Orthopedic Resources, Inc. v. Nautilus Ins. Co., Case No. 08-CV-732-CVE-TLW.

• Decision Date: 06 August 2009
• Docket Number: Case No. 08-CV-732-CVE-TLW.
• Citation: 654 F.Supp.2d 1307
• Parties: ORTHOPEDIC RESOURCES, INC., Plaintiff, v. NAUTILUS INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Oklahoma

Page 1307

654 F.Supp.2d 1307

ORTHOPEDIC RESOURCES, INC., Plaintiff, v. NAUTILUS INSURANCE COMPANY, Defendant.

Case No. 08-CV-732-CVE-TLW.

United States District Court, N.D. Oklahoma.

August 6, 2009.

Galen Lee Brittingham, Atkinson Haskins Nellis Brittingham Gladd & Carwile, Tulsa, OK, for Plaintiff.

David Charles Senger, Robert P. Coffey, Jr., Coffey Gudgel & McDaniel PLLC, Tulsa, OK, for Defendant.

Gregory Don Nellis, Atkinson Haskins Nellis Brittingham Gladd & Carwile, Tulsa, OK.

OPINION AND ORDER

CLAIRE V. EAGAN, Chief Judge.

Before the Court are the Motion for Summary Judgment and Supporting Brief of Plaintiff and Counterclaim Defendant Orthopedic Resources, Inc. (Dkt. # 15) and Defendant Nautilus Insurance Company's Motion for Summary Judgment and Brief in Support (Dkt. # 16). Plaintiff seeks a declaratory judgment that it is entitled to coverage from defendant and defendant seeks a declaratory judgment that plaintiff is not entitled to coverage based on an exclusion in the insurance policy. Both parties assert that no genuine issue of material fact precludes summary judgment.

I.

The following material facts are undisputed: Orthopedic Resources, Inc. (ORI) is an Oklahoma corporation involved in the distribution of medical equipment. Nautilus Insurance Company (Nautilus) is an Arizona corporation, doing business in the State of Oklahoma. The equipment ORI distributes includes a therapy system called VascuTherm. VascuTherm is a device manufactured by ThermaTek that provides thermal heating, cooling, and compression in order to reduce post-operative swelling. In 2008, pursuant to a Marketing Agreement (the Agreement) with John Wall of JTW Medical Products, Inc. (JTW), ORI provided JTW with approximately twenty-six VascuTherm units, which JTW in turn provided to patients and healthcare providers.¹

Nautilus issued a policy of insurance to Every Little Bit, Inc. d/b/a JPS Surgical Orthopedic Resources, Inc.²—Commercial General Liability (CGL) Insurance Policy No. NC669841 (the Policy). Dkt. # 26-7, at 1. The Policy provided general liability coverage and coverage for certain specified bodily injury³ and property damage during the Policy period May 24, 2007 to May 24, 2008. The bodily injury coverage agreement provides in relevant part:

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result. . . ."

Dkt. # 26-7, at 7.

The Policy contains a provision entitled "EXCLUSION—PRODUCTS-COMPLETED OPERATIONS HAZARD" (the Exclusion). Id. at 23. The Exclusion provides that: "[t]his insurance does not apply to `bodily injury' or `property damage' included within the `products-completed operations hazard.'" Id. The Policy defines that hazard as:

16. "Products-completed operations hazard":

a. Includes all "bodily injury" and "property damage" occurring away from premises you own or rent and arising out of "your product" or "your work" except:

(1) Products that are still in your physical possession; or

(2) Work that has not yet been completed or abandoned. However, "your work" will be deemed completed at the earliest of the following times:

(a) When all of the work called for in your contract has been completed.

(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.

(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.

Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.

Id. at 20.

The Policy defines "your product" as:

21. "Your product":

a. Means:

(1) Any goods or products, other than real property, manufactured, sold, handled or disposed of by:

(a) You;

(b) Others trading under your name; or

(c) A person or organization whose business or assets you have acquired; and (2) Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products. . . .

