Parvin v. CNA Financial Corporation et al

Filing 86

ORDER: Denying Motion for Summary Judgment 47 ; Denying Motion for Partial Summary Judgment 60 ). Signed on 10/31/12 by Judge Michael R. Hogan. (sln)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
DR. DARA PARVIN
Plaintiff,

Case No. 6:10-cv-6332-HO

v.

ORDER

CNA FINANCIAL CORPORATION d.b.a.,
"CNA INSURANCE COMPANY" and
CONTINENTAL CASUALTY COMPANY,
Defendants.
INTRODUCTION
Dr. Dara Parvin (plaintiff), filed a civil action in the
Circuit Court of the State of Oregon for Coos County, alleging
breach of an insurance contract against defendants CNA Financial
Corporation (CNA) and Continental Casualty Company (CCC), and
seeking economic damages of $25 million and punitive damages of
$125 million.

[#4-Ex.A].

moved to dismiss.
motion to dismiss.

[#14].

Defendants removed the matter and
On May 24, 2011, the court, denied the

[#25].

Defendants now move for summary judgment against plaintiff's
ORDER - page 1

claims, asserting that CCC complied with the terms of the policy
(PSC 1087741372), when it settled the Mason lawsuit.

Further

defendants argue that CNA should be dismissed because it is not a
proper party to this contractual dispute between CCC and
plaintiff.
Plaintiff responds that defendants breached their contract
with plaintiff by settling a defensible lawsuit against him
despite lacking authority to settle, because neither plaintiff
nor the Oregon Medical Association Professional Consultation
Committee (OMAPCC), consented to settle the suit.

Plaintiff also

moves for partial summary judgment on breach of contract
liability.

[#60]

The case stems from a medical malpractice action that Gloria
Mason, filed against plaintiff.

[#48]. CCC was Dr. Parvin's

medical malpractice insurer with the authority to settle a case
against him with the consent of either Dr. Parvin or the OMAPCC.
The matter proceeded to trial and settled for $1.5 million after
the fourth day.
Discussion
~

Factual Background:

The following facts gleaned from the parties' briefing, are
viewed in the light most favorable to plaintