Mutual Ins. Co. of Arizona v. American Cas. Co. of Reading Pennsylvania

• Decision Date: 22 August 1996
• Docket Number: No. 1,CA-CV,1
• Citation: 938 P.2d 71,189 Ariz. 22
• Parties: MUTUAL INSURANCE COMPANY OF ARIZONA, Plaintiff-Appellant, v. AMERICAN CASUALTY COMPANY OF READING PENNSYLVANIA; National Casualty Company; Chicago Insurance Company, Defendants-Appellees. 95-0116.
• Court: Arizona Court of Appeals

Page 71

938 P.2d 71

189 Ariz. 22

MUTUAL INSURANCE COMPANY OF ARIZONA, Plaintiff-Appellant, v. AMERICAN CASUALTY COMPANY OF READING PENNSYLVANIA; National Casualty Company; Chicago Insurance Company, Defendants-Appellees.

No. 1 CA-CV 95-0116.

Court of Appeals of Arizona Division 1, Department E.

Aug. 22, 1996.

Reconsideration Denied Oct. 17, 1997.

[189 Ariz. 23] Jones, Skelton & Hochuli by William R. Jones, Jr., Lori A. Shipley and David C. Lewis, Phoenix, for Appellant Mutual Insurance Company.

Jennings, Strouss & Salmon, P.L.C. by James M. Ackerman and Beale & Micheaels, P.C. by John A. Micheaels, Phoenix, for Appellee American Casualty Company.

Sorenson, Moore, Evens, Marshall & Rocco by Timothy W. Evens, Phoenix, for Appellee National Casualty Company.

Renaud, Cook & Drury, P.A. by J. Gordon Cook and Diane Mihalsky, Phoenix, for Appellee Chicago Insurance Company.

OPINION

THOMPSON, Judge.

Appellant Mutual Insurance Company of Arizona (MICA) sued Appellees American Casualty Company of Reading (American), National Casualty Company (National) and Chicago Insurance Company (Chicago) seeking reimbursement of settlement monies based on theories of contribution, indemnity, equitable subrogation and bad faith. The trial court granted appellees' motions for summary judgment on all claims. MICA appeals the trial court's entry of summary judgment on the contribution and equitable subrogation claims. For the following reasons, we reverse and remand.

FACTS AND PROCEDURAL HISTORY

On June 27, 1987, Terry Musil (Musil) was admitted to Phoenix Baptist Hospital (Phoenix Hospital) due to complaints of chest pain. A hospital cardiologist, Dr. Stuart Biliack (Biliack), diagnosed her with acute myocardial infarction. Musil was subsequently taken to Heart to Heart Medical Laboratories (Heart to Heart), a facility physically connected to Phoenix Hospital but maintaining a separate legal status. At Heart to Heart, Biliack performed a diagnostic heart catherization procedure on Musil. Following the procedure, Musil returned to Phoenix Hospital.

On July 6, 1987, Musil returned to Heart to Heart for an angioplasty to be performed by Biliack. During the operation, Judith Tourville (Tourville) served as the circulating nurse and Donna Craghan (Craghan) was the scrub nurse. A "dissection" or blush occurred in the right coronary artery during the angioplasty procedure. Craghan was aware of the blush. Following the angioplasty, Musil complained of soreness in her chest.

Later that day, Musil was transferred back to Phoenix Hospital. Phoenix Hospital Nurse Patricia Valentine received Musil from Nurses Tourville and Craghan. Neither nurse reported the blush to Nurse Valentine. Within eleven hours after her transfer, Musil's condition deteriorated to the point where she had to be taken to surgery by Biliack and Dr. David Goldfarb (Goldfarb). The preoperative diagnosis was pericardial tamponade, severe coronary heart disease with critical stenosis of the proximal right coronary artery and post-circulatory arrest. Goldfarb successfully restored cardiac and pulmonary function, but Musil suffered significant loss of oxygen to the brain which left her in a comatose state.

Members of Musil's family subsequently sued Phoenix Hospital, Biliack, Goldfarb and Heart to Heart. Although the complaint referred to Tourville and Craghan as "having participated in the events giving rise to th[e] lawsuit," neither nurse was named in the suit. The complaint asserted that Heart to Heart was liable for the alleged negligence of its employees, Nurses Craghan and Tourville.

Heart to Heart was an additional named insured of a medical malpractice policy issued by MICA, which provided limits of $3,000,000 and yearly premiums in excess of $300,000. The MICA policy apparently also covered any employees of Heart to Heart, including Craghan and Tourville, as "additional insureds."

Nurse Tourville had a personal professional liability policy issued by American that provided liability limits of $500,000. The American policy had an annual premium of $38. Tourville also had a similar policy from National with limits of $1,000,000 and a yearly premium of $52.

Nurse Craghan had additional malpractice coverage under a personal professional policy issued by Chicago. The Chicago policy had a limit of $1,000,000 and a yearly premium of $58.

