New Memorial Associates v. Credit Gen. Ins. Corp.

• Decision Date: 18 March 1997
• Docket Number: Civil No. 96-1350 DJS/JHG.
• Citation: 973 F.Supp. 1027
• Parties: NEW MEMORIAL ASSOCIATES, a New Mexico joint venture, Plaintiff, v. CREDIT GENERAL INSURANCE CORP., Campania Management Co., Inc., Health Facilities Insurance Co., and Health Facilities Management Co., Inc., Defendants.
• Court: U.S. District Court — District of New Mexico

973 F.Supp. 1027

NEW MEMORIAL ASSOCIATES, a New Mexico joint venture, Plaintiff, v. CREDIT GENERAL INSURANCE CORP., Campania Management Co., Inc., Health Facilities Insurance Co., and Health Facilities Management Co., Inc., Defendants.

Civil No. 96-1350 DJS/JHG.

United States District Court, D. New Mexico.

March 18, 1997.

Kurt Wihl, Keleher & McLeod, Albuquerque, NM, for New Memorial Associates.

Rocco N. Covino and Dierdre G. Johnson, LeBoeuf, Lamb, Greene & MacRae, L.L.P., Washington, DC, Victor R. Marshall, Marshall & Associates, Albuquerque, NM, for Credit Gen. Ins. Corp., Campania Management Co., Inc., Health Facilities Ins. Co., Health Facilities Management Co.

MEMORANDUM OPINION AND ORDER

SVET, United States Magistrate Judge.

THIS MATTER comes before the Court upon Defendants' Joint Motion to Dismiss the Complaint for Failure to State a Claim on which Relief May be Granted filed January 17, 1997 (Docket No. 9). Pursuant to 28 U.S.C. § 636(c) and Fed.R.Civ.P. 73, this case has been assigned to a Magistrate Judge for final disposition.

Plaintiff has brought this action for breach of insurance agreement, violation of the New Mexico Insurance Practices Act NMSA 1978 §§ 59A-16-20 and 30 (1995 Repl. Pamph.), and violation of the New Mexico Unfair Practices Act NMSA 1978 §§ 57-12-2, 3, and 10. Plaintiff seeks damages, punitive damages, and attorney fees for Defendants' alleged wrongful failure to defend and indemnify it against claims brought by the government. Plaintiff was sued in 1994 by the United States Government to recover damages and civil penalties under the False Claims Act, 31 U.S.C. §§ 3729-3722. That action was styled United States of America, ex rel. Victoria King v. James D.C. Jaramillo, medical institute for Mental Health and Memorial Hospital, 92-Cv-1045 MV/WWD (D.N.M.) (hereinafter "qui tam action").

Defendants seek to dismiss the complaint on the ground that it fails to state a claim upon which relief can be granted. Defendants contend that actions for which Plaintiff sought defense and indemnity are not covered under the clear terms of the insurance policies. Defendants assert that the policies under which Plaintiff seeks to recover expressly exclude from coverage any repayment of fees and any payments to the government. Defendants also argue that the government's suit did not allege a "covered occurrence" under the terms of the policies.

STANDARD OF REVIEW

Defendants filed this motion pursuant to Fed.R.Civ.P. 12(b)(6), asserting that this matter should be dismissed as a matter of law because it fails to state a claim upon which relief can be granted. Defendants attached copies of the underlying insurance policies, the complaint from the qui tam action for which Plaintiff sought a defense and indemnity, and the settlement agreement from that action to the instant motion to dismiss. Plaintiff contends that by doing so, Defendants referred to matters outside the complaint and the instant motion must be considered as a motion for summary judgment under the standards contained in Fed. R.Civ.P. 56.

Plaintiff is, of course, correct that when a court considers matters outside the complaint when ruling upon a Rule 12(b)(6) motion that motion is considered as a motion for summary judgment pursuant to Rule 56. However, the Court may consider documents referenced in the complaint but not attached to it without converting a motion to dismiss into one for summary judgment. E.g. Gasner v. County of Dinwiddie, 162 F.R.D. 280, 281 (E.D.Va.1995) (collecting cases, citations omitted); Sheppard v. Texas Dept. of Transportation, 158 F.R.D. 592, 595 (E.D.Tx.1994) (collecting cases, citations omitted). For this exception to Rule 12(b)(6) to apply, the document must be referred to by the complaint and must be integral and central to the plaintiff's claim. Sheppard, 158 F.R.D. at 595 (citing Field v. Trump, 850 F.2d 938, 949 (2nd cir.1988) cert. denied 489 U.S. 1012, 109 S.Ct. 1122, 103 L.Ed.2d 185 (1989)); and Venture Associates v. Zenith Data Systems, 987 F.2d 429, 431 (7th Cir.1993). The exception encompasses documents quoted, relied upon, or incorporated by reference in the complaint as well as official public records pertinent to the plaintiff's claims, so long as the documents are of unquestioned authenticity. Gasner, 162 F.R.D. at 282 (citations omitted).

In this instance, Plaintiff does not contest the authenticity of any of the documents attached to Defendants' motion. Further, each of the documents is referred to in the Complaint. In addition, the complaint in the underlying qui tam action is quoted in part in Plaintiff's complaint. Accordingly, the exhibits to Defendants' motion to dismiss will be considered by the Court but do not convert that motion to one for summary judgment. In contrast, Plaintiff attaches an affidavit to its response to the motion which is not appropriately considered under a Rule 12(b)(6) standard and which the Court will not rely upon in reaching its decision.

A complaint may be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) only "if the plaintiff can prove no set of facts to support a claim for relief." Jojola v. Chavez, 55 F.3d 488, 490 (10th Cir.1995). In deciding the motion, the Court should accept all the well-pleaded allegations of the complaint as true and construe them in the light most favorable to the plaintiff. Gagan v. Norton, 35 F.3d 1473, 1474 n. 1 (10th Cir.1994) cert. denied, 513 U.S. 1183, 115 S.Ct. 1175, 130 L.Ed.2d 1128 (1995) (quoting Williams v. Meese, 926 F.2d 994, 997 (10th Cir.1991)). Under this standard, Defendants' motion to dismiss should be granted.

POLICIES EXCLUDED COVERAGE OF REPAYMENT OF GOVERNMENT FEES

The policies under which Plaintiff sought defense and indemnity each stated in part that "... the policy does not apply to any fines, penalties, the return or withdrawal of fees, or government payment, any award of punitive damages, or any sum in excess of compensatory damages." Endorsement # 3 of Exhibit A to Defendants' Memorandum in Support of Motion to Dismiss, Endorsement # 3 of Exhibit B to Defendants' Memorandum in Support of Motion to Dismiss.

The qui tam action undertaken by the government was made "to recover damages and civil penalties on behalf of the United States of America ...". Exhibit C to Defendants' Memorandum in Support of Motion to Dismiss at 1. The government alleged that Plaintiff "improperly received monies from the Federal treasury thereby damaging Plaintiff'. Id. at 10. It is the law of the state of New Mexico that an exclusionary clause in an insurance contract excludes harm of the same general type as the insured intended. Knowles v. United Servs. Auto. Ass'n, 113 N.M. 703, 832 P.2d 394, 397 (1992). Based upon the complaint in the qui tam action, it is clear that Plaintiff sought defense and indemnity for an action brought to secure the repayment of government funds, which action was excluded by the clear terms of the insurance policies.

INSURANCE POLICIES EXCLUDED INTENTIONAL CONDUCT

The government alleged that Plaintiff aided and abetted the fraudulent billing practices of others. Exhibit C to Defendants' Memorandum in Support of Motion to Dismiss at 9. The government further alleged that, along with the other defendants in the qui tam action, Plaintiff presented claims for payment that it knew were false or fraudulent, or that Plaintiff was deliberately ignorant of the truth or falsity of such claims, or that Plaintiff acted in reckless disregard of whether such claims were false. Id. at 11. Additionally, the government asserted that Plaintiff knowingly failed to enforce standards regarding minimum level of care for hospitalized patients. Id. at 12. The allegations in the Government's complaint assert deliberate conduct on the part of Plaintiff.

The insurance policies provided coverage for "all sums to which the `Insured' shall become legally obligated to pay because of `bodily injury' or `property damage' caused by an `occurrence' under the terms and limits of liability provided for in the Policy." Exhibit A of Defendants' Memorandum in Support of Motion to Dismiss; Exhibit B of Defendants' Memorandum in Support of Motion to Dismiss. Leaving aside the question of whether the qui tam action involved claims for bodily injury or property damage, "occurrence" is defined under the policies as "with respect to `bodily injury' or `property damage', an accident ... which results in `personal injury' or `property damage' neither expected nor intended from the standpoint of the insured." Id. The government sought recovery under the False Claims Act for conduct which can in no way be characterized as accidental.

"Whenever the word `accident' is not defined in the insurance policy, `the word must be interpreted in its usual, ordinary and popular sense.'" Vihstadt v. Travelers Ins. Co., 103 N.M. 465, 709 P.2d 187, 188 (1985) (quoting Watson v. Western Cas. & Sur. Co., 72 N.M. 250, 382 P.2d 723, 725 (1963)). In Vihstadt, the New Mexico Supreme Court went on to quote several definitions of the word "accident," among...