Phico Ins. Co. v. Providers Ins. Co.
| Decision Date | 27 October 1989 |
| Docket Number | No. 88-1968,88-1968 |
| Parties | PHICO INSURANCE COMPANY, Plaintiff-Appellant, v. PROVIDERS INSURANCE COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Sally H. Harris (Jeffrey L. Lauersdorf, with her on the briefs), of Wallace, Saunders, Austin, Brown & Enochs, Overland Park, Kan., for plaintiff-appellant.
Ronald McMillin of Carson, Coil, Riley, McMillin, Levine & Veit, Jefferson City, Mo. (Douglas M. Greenwald of McAnany, Van Cleave & Phillips, Kansas City, Kan and David M. Druten of McAnany, Van Cleave & Phillips, Lenexa, Kan., with him on the brief), for defendant-appellee.
Before BRORBY, BARRETT and EBEL, Circuit Judges.
Phico Insurance Company (Phico) plaintiff below, appeals from the district court's Memorandum and Order denying its motion for summary judgment and granting a motion for summary judgment in favor of Providers Insurance Company (Providers), defendant below. In this diversity action, the issue presented is which insurance carrier is responsible to reimburse the other for the sum of $100,000 contributed toward a settlement. Jurisdiction in this declaratory judgment action was based on diversity of citizenship, 28 U.S.C. Sec. 1332. A recitation of material facts follows.
On April 24, 1985, Kimberly Borland, then 15 years of age, fell from a second story window at the University of Kansas Medical Center (Medical Center) and sustained serious injuries. It was alleged that Medical Center failed to adequately supervise Kimberly, who got out of restraints and fell out of the hospital window.
Providers issued a claims made insurance policy to the Medical Center for $200,000 of coverage by reason of any accident occurring during the policy period August 1, 1984, until August 1, 1985. One of the provisions stated that a claim must be made during the policy period, and that a claim is made only by submitting to Providers written notice of the accident.
Phico also issued a claims made insurance policy to Medical Center which provided $200,000 coverage by reason of any accident for the policy period August 1, 1985, to August 1, 1986. However, the Phico policy contained a Prior Acts Coverage Endorsement applying to any accident occurring after July 1, 1979, upon a claim made, providing that no such coverage would apply if a policy of any other insurer was in effect and would otherwise provide coverage to the insured. Written notice was given by Medical Center to Phico of the Kimberly Borland accident.
On April 25, 1985, the day after the Kimberly Borland accident, counsel for Medical Center phoned the claims manager of Providers and advised of the accident. The claims manager opened a file on the case, set a reserve of $50,000 and contacted a claims investigator to commence an investigation of the accident. On April 26, 1985, Providers submitted a memo to Medical Center advising that investigators would be contacting Medical Center to investigate the Kimberly Borland accident reported by Medical Center. On May 9, 1985, the investigators submitted a four-page report of the accident to Providers, accompanied by summaries of statements, photographs and copies of incident reports. No representative of Providers ever notified anyone at Medical Center that a claim was not made involving the Kimberly Borland accident or that a written claim must be filed.
Suit for damages was filed by Borland against Medical Center in the District Court of Wyandotte County, Kansas. Pursuant to the Health Care Stabilization Act, K.S.A. Sec. 40-3401, et seq., the Health Care Stabilization Fund (Fund) undertook defense of the action after Providers and Phico, per agreement, each contributed $100,000 to meet the primary insurance limits of $200,000. Under the Health Care Stabilization Act, the Fund provides coverage for any claim over and above the basic coverage of $200,000 per claim. Under the agreement, if Phico is determined to have coverage and Providers does not, Phico will pay $100,000 to Providers. On the other hand, if Providers is determined to have coverage and Phico does not, Providers will pay $100,000 to Phico.
The issue presented to the district court and on appeal to this court is which of the two insurance companies, Providers or Phico, providing professional liability insurance to Medical Center, should be responsible for providing the primary coverage of $200,000 for Medical Center on the claim of Kimberly Borland.