Id. at 21. "Your product" also includes: "[w]arranties or representations made at any time with respect to the fitness, quality, durability, performance or use of `your product'; and [t]he providing of or failure to provide warnings or instructions," but does not include "vending machines or other property rented to or located for the use of others but not sold." Id.

"Your work" is defined as "[w]ork or operations performed by you or on your behalf; and [m]aterials, parts or equipment furnished in connection with such work or operations" and includes "[w]arranties or representations made at any time with respect to the fitness, quality, durability, performance or use of `your work'; and [t]he providing of or failure to provide warnings or instructions." Id.

On September 26, 2008, Kara and Jeremy Swindell filed a lawsuit against ORI and others in the District Court for Dallas County, Texas (the Swindell lawsuit). Dkt. # 16 at 2. The Swindells alleged negligence, strict liability/design defect, strict liability/marketing defect, strict liability manufacturing defect, breach of implied warranties, res ipsa loquitur, breach of express warranty, gross negligence, and joint enterprise, after Ms. Swindell was allegedly injured from using a VascuTherm unit supplied by JTW. Id. In the Swindell lawsuit, the Swindells allege that on March 19, 2008, Ms. Swindell had surgery on her right foot. Dkt. # 16-2. Following surgery, Wall "applied the VascuTherm unit to her right foot," and instructed the Swindells "to keep the unit on for `24 hours a day-7 days a week.'" Dkt. # 16-2. Ms. Swindell's healthcare provider was to be charged by ORI for the use of the VascuTherm and, upon conclusion of Ms. Swindell's use of the unit, the device was to be returned.⁴

The Swindells allege that, as a result of Wall's instructions, Ms. Swindell suffered extensive injuries resulting in the full or partial amputation of four toes. Id. The Swindell lawsuit further alleges that the defendants, including ORI, were negligent in training each other on the proper use of the VascuTherm, and that ORI was negligent in failing to warn Ms. Swindell that use in the manner directed by Wall could lead to injury. The Swindells also allege that ORI was negligent in failing to provide instructions or other written materials about the use of the VascuTherm.

After ORI was served as a defendant in the Swindell lawsuit, ORI contacted Nautilus and requested that Nautilus provide a defense and indemnity coverage to ORI. On October 13, 2008, Nautilus sent a letter to ORI President Mark Farrow denying coverage for claims contained in the Swindell lawsuit based on the Exclusion in the Policy. Dkt. # 15-5. Counsel for ORI sent a letter to Nautilus asking it to reconsider its denial of coverage, explaining that the Exclusion should not apply to work that had not yet been completed and, as a result, the Swindell claims do not fall within the Exclusion. Dkt. # 15-6. ORI further stated that, under Oklahoma law, there is a duty to defend if there is even a possibility of coverage under the insurance contract. Id. Nautilus did not reconsider its position with respect to coverage.

ORI retained outside counsel⁵ and, on November 10, 2008, commenced this action against Nautilus in Tulsa County District Court. Nautilus subsequently filed a notice of removal asserting that this Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship and the amount in controversy is believed to exceed $75,000. Dkt. # 2. On December 9, 2008, Nautilus agreed in writing to provide ORI with a defense in the Swindell lawsuit.⁶ Dkt. # 26-3. On December 17, 2008, Nautilus filed a counterclaim seeking a declaratory judgment that ORI is not covered under the Policy for any damages incurred in the Swindell lawsuit. Dkt. # 7. After cross-motions for summary judgment were filed, ORI and Nautilus filed a joint motion requesting dismissal without prejudice of ORI's bad faith claim against Nautilus, Dkt. # 18, which was granted. Dkt. # 19.

II.

Summary judgment pursuant to Fed. R.Civ.P. 56 is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Kendall v. Watkins, 998 F.2d 848, 850 (10th Cir.1993). The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 317, 106 S.Ct. 2548. "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Id. at 327, 106 S.Ct. 2548.

"When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue...