Rolan v. New W. Health Servs.

Decision Date04 January 2022
Docket NumberDA 20-0279
Citation2022 MT 1
CourtMontana Supreme Court
PartiesDANA ROLAN, on her own behalf and on behalf of the class she represents, Plaintiffs, Counter-Defendants, and Appellees, v. NEW WEST HEALTH SERVICES, Defendant and Appellee, DARWIN SELECT INSURANCE COMPANY and ALLIED WORLD ASSURANCE COMPANY and DARWIN NATIONAL ASSURANCE COMPANY, Defendant, Counter-Claimant, and Appellant.

Submitted on Briefs: February 24, 2021

District Court of the First Judicial District, In and For the County of Lewis and Clark, Cause No. CDV-2010-91 Honorable Kathy Seeley, Presiding Judge

For Appellant Allied World Assurance Company: Martha Sheehy Sheehy Law Firm, Billings, Montana Randall G. Nelson, Nelson Law Firm, Billings, Montana

For Appellees Dana Rolan and the class she represents: Erik B Thueson, Attorney at Law, Helena, Montana For Appellee New West Health Services: Robert Lukes, Garlington, Lohn & Robinson, Missoula, Montana Gary M. Zadick, Ugrin Alexander Zadick P.C., Great Falls, Montana


¶1 Defendant Allied World Assurance Company (Allied), New West Health Service's (New West) insurer, appeals the Orders of the First Judicial District Court, Lewis and Clark County granting Plaintiffs and New West's cross-motion for partial summary judgment finding Allied is equitably estopped from enforcing the "each Claim" policy limit and denying Allied's motion for partial summary judgment on indemnification. We restate and address the following issues on appeal:

1. Whether the District Court erred by holding that Allied was estopped from enforcing the $1 million limit of liability under the MCEO Policy.
2. Whether the District Court erred by holding that the Policy's "Loss "provision does not exclude the class's damages from Allied's indemnity obligation.

¶2 We reverse in part and affirm in part and remand for further proceedings.


¶3 On November 16, 2007, Dana Rolan sustained serious injuries from an automobile accident resulting in $120, 000 of immediate medical expenses. Rolan had health insurance through New West. The tortfeasor's liability insurance Unitrin Services Group (Unitrin), paid $100, 000 of Rolan's medical expenses directly to her medical providers under its liability policy. New West denied coverage to Rolan because Unitrin had paid medical costs in advance.

¶4 On January 26, 2010, Rolan filed a complaint against New West alleging individual and class claims for breach of contract, violation of made-whole rights, and unfair claims settlement practices under § 33-18-201, MCA. Rolan argued New West reduced her insurance coverage by $100, 000 in violation of its made-whole obligations. Rolan sought class certification based on New West's practice of failing to conduct a made-whole analysis and denying claims that were also covered by a liability insurer. New West tendered the defense to Allied.

¶5 Allied acknowledged a duty to defend New West under the Managed Care Organization Errors and Omissions Liability Policy ("MCEO Policy"). In a reservation of rights letter dated February 18, 2010, Allied's Senior Claims Analyst, Joseph Sappington, wrote:

As the Complaint includes allegations sounding in a Managed Care Activity, and the allegations were apparently first made against an Insured in writing during the Policy Period, the conditions precedent to the Insuring Agreement appear to be satisfied. Accordingly, the MCEO Policy provides for a Per Claim Limit of Liability of $1, 000, 000 and a Maximum Aggregate Limit of Liability of $3, 000, 000 subject to a $50, 000 retention applicable to Loss, including Defense Expenses, for each Claim.
Under the MCEO Policy the Underwriter has the right and duty to defend any Claim made against any Insured which is covered by this MCEO Policy even if the allegations of such Claim are groundless, false or fraudulent. (Insuring Agreement § I). In addition and pursuant to the MCEO Policy, the amount stated in ITEM 3(a) of the Declarations shall be the maximum aggregate Limit of Liability of the Underwriter for all Loss, including Defense Expenses, resulting from all Claims for which this MCEO Policy provides coverage, regardless of the number of Claims, the number of persons or entities included within the definition of Insured, or the number of Claimants.
Given the allegations in the Complaint, please appreciate the potential implication of the following MCEO Policy provisions, which may operate to limit or preclude coverage in this matter.
The MCEO Policy defines Loss as Defense Expenses and any monetary amount which an Insured is legally obligated to pay as a result of a Claim[.] . . . Loss, however, does not include:
2) fees, amounts, benefits or coverage owed under any contract with any party including providers of health care services, health care plan or trust, insurance or workers' compensation policy or plan or program of self-insurance[.]
Darwin National Assurance Company and Darwin Select Insurance Company respectfully reserve all of their rights and defenses under the Policies and available at law with respect to this matter.

