Kubit v. Mag Mut. Ins. Co.
| Decision Date | 15 March 2011 |
| Docket Number | No. COA09–1056.,COA09–1056. |
| Citation | 708 S.E.2d 138 |
| Court | North Carolina Court of Appeals |
| Parties | Victor KUBIT, Sanjay B. Shah, Larry Dale Withers and Cumberland Anesthesia Associates, PA, Plaintiffs,v.MAG MUTUAL INSURANCE COMPANY, Federal Insurance Company, American Economy Insurance Company, American States Insurance Company, Cincinnati Insurance Company, United States Fidelity & Guaranty Company, Travelers Property & Casualty Company Of America, Travelers Indemnity Company and Viren Desai, Defendants. |
OPINION TEXT STARTS HERE
Appeal by plaintiffs from orders entered 5 March 2009, 9 March 2009, and 10 March 2009 by Judge E. Lynn Johnson in Cumberland County Superior Court. Heard in the Court of Appeals 11 February 2010.
Smyth & Cioffi, LLP, Raleigh, by Theodore B. Smyth, for plaintiffs-appellants.
Ellis & Winters LLP, Greensboro, by J. Donald Cowan, Jr. and Stephen C. Keadey, for defendant-appellee MAG Mutual Insurance Company.Cranfill Sumner & Hartzog LLP, Raleigh, by Susan K. Burkhart, for defendant-appellee Cincinnati Insurance Company.Womble Carlyle Sandridge & Rice, PLLC, Raleigh, by Garth A. Gersten, for defendants-appellees Travelers Property & Casualty Company of America, Travelers Indemnity Company, and United States Fidelity & Guaranty Company.Moreau & Marks, PLLC, Charlotte, by Daniel C. Marks, for defendants-appellees American Economy Insurance Company and American States Insurance Company.
Plaintiffs Victor Kubit, Sanjay B. Shah, and Larry Dale Withers (collectively “the individual plaintiffs”), along with Cumberland Anesthesia Associates, PA, appeal from the trial court's orders denying their motions for summary judgment and granting summary judgment in favor of the defendant insurance carriers. Plaintiffs contend that the trial court erred in concluding that the defendant insurers had no duty to defend plaintiffs in a tort action brought by Wayne Welsher, M.D. We affirm the trial court's orders in part and reverse in part.
Applying the comparison test set out in Waste Management of Carolinas, Inc. v. Peerless Insurance Co., 315 N.C. 688, 340 S.E.2d 374 (1986), we agree with plaintiffs that insurers MAG Mutual Insurance Company; American Economy Insurance Company and American States Insurance Company (collectively “American”); and Cincinnati Insurance Company all had a duty to defend plaintiffs in the underlying action. That duty arose, however, only when the insurers were given actual notice of the underlying complaint. Because we have concluded that plaintiffs have failed to establish that they gave proper notice to an agent of American or Cincinnati, the insurers' duty did not arise until the insurers themselves received notice.
As for United States Fidelity & Guaranty Company, Travelers Property & Casualty Company of America, and Travelers Indemnity Company (collectively “Travelers”), there is no dispute that Travelers did not receive notice of the Welsher action until more than eight months after the Welsher action was filed. Since plaintiffs have failed to offer any reason for their failure to timely notify Travelers of the action, we are compelled to conclude that those carriers were relieved of their duty to defend because of plaintiffs' failure to give Travelers timely notice of the Welsher action.
On 3 July 2006, Dr. Welsher, a cardiothoracic and vascular surgeon at Cape Fear Valley Medical Center (“the Hospital”), filed suit against the individual plaintiffs and Dr. Viren Desai (collectively “the individual anesthesiologists”). The individual anesthesiologists were members of Cumberland Anesthesia, a medical practice that provided anesthesia services at the Hospital. The Welsher complaint included causes of action for defamation, tortious interference with contract, tortious interference with prospective economic advantage, intentional or negligent infliction of emotional distress, and unfair and deceptive trade practices.
The Welsher complaint alleged that the individual anesthesiologists engaged in a series of “conspiratorial acts” in order “to destroy Dr. Welsher's practice, to interfere with his relationships with his patients, hospital staff, and referral physicians, and to have him removed from the Hospital.” In particular, the Welsher complaint alleged that after the individual anesthesiologists joined Cumberland Anesthesia in 2001, they instituted new rules of operation at the Hospital regarding the provision of anesthesia services. Dr. Welsher alleged that the individual anesthesiologists retaliated against him when he opposed the rules as being contrary to patient safety.
