St. Peter's Hospital et al v. American International Group et al

Filing 114

ORDERED: Plaintiffs' First Motions in Limine is GRANTED in part and DENIED in part re 72 . Please review order for complete details . Signed by Judge Sam E Haddon on 6/4/2018. (HEG)

FILED
JUN O4 2018
IN THE UNITED STATES DISTRICT COURT

Clerk, U.S. District Court
District Of Montana
Helena

FOR THE DISTRICT OF MONT ANA
HELENA DIVISION

MOUNTAIN STATES
HEAL TH CARE RECIPROCAL RISK
RETENTION GROUP and
COLUMBIA CASUALTY
COMPANY,

No. CV 16-91-H-SEH

ORDER
Plaintiffs,
vs.
LEXINGTON INSURANCE
COMPANY,
Defendant.
Before the Court are Plaintiffs' First Motions in Limine, 1 which request
orders:
1.

1

Doc. 72.

Precluding Lexington Insurance Company
("Lexington") from introducing any comment,

2.

argument, testimony, or evidence concerning the
basis for Lexington's denial of defense to the
Hospital other than the letter denying defense and
indemnity dated April 15, 2016, and
Precluding Lexington from introducing any
comment, argument, testimony, or evidence
regarding whether coverage exists under
Lexington's policies, because the only issue is
whether Lexington made an unequivocal
demonstration that no coverage exists.2

In Montana, it is well-established that "[t]he duty to defend arises when a
complaint against an insured alleges facts, which if proven, would result in
coverage." 3 The carrier must provide "an unequivocal demonstration that the claim
against the insured does not fall within the policy coverage before an insurer can
refuse to defend; otherwise, the insurer has a duty to defend." 4 Accordingly, when
defending a breach of duty to defend claim, the insurer is limited to those facts it
was aware of and utilized at the time it denied coverage. 5

2

Doc. 72 at 2.

3

J & C Moodie Props., LLC v. Deck, 384 P.3d 466,472 (Mont. 2016) (quoting Farmers
Union Mut. Ins. Co. v. Staples, 90 P.3d 381,385 (Mont. 2004).
4

Newman v. Scottsdale Ins. Co., 301 P.3d 348, 359 (Mont. 2013) (emphasis added)
(citing Staples, 90 P.3d at 386)).
'See, e.g., Pacific Hide & Fur Depot v. Great Am. Ins. Co., 23 F. Supp. 3d 1208, 1225 (D.
Mont. 2014) (citing Newman, 301 P.3d at 359-61 and Staples, 90 P.3d at 386-87.); See also
Revelation Indus., Inc. v. St. Paul Fire & Marine Ins. Co., 206 P.3d 919,928 (Mont. 2009).
2

An insurer waives any policy defenses not raised as a basis for denying
coverage. 6 Moreover, policy defenses, if potentially applicable, are to be narrowly
and strictly construed. 7 The Montana Supreme Court has repeatedly advised that
an insurer defend under a reservation of rights if it believes a policy exclusion
applies. 8
In this case, on April 15, 2016, Lexington issued a letter denying coverage
("Denial Letter") under its policy with St. Peter's Hospital ("St. Peter's") for a
lawsuit filed against St. Peter's on September 18, 2014. 9 The Denial Letter recited,
inter alia:

At this time, and based on the information currently
available to us, we must inform you that there is no
coverage under the Subject Policies for the Subject
Claim, as more fully discussed below. 10
Moreover, Lexington twice repeated its assertion in the Denial Letter that its
policies provide "no coverage." 11

6

See Newman, 301 P.3d at 359-61.

7

See Newman, 301 P.3d at 355.

8

See J & C Moodie Props., LLC, 384 P.3d at 472-73; See also Huckins v. United
Services Automobile Association, 396 P.3d 121, 128 (Mont. 2017).
9

See Doc. 7-7.

10

Doc. 7-7 at I.

11

See Doc. 7-7 at 2-3.

3

To date, Lexington has not altered its position of"no coverage under the
Subject Policies for the Subject Claim." 12
Having unequivocally asserted "no coverage," Lexington may well be said
to have waived any basis for claiming notice conditions of the policy were not
satisfied.
ORDERED:
Plaintiffs' First Motions in Limine 13 is GRANTED in part and DENIED in
part as follows:
1.

Lexington may not present any evidence, or make any comments,

argument, or statements, related to any facts or information about which it learned
or obtained after April 15, 2016, concerning any matter relevant to the issues in
this case.
2.

Lexington may offer evidence, as determined by the Court at trial to

be admissible, of facts known to it as of April 15, 2016, offered in support of the
position taken in the Denial Letter that no coverage existed under its policies with
St. Peter' s. 14 The legal effect or weight of any such evidence offered at trial is yet

12

Doc. 7-7 at I.

13

Doc. 72.

14

See Doc. 7-7.
4

to be determined and may or may not be relevant to any issue before the Court at
that time.

/

DATED this A y of June, 2018

,{~~/n,_,,
United States District Judge

5