(Emphasis added.) The reservation of rights letter further stated, "As we are assuming New West's defense in this matter I will be in contact with you shortly to discuss the retention of [attorneys] as counsel."

¶6 On May 7, 2012, the District Court certified the class and held New West liable for monetary losses. On August 6, 2013, this Court upheld the class certification in Rolan v. New W. Health Servs., 2013 MT 220, 371 Mont. 228, 307 P.3d 291 (Rolan I). This matter came before us again in 2017, Rolan v. New W. Health Servs., 2017 MT 270, 389 Mont. 228, 405 P.3d 65 (Rolan II), in which we reversed the District Court's ruling granting New West leave to amend.

¶7 On September 30, 2013, after New West retained its own coverage counsel, it confirmed in a letter to Allied's Senior Claims Analyst that Allied's reservation of rights letter accurately set forth coverages available for indemnification:

Pursuant to your letter dated February 18, 2010, it appears that you agree there is coverage under the MCEO policy, unless New West committed willful misconduct or willfully violated a state law. Please contact me to confirm this.
As I am sure you are aware, in Montana, an insurer is required to acknowledge and act reasonably promptly upon communications. Mont. Code. Ann. § 33-18-201(2). Please contact me at your earliest convenience to discuss New West's insurance coverage under the MCEO policy.

New West's coverage counsel and a New West representative followed up the letter in a phone conversation with Allied's Senior Claims Analyst that Allied would only contest coverage for "willful misconduct or willful violation of state law."

¶8 Three years later, and six years into litigation, Allied clarified in an October 5, 2016 email that the $1 million "each Claim" limit applied to the class action lawsuit, rather than the $3 million aggregate-claim limit. Allied also asserted, for the first time, that it had no indemnity obligation under the MCEO Policy. New West's coverage counsel responded to Allied's change in position:

There has been no supplemental reservation of rights issued [since the February 18, 2010 letter]. However, [New West's counsel], on behalf of your insured New West, wrote to [Allied's Senior Claims Analyst] on September 30, 2013 confirming his understanding that New West was covered except to the extent of any willful misconduct or willful violation of state law. [New West's counsel] also spoke with [Allied's Senior Claims Analyst] and he confirmed to them that those were the only grounds upon which [Allied] was contesting coverage.
Of course, it is far too late to assert any additional ground for challenging coverage. [Allied] has been defending the case for six years under the February 18, 2010 reservation of rights. [Allied] would be estopped to raise any additional defenses at this late date.
[New West] is concerned, however, because of a comment you made in an email to defense counsel ... of October 5, 2016 in which you stated: "We issued a reservation of rights letter with respect to this matter, and our position is that there is no indemnity obligation under the policy." This comment is directly contrary to [Allied's] reservation of rights letter of February 18, 2010 in which [Allied's Senior Claims Analyst] acknowledged that there would be coverage except only to the extent of any conduct that would fall within Exclusion A [for willful acts].
Therefore, New West expects that [Allied] will continue to provide a defense and indemnify New West with respect to any recovery that is not within the scope of the very stringent limitation of [the willful-acts exclusion].

(Emphasis added.)

¶9 In 2016, New West announced it was going out of business. Rolan moved for a preliminary injunction and show cause hearing to ensure the Plaintiffs' interests were protected. On October 20, 2016, New West in its response brief opposing Rolan's motion assured the District Court that adequate insurance coverage still existed to cover Rolan's claim, as Rolan was still the only identified plaintiff:

Although Plaintiff seeks a wide variety of relief designated for the class, it is important to recognize that no class currently exists in the case.
Although the company is going out of business, New West has insurance with an aggregate limit of $3, 000, 000 and with a per claim limit of $1, 000, 000. Although defense expenses reduce the policy limits, approximately $920, 000 remains of the original policy limits. The insurer has issued a Reservation of Rights letter, but New West believes it only disclaims liability for intentional acts. Thus, this insurance policy appears to

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