UMIA Ins., Inc. v. Arguelles
| Docket Number | CV 20-177-BLG-TJC |
| Decision Date | 18 March 2022 |
| Citation | 591 F.Supp.3d 876 |
| Parties | UMIA INSURANCE, INC., Plaintiff, v. Enrico F. ARGUELLES, Arthritis & Osteoporosis Center PC, Donna Fryer, Brooklyn T. Black, Barbara Davison, Lora Smith, Julie Lortz and Steve Lortz, Defendants. |
| Court | U.S. District Court — District of Montana |
Guy W. Rogers, Jon A. Wilson, Brown Law Firm, P.C., Billings, MT, Mark D. Malloy, Pro Hac Vice, Meissner Tierney Fisher & Nichols, Milwaukee, WI, for Plaintiff.
Michael G. Black, John L. Amsden, Beck, Amsden & Stalpes, PLLC, Bozeman, MT, for Defendants Enrico F. Arguelles, Arthritis & Osteoporosis Center PC.
Plaintiff UMIA Insurance, Inc. ("UMIA") filed this action against Defendants Enrico F. Arguelles, M.D. ("Arguelles"), and Arthritis & Osteoporosis Center PC ("AOC") ("Insureds"), and against Donna Fryer, Brooklyn T. Black, Barbara Davison, Lora Smith, and Julie and Steve Lortz ("Underlying Claimants"), seeking a declaration as to its duty to defend and indemnify Arguelles and AOC in relation to claims brought by the Underlying Claimants, as well as its duty to defend certain subpoenas and requests for information served on Arguelles and AOC. (Doc. 1.)
Arguelles and AOC filed an Amended Answer and Counterclaim against UMIA seeking declaratory relief, and also asserting claims of breach of contract, abuse of process, and bad faith. (Doc. 20.) Arguelles and AOC have also filed a Motion to Certify Question to the Montana Supreme Court (Doc. 42).
Presently before the Court are UMIA's Motion for Partial Summary Judgment as to Arguelles and AOC's counterclaims (Doc. 29), Arguelles and AOC's Motion to Certify Question to the Montana Supreme Court (Doc. 42), and Arguelles and AOC's Motion for Partial Summary Judgment Re Duty to Defend (Doc. 44). The motions are fully briefed and ripe for review.
Having considered the parties’ submissions, the Court finds that UMIA's motion (Doc. 29) should be GRANTED in part and DENIED in part; Arguelles and AOC's motion to certify (Doc. 42) should be DENIED; and Arguelles and AOC's motion re duty to defend (Doc. 44) should be DENIED.
Arguelles was the president and director of the Arthritis & Osteoporosis Center in Billings, Montana. At AOC, Arguelles provided treatment to patients with autoimmune and joint diseases, including rheumatoid arthritis. Between 2013 and 2017, Defendants Fryer, Black, Smith, Davison, and Lortz were patients of Dr. Arguelles. Subsequently, these patients each filed lawsuits against Arguelles and AOC, alleging claims for medical malpractice and fraud for engaging in a pattern of improperly diagnosing rheumatoid arthritis, and for providing unnecessary medical treatment to increase profits (the "Underlying Lawsuits" or "Underlying Claims"). Arguelles and AOC deny committing any fraudulent acts or intentional violations of law.
At all times relevant to the Underlying Lawsuits, UMIA insured Arguelles and AOC under two separate policies. The Underlying Claims were tendered to UMIA, and UMIA took the position that the claims of fraud implicated several exclusions in the policy. Nevertheless, UMIA agreed to defend pursuant to a reservation of rights.
Later, Arguelles and AOC also tendered to UMIA several subpoenas and requests for information issued by the United States Department of Justice and Department of Health and Human Services, respectively.2 UMIA rejected the tender of defense.3 Arguelles and AOC maintain that there is potential coverage in responding to these matters under the policy's "Cyber Solutions®/Medefense® Plus Endorsement,"4 and thus, UMIA has a duty to defend. UMIA disputes that this section provides coverage.
On December 7, 2020, UMIA filed this action seeking a declaration that it has no continuing duty to defend or indemnify Arguelles and AOC for the claims asserted in the Underlying Lawsuits or in connection with the subpoenas and requests for information.
