Moses Taylor Found. v. Coverys & Proselect Ins. Co., CIVIL 3:20-CV-00990

• Decision Date: 22 November 2021
• Docket Number: CIVIL 3:20-CV-00990
• Parties: MOSES TAYLOR FOUNDATION o/b/a MOSES TAYLOR HOSPITAL, Plaintiff, v. COVERYS and PROSELECT INSURANCE COMPANY, Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

MOSES TAYLOR FOUNDATION o/b/a MOSES TAYLOR HOSPITAL, Plaintiff,
v.
COVERYS and PROSELECT INSURANCE COMPANY, Defendants.

CIVIL No. 3:20-CV-00990

United States District Court, M.D. Pennsylvania

November 22, 2021

MEMORANDUM

JENNIFER P. WILSON United States District Court Judge Middle District of Pennsylvania

Before the court is Defendants' second motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. 40.) This action was brought by Plaintiff, Moses Taylor Foundation on behalf of Moses Taylor Hospital (“Moses Taylor”), to recover damages for the alleged breach of contract by Defendants, Coverys and Proselect Insurance Company (“Coverys”) for failure to negotiate a desirable settlement in a previous lawsuit (“the underlying suit”). (Doc. 1-4, ¶¶ 1-5, 13-39.)^[1] This court granted an earlier motion to dismiss with leave to file an amended complaint to identify non-speculative damages on March 17, 2021. (Doc. 30.) On April 1, 2021 Moses Taylor filed an amended complaint which was a duplicate of the original complaint except for additional information about a state action in Lackawanna County (“State Action”) that has subsequently

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settled. (Doc. 32.) Once more, Coverys has moved to dismiss all three counts in Moses Taylor's amended complaint for breach of contract, bad faith, and vicarious liability. (Doc. 40.) The court finds that Moses Taylor has failed to rectify the defects specified with respect to the initial complaint, and has continued to plead speculative damages. The court further finds the claims for bad faith and vicarious liability require a valid predicate cause of action, and without a valid breach of contract claim they are not actionable. Therefore, the court will grant the motion to dismiss the amended complaint with prejudice.

Factual Background and Procedural History

According to its amended complaint, Moses Taylor Hospital is a hospital in Lackawanna County, Pennsylvania and the Moses Taylor Foundation is a not-for-profit corporation with the authority to represent Moses Taylor Hospital. (Doc. 32, ¶ 1.) Defendant Coverys is a medical professional liability insurance provider. (Id. ¶ 2.) Proselect Insurance Company is an underwriting company for Coverys which supplies insurance protection to healthcare facilities. (Id. ¶ 3.) Moses Taylor maintained a medical professional liability insurance policy with Coverys. (Id. ¶ 6.)

On August 29, 2017, the Pennsylvania Trust Company, as guardian ad litem for a minor plaintiff, filed a professional negligence action against Moses Taylor after the minor plaintiff allegedly sustained “severe, permanent, disabling birth

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injuries” while receiving treatment at the hospital. (Id. ¶ 16.) Coverys, as the insurer for Moses Taylor, “provided a defense and legal representation” for this lawsuit, during which Coverys “directed, controlled, monitored, over[saw], funded, [and] strategized” about the action, “including making, participating in and/or advising and counseling [Moses Taylor Hospital] about whether . . . to settle the action prior to the verdict.” (Id. ¶¶ 17, 19.) According to the amended complaint, Coverys was “fully aware” that Moses Taylor “could be reasonably, foreseeably, and fairly held liable . . . for millions of dollars of damages which could . . . adversely affect the aggregate available insurance coverage that existed to insure Moses Taylor Hospital” with respect to future litigation. (Id. ¶ 18.)

In February 2019, the minor plaintiff made a demand for the policy limits of the insurance coverage that Coverys provided to Moses Taylor. (Id. ¶ 21.) A few days after the demand, Moses Taylor claims that it informed Coverys of the need to settle the case within its policy limits at the scheduled March 1, 2019 pre-trial conference. (Id. ¶ 22.) Coverys participated in this conference through its agent, Matthew Cosgrave, who allegedly arrived unprepared and without authority to negotiate a settlement. (Id. ¶¶ 23-24.) The judge presiding over the conference ordered “the insurance representative with the highest level of settlement authority, ” Mollie O'Brien, to appear at the next conference on March 6, 2019. (Id. ¶ 25.) Contrary to the court's order, O'Brien failed to appear at this

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conference, instead sending Cosgrave and attorney Thomas Hurd, each without additional settlement authority; as a result, no settlement was reached at this conference. (Id. ¶¶ 27, 29.)

In a March 7, 2019 correspondence to Coverys, Moses Taylor demanded that Coverys settle the lawsuit. (Id. ¶ 31.) Moses Taylor alleges that it persuaded Coverys to engage in a high-low arbitration after Moses Taylor agreed to contribute $500, 000 of its own funds. (Id. ¶ 32.) The “low” limit was set at $2, 500, 000 and the “high” limit was set at $7, 750, 000.^[2] (Id. ¶ 34.)

After Coverys' presentation at the arbitration, the minor plaintiff made a final demand for $6, 000, 000 to settle the case in full. (Id. ¶ 36.) Moses Taylor asserts that it directed Coverys to settle, or attempt to settle, the controversy for such amount. (Id. ¶ 37.) Moses Taylor claims that Coverys once again failed to settle the case or reasonably engage in settlement discussions. (Id. ¶ 38.) The minor plaintiff proceeded with the arbitration, allegedly setting forth substantially the same evidence presented at the pre-trial conference, which supported an estimated damages award in excess of $200, 000, 000. (Id. ¶ 39.) On May 9, 2019,

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the arbitrator awarded the minor plaintiff “a substantial verdict, grossly in excess of the settlement figures, and well . . . in excess of the agreed upon ‘high' limit.”^[3](Id. ¶ 40.)

Moses Taylor claims that this settlement left it with $1, 750, 000 less in its available insurance coverage than if Coverys had settled the suit for the minor plaintiff's $6, 000, 000 demand as directed by Moses Taylor. (Id. ¶ 41.) Specifically...