MICA retained an attorney, John C. West (West), to represent Heart to Heart in the Musil litigation. ¹ National, Chicago and American were all advised of the litigation and invited to participate in settlement negotiations. National and American retained an attorney to represent Nurse Tourville. Chicago also retained an attorney to protect Nurse Craghan's interest. Both Craghan and Tourville instructed MICA to settle the case within the policy limits.

Prior to trial, MICA settled the Musil action for $1.4 million. Although the original draft of the settlement agreement and release did not name Craghan or Tourville, the final version included both nurses' names. The release was signed by the Musils, Heart to Heart, Goldfarb and Phoenix Radiology, but not by Tourville or Craghan.

MICA unilaterally decided to allocate 20% of the settlement to Goldfarb and 80% to Nurses Craghan and Tourville. MICA further allocated two-thirds of the nurses' purported share to Craghan and one-third to Tourville. MICA demanded that National, American and Chicago contribute their insureds' respective portions of the settlement. The three insurers did not reimburse MICA for its settlement of the Musil litigation, contending that they had no duty to pay because neither Craghan nor Tourville was named in the lawsuit. ²

Subsequently, MICA brought suit against National, Chicago and American for indemnity, contribution and subrogation. The defendant-insurers moved for partial summary judgment. The trial court granted the motion and dismissed all of MICA's claims, except for the contribution claim, concluding that MICA "theoretically has an equitable contribution claim against the defendant insurance companies." After the parties provided additional briefing on the equitable contribution issue, the court dismissed that remaining claim, awarded attorneys' fees to the defendant-insurers and entered final judgment. MICA timely appealed.

DISCUSSION

MICA contends that the trial court erred in granting summary judgment on its equitable contribution claim. ³ The issues presented in that claim, MICA argues, were decisively addressed by two previous Arizona cases, American Continental Ins. Co., Inc. v. American Casualty Co. of Reading, Pennsylvania, 183 Ariz. 301, 903 P.2d 609 (App.1995), review denied (Sept. 26, 1995), and Industrial Indemnity Co. v. Beeson, 132 Ariz. 503, 647 P.2d 634 (App.1982), appeal after remand, 153 Ariz. 317, 736 P.2d 800 (App.1986). We agree.

This case is very similar to American Continental. There, a patient at John C. Lincoln Hospital received intramuscular injections from a hospital nurse while sitting, unsecured, on the edge of a gurney. 183 Ariz. at 301, 903 P.2d at 609. The standard of care requires that such injections be given while the patient is in a prone position. Id. After the second injection, the patient fell off the bed and struck his head on the floor, rendering him a quadriplegic. Id.

The patient subsequently filed suit against the hospital, the attending physician and Emergency Medical Consultants. Id. at 302, 903 P.2d at 610. The complaint referred to the negligence of the hospital's "employees and/or agents," but did not name the nurse as a defendant in the lawsuit. Id. Lincoln Hospital had two separate insurance policies which obligated Appellee American Continental Insurance Company, Inc. (ACIC) to defend and indemnify the insured against medical malpractice claims. Id. at 301-02, 903 P.2d at 609-10. Both policies defined "insured" as including Lincoln Hospital and its employees. Id. at 302, 903 P.2d at 610. The nurse was employed by Lincoln Hospital when the malpractice occurred and therefore was insured by ACIC. Id. She also had a personal professional liability policy issued by Appellant American Casualty Company of Reading (ACCR), ⁴ which provided overlapping insurance coverage. Id.

ACIC advised ACCR of the malpractice action and invited ACCR to participate in settlement talks, which it refused to do. Id. ACIC also demanded contribution and/or indemnity from ACCR. Id. After ACIC settled the lawsuit, it sued ACCR, seeking recovery for a portion of settlement costs based on theories of indemnity, equitable contribution, statutory contribution, equitable subrogation and bad faith. Id. ACCR moved for summary judgment on all counts. Id. ACIC filed a cross-motion for summary judgment which the trial court granted, ruling that ACIC was entitled to seek equitable contribution. Id. ACIC and ACCR stipulated that the settlement of the malpractice suit was reasonable, and that 50% of Lincoln Hospital's liability arose from the nurse's negligence. Id.

In its appeal, ACCR argued that ACIC could not require contribution from ACCR because the nurse was never sued in the underlying action; thus she never faced any liability or obligation to pay damages. Id. Consequently, ACCR claimed that it had no obligation to defend or indemnify its insured. Id. Division Two of this court disagreed, and held that, notwithstanding the fact that the nurse was not named in the underlying malpractice action, ACIC was entitled to equitable contribution from ACCR. Id. at 303, 903 P.2d at 611. In reaching this conclusion, the court identified three elements that must be satisfied to establish an equitable contribution claim: (1) the two insurers must insure the same risk; (2) neither can be the primary insurer; and (3) the loss sustained must be caused by the risk insured against. ⁵ Id.

Application of the American Continental analysis to the present facts dictates a similar result. Indeed, the appellees-insurers make the same basic...