Arguelles and AOC filed an Amended Answer and Counterclaims against UMIA for breach of contract (Counterclaim One), violation of the Unfair Trade Practices Act and the implied covenant of good faith and fair dealing (Counterclaim Two), declaratory relief establishing that the Underlying Claims are covered under the policies and that UMIA has a duty to settle (Counterclaim Three), and abuse of process (Counterclaim Four). (See Doc. 20.) UMIA moves for partial summary judgment as to all of Arguelles and AOC's counterclaims except declaration of coverage as to the Underlying Lawsuits. (Doc. 29.)
Arguelles and AOC have also now moved to certify to the Montana Supreme Court the following question:
Whether a liability insurer is immune from suit for breaches of its contractual and statutory duties to settle and act in good faith due to the mere existence of a pending declaratory relief action.
(Doc. 42.) In addition, Arguelles and AOC have moved for partial summary judgment, seeking a declaration that UMIA has a duty to defend the Underlying Lawsuits, subpoenas, and requests for information. (See Docs. 44-45.)
Since the filing of this action, Defendants Fryer, Black, Smith, Davison, and Lortz have been dismissed pursuant to settlements of all the Underlying Lawsuits.5
Summary judgment is appropriate where the moving party demonstrates the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. See Fed. R. Civ. P. 56(c) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable factfinder to return a verdict for the nonmoving party. Id . "Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n , 809 F.2d 626, 630 (9th Cir. 1987).
The party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex , 477 U.S. at 323, 106 S.Ct. 2548. If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually exists. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
In attempting to establish the existence of this factual dispute, the opposing party must "go beyond the pleadings and ... by ‘the depositions, answers to interrogatories, and admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.’ " Celotex , 477 U.S. at 324, 106 S.Ct. 2548 (quoting Fed. R. Civ. P. 56(e) ). The opposing party cannot defeat summary judgment merely by demonstrating "that there is some metaphysical doubt as to the material facts." Matsushita , 475 U.S. at 586, 106 S.Ct. 1348 ; Triton Energy Corp. v. Square D Co. , 68 F.3d 1216, 1221 (9th Cir. 1995) () (citing Anderson , 477 U.S. at 252, 106 S.Ct. 2505 ).
When making this determination, the Court must view all inferences drawn from the underlying facts in the light most favorable to the non-moving party. See Matsushita , 475 U.S. at 587, 106 S.Ct. 1348. "Credibility determinations, the weighing of evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, [when] he [or she] is ruling on a motion for summary judgment." Anderson , 477 U.S. at 255, 106 S.Ct. 2505.
Arguelles and AOC allege UMIA breached its duties under the policies for "failure to accept indemnity coverage, reserving rights in connection with its provision of a defense, and refusing to accept a reasonable settlement offer within limits." (Doc. 20 at ¶ 35.) UMIA moves for summary judgment on Arguelles and AOC's breach of contract claims. In doing so, however, UMIA does not advance any argument as to whether there is, in fact, coverage under the policy. Instead, the sole basis for asserting entitlement to summary judgment is that UMIA followed the Montana Supreme Court's recommended procedure when a defense is tendered on a claim with disputed coverage. That is, accepting the tender of defense under a reservation of rights and filing a declaratory judgment action as to coverage under the policy.
The Court's jurisdiction over this action is based on diversity of citizenship. Thus, the Court must apply the substantive law of Montana. Med. Lab. Mgmt. Consultants v. Am. Broad. Companies, Inc. , 306 F.3d 806, 812 (9th Cir. 2002). UMIA acknowledges that an insurer in these circumstances potentially has at least three separate and independent duties under Montana law: (1) a duty to defend; (2) a duty to indemnify; and (3) in some circumstances, a duty to settle within policy limits. (Doc. 49 at 5.)
With respect to the first duty, it is well-settled in Montana that an insurer's duty to defend is independent from and broader than its duty to indemnify. Farmers Union Mut. Ins. Co. v. Staples , 321 Mont. 99, 90 P.3d 381, 385 (2004). "The duty to defend arises when a complaint against an insured alleges facts which, if proved, would result in coverage." Tidyman's Mgmt. Services Inc. v. Davis , 376 Mont. 80, 330 P.3d 1139, 1149 (2014) (citing Staples , 90 P.3d at 385 (Mont. 2004) ); State Farm Mut. Auto. Ins. Co. v. Freyer , 372 Mont. 191, 312 P.3d 403, 410-11 (2013). Likewise, a duty to defend exists where a complaint alleges facts that fall outside of the policy, but also contains facts which, if proved, would result in coverage. Staples , 90 P.3d at 385.
The "fundamental protective purpose of an insurance policy,"...
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