The district court, in granting summary judgment in favor of Providers found/concluded that: (a) Phico had standing to bring its indemnity action against Providers, even though it was not a party to the contract between Providers and Medical Center, and (b) if the Medical Center were the plaintiff in an action against Providers seeking coverage the court would face a more difficult decision (because Providers was clearly orally notified of the Borland occurrence by Medical Center), but when two insurance companies dispute each other, relevant contract terms must be construed as written. See Memorandum and Order, R. Vol. I, Tab 49. The court concluded:
The Providers policy's terms are explicit: a claim is made when written notification of the occurrence is received. No written notice was received, and thus the claim was not made during the Providers policy. Thus, the Phico policy covers the claim, and summary judgment for Providers is warranted.
Appellant Phico argues that the district court erred in (a) determining, under Kansas law, that the failure of personnel from Medical Center to provide written notification of an occurrence to Providers resulted in a breach of the Providers insurance contract, and (b) granting Providers' motion for summary judgment and in denying Phico's motion for summary judgment. Appellee Providers argues that the district court erred in ruling that Phico had standing to contest whether Providers' insurance contract with Medical Center provided coverage where Phico was not a party to that contract and where no outstanding claim for coverage on the part of Medical Center existed.
No contention is advanced on appeal that substantial issues of material fact existed, precluding summary judgment under Rule 56(a), Fed.R.Civ.P. That being so, it is our duty, just as it was the duty of the district court, to apply the proper substantive law. Florom v. Elliott Manufacturing, 867 F.2d 570, 574 (10th Cir.1989). In making this evaluation, pleadings and all other evidence must be examined in the light most favorable to the opposing party. Id; Harman v. Diversified Medical Investment Corp., 488 F.2d 111, 113 (10th Cir.1973), appeal after remand, 524 F.2d 361 (10th Cir.1975), cert. denied, 425 U.S. 951, 96 S.Ct. 1727, 48 L.Ed.2d 195 (1976). Finally, in our de novo review, we have recognized different degrees of deference we must give to the interpretations and applications of state law by a resident federal judge sitting in a diversity action. Wilson v. Al McCord, Inc., 858 F.2d 1469, 1473 (10th Cir.1988) (some deference); Mullan v. Quickie Aircraft Corp., 797 F.2d 845, 850 (10th Cir.1986) (clearly erroneous standard); Rhody v. State Farm Mutual Insurance Company, 771 F.2d 1416, 1417 (10th Cir.1985) (great deference). We shall proceed under the "some deference" standard.
Appellee Providers asserted in the district court and renews the assertion here that Phico lacks standing to bring this action because Phico was not a party to the insurance contract between Providers and Medical Center. The district court looked to Kansas law to resolve the matter, observing that Kansas law requires that an action be brought by the real party in interest, citing K.S.A. 60-217(a) and Torkelson v. Bank of Horton, 208 Kan. 267, 491 P.2d 954 (Kan.1971). The court correctly concluded that Phico is the real party in interest inasmuch as this action will conclusively establish whether Providers or Phico is responsible for providing the primary coverage of $200,000 for Medical Center on the Borland claim.
It has been stated that in most situations the standing requirement is easily met simply by determining whether the judgment has an adverse effect on the appellant. Wright-Miller-Cooper, Federal Practice and Procedure, Vol. 15, Sec. 3902, p. 401 (1976). Standing to sue relates to the right to relief by one (Phico) who will suffer an injury in fact ($100,000) if it is determined to be responsible for providing Medical Center $200,000 on the Borland claim. The above recitation shows, we believe, that the parties are clearly adverse to each other and have a significant stake in the controversy.
For purposes of Article III of the Constitution of the United States, standing is met if a party shows that he personally has suffered some actual or threatened injury that can be traced to the challenged action and is likely to be redressed by a favorable decision. Acorn v. City of Tulsa, Oklahoma, 835 F.2d 735, 738 (10th Cir.1987). This court has observed that standing problems are analyzed by the Supreme Court based upon two inquiries, i.e., (a) whether the plaintiff (Phico) alleges that the challenged action (refusal of Providers to recognize coverage for the Medical Center on the Borland claim) has or will likely cause it injury in fact (economic or otherwise), and (b) whether the interest sought to be protected by the plaintiff (Phico) is arguably within the zone of interests to be protected or regulated by law, statute or constitutional guarantee. ANR Pipeline v. Corporation Commission of State of Oklahoma, 860 F.2d 1571, 1579 (10th Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct. 1967, 104 L.Ed.2d 435.
The district court correctly analyzed the standing requirement. Having ruled that Phico is the real party in interest, the court further reasoned:
Further, Providers' assertion that Phico cannot recover because it was not a...
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