The complaint further alleged that the individual anesthesiologists tried to persuade or intimidate other hospital staff members to join them in their efforts to have Dr. Welsher removed from the Hospital. According to the complaint, the individual anesthesiologists intentionally created “a hostile environment for Dr. Welsher, repeatedly challenging his decisions and undermining his authority.” The complaint claimed that as a result of the individual anesthesiologists filing “patently erroneous and hostile” and “false and malicious” complaints, the Medical Executive Committee of the Hospital summarily suspended Dr. Welsher's privileges for a period of 30 days in 2002. Finally, the complaint asserts that, taken together, the individual anesthesiologists' actions “caused irreparable harm to Dr. Welsher's reputation and practice.”
The defendant insurance companies that provided coverage to Cumberland Anesthesia received notice of the Welsher complaint at different times. Plaintiffs contend that MAG Mutual received notice on 7 July 2006, four days after the Welsher complaint was filed, when Catherine Green, the Practice Manager of Cumberland Anesthesia, faxed the complaint to MAG Insurance Agency. Plaintiffs contend that Cincinnati and American received notice on 28 September 2006 when Ms. Green faxed the complaint to an insurance agency, Insurance Service Center of Fayetteville. Cincinnati and American dispute whether Insurance Service Center was their agent and whether the notice to the agency was sufficient to provide them with notice. Cincinnati contends that it did not receive notice until 26 March 2007, while American argues that it only received notice on 9 July 2007. It is undisputed that Travelers received notice of the Welsher complaint on 21 March 2007.
Plaintiffs had retained Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP to defend the Welsher action. Upon receiving notice of the action, Travelers agreed to provide a defense to plaintiffs under a complete reservation of rights, and the defense was transferred to Yates McLamb & Weyher. Travelers paid all of the attorneys' fees and costs charged by Yates McLamb & Weyher. The record indicates that Dr. Welsher voluntarily dismissed his action without prejudice in August 2007 and did not subsequently re-file his complaint.
On 12 May 2008, plaintiffs filed this action against MAG Mutual, Cincinnati, American, Travelers (collectively “defendants”), Federal Insurance Company, and Dr. Desai.1 With respect to the insurance carriers, plaintiffs alleged a claim for breach of contract based on the carriers' failure to provide a defense or to indemnify plaintiffs for defense costs they incurred in defending the Welsher action. In the alternative, Cumberland Anesthesia sought to recover damages from Dr. Desai for breaching his agreement to pay a portion of the total defense costs.2
MAG Mutual filed a motion for summary judgment against plaintiffs on 30 December 2008, seeking a declaratory judgment that MAG Mutual had no duty to defend the Welsher complaint. Plaintiffs, in turn, filed a motion for summary judgment against defendants on 4 February 2009, seeking a declaratory judgment that defendants all had a duty to defend the Welsher complaint. Cincinnati, on 6 February 2009, and American, on 9 February 2009, also filed summary judgment motions seeking declaratory judgments that they had no duty to defend plaintiffs.
On 5 March 2009, the trial court entered an order granting MAG Mutual's motion. On 9 March 2009, the trial court denied plaintiffs' motion for summary judgment as to Travelers and entered summary judgment in favor of Travelers pursuant to Rule 56(c) of the Rules of Civil Procedure. The trial court granted American's motion for summary judgment also on 9 March 2009. Cincinnati's motion for summary judgment was allowed on 10 March 2009. Plaintiffs timely appealed to this Court.
Our Supreme Court has observed that “the insurer's duty to defend the insured is broader than its obligation to pay damages incurred by events covered by a particular policy.” Waste Mgmt., 315 N.C. at 691, 340 S.E.2d at 377. This duty to defend “is ordinarily measured by the facts as alleged in the pleadings.” Id. “When the pleadings state facts demonstrating that the alleged injury is covered by the policy, then the insurer has a duty to defend, whether or not the insured is ultimately liable.” Id. An insurer is excused from its duty to defend only “if the facts are not even arguably covered by the policy.” Id. at 692, 340 S.E.2d at 378.
In our Supreme Court's most recent decision on the duty to defend, the Court explained that in order to answer the question whether an insurer has a duty to defend, we apply the “ ‘comparison test,’ reading the policies and the complaint ‘side-by-side ... to determine whether the events as alleged are covered or excluded.’ ” Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield, L.L.C., 364 N.C. 1, 6, 692 S.E.2d 605, 610 (2010) (quoting Waste Mgmt., 315 N.C. at 693, 340 S.E.2d at 378). In performing this test, Id. at 7, 692 S.E.2d at 611.
The Supreme Court stated in Waste Management, 315 N.C....
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