring must indemnify the “Insured” for damages of up to $5 million per incident resulting from covered medical incidents. The policy defines “Insured” to include “all past, present, or future full-time or part-time Employees” of MedStar, including employees of MedStar subsidiaries such as Washington Hospital. The Greenspring policy also includes an “other insurance” clause—i.e., a clause apportioning liability in the event multiple insurance policies cover the same risk. The clause states that “[t]he insurance afforded by this policy is primary insurance” except when otherwise specified.

Another insurer, Interstate Fire and Casualty Co., issued a professional liability policy covering Progressive and its current and former employees for claims made between November 2006 and November 2007, with a cap of $1 million per incident. The policy includes an “other insurance” clause which states that, “[i]f there is other valid insurance (whether primary, excess, contingent or self-insurance) which may apply against a loss or claim covered by this policy, the insurance provided hereunder shall be deemed excess insurance over and above the applicable limit of all other insurance or self-insurance.” Interstate Fire simultaneously issued an excess commercial liability policy to Progressive which covers Progressive and its current and former employees for up to $4 million per incident. The policy also applies “as excess of and not contributory with” any primary or other insurance.

Chichio Hand, a registered nurse, was hired by Progressive in 1999 and later assigned to work at Washington Hospital. In April 2004, Nurse Hand was one of several medical professionals at WashingtonHospital involved in the treatment of Radianne Banks. Ms. Banks, who had been admitted to Washington Hospital while pregnant with her first child, underwent a caesarean section and could not move her legs afterward. In March 2007, she sued Washington Hospital and two of its doctors in D.C. Superior Court for negligence, alleging that she became completely wheelchair-bound as a result of injuries she sustained at the hospital. In June 2008, Washington Hospital filed a third-party complaint in the Banks action seeking indemnification and contribution from Nurse Hand and Progressive. Nurse Hand and Progressive then filed a fourth-party complaint against Washington Hospital and one of its doctors, likewise seeking indemnification and contribution.

In August 2009, Ms. Banks, Washington Hospital, Nurse Hand, Progressive, and Interstate Fire entered into a settlement agreement resolving their respective claims. Washington Hospital agreed to pay Ms. Banks and her attorneys $1.05 million, while Interstate Fire agreed to pay $3.055 million, consisting of a $1.455 million payment to Ms. Banks and her attorneys as well as the purchase of two annuities for Ms. Banks at a combined cost of $1.6 million. Significantly, Interstate Fire “expressly reserv[ed] the right to rely on the ‘other insurance’ clauses incorporated into its policies to seek reallocation of the settlement as may be warranted.”

In July 2010, Interstate Fire followed through on its reservation. It sued Washington Hospital, MedStar, and Greenspring in federal district court, alleging that the defendants owed a duty under the Greenspring general liability policy to provide primary insurance coverage for Nurse Hand. Interstate Fire asserted that it “stands in the shoes” of Nurse Hand and Progressive for purposes of the litigation, and it sought damages equal to all legal fees and costs it had paid on behalf of Nurse Hand and Progressive. The complaint invoked the district court's diversity jurisdiction. 28 U.S.C. § 1332.

The parties filed cross motions for summary judgment, and the district court issued an initial decision in March 2012. See Interstate Fire & Cas. Co. v. Wash. Hosp. Ctr. Corp., 853 F.Supp.2d 49 (D.D.C.2012) ( Interstate Fire I ). The court held that Nurse Hand is an “employee” of Washington Hospital for purposes of the Greenspring policy, and that Nurse Hand thus qualifies as a person insured under that policy. Next, the court rejected the defendants' argument that the staffing agreement between Washington Hospital and Progressive requires Progressive's insurer, Interstate Fire, to indemnify Washington Hospital for any liability arising out of the actions of Progressive's nurses. The court held that Washington Hospital had waived its right to indemnification when it released its claims against Progressive and Interstate Fire in the settlement of the Banks litigation. The court then examined the “other insurance” clauses in the various insurance policies and determined that Greenspring's coverage of Nurse Hand is primary. The court therefore granted partial summary judgment to Interstate Fire with regard to Greenspring's liability. In a subsequent decision, the court ruled that Interstate Fire was entitled to recover $3.055 million from Greenspring for payments under the settlement agreement and $153,248.72 for attorneys' fees and costs, along with pre-judgment and post-judgment interest. See Interstate Fire & Cas. Co. v. Wash. Hosp. Ctr. Corp., 917 F.Supp.2d 87 (D.D.C.2013) ( Interstate Fire II ). Greenspring appeals.

II.

We review the district court's grant of summary judgment de novo. See United States v. Regenerative Scis., LLC, 741 F.3d 1314, 1318 (D.C.Cir.2014). The parties agree that the District of Columbia's substantive law applies, and we follow the decisions of the District of Columbia Court of Appeals with respect to local law. See Burke v. Air Serv Int'l, Inc., 685 F.3d 1102, 1105, 1107 n. 4 (D.C.Cir.2012). Until February 1, 1971, judgments of the District of Columbia courts were subject to review by this court, and D.C. Circuit decisions from before that date are binding as to local law. See Hemphill v. Wash. Metro. Area Transit Auth., 982 F.2d 572, 574 & n. 1 (D.C.Cir.1993); M.A.P. v. Ryan, 285 A.2d 310, 312 (D.C.1971). When local law is “silent,” the common law of Maryland is “ ‘especially persuasive authority,’ ” as Maryland law is historically “ ‘the source of the District's common law.’ ” TMG II v. United States, 1 F.3d 36, 41 (D.C.Cir.1993) (quoting Napoleon v. Heard, 455 A.2d 901, 903 (D.C.1983)).

A.

The principal issue in this case is whether Nurse Hand, who was hired by a staffing agency (Progressive) and assigned to work at Washington Hospital, qualifies as an “employee” of the hospital. If so, Nurse Hand is an insured under the Greenspring policy, implicating Greenspring's primary coverage. It is undisputed that Nurse Hand is also an employee of Progressive. But “[g]enerally, a person may be the employee of two employers” as long as “ ‘the service to one does not involve abandonment of the service to the other.’ ” Zinn v. McKune, 143 F.3d 1353, 1361 (10th Cir.1998) (quoting Restatement (2d) of Agency § 226 (1958)); see Lovelace v. Anderson, 366 Md. 690, 785 A.2d 726, 741 (2001). The fact that only Progressive paid a salary to Nurse Hand does not preclude a finding that she is an employee of both Progressive and the hospital. See Beegle v. Rest. Mgmt., Inc., 679 A.2d 480, 485 (D.C.1996) (issue of “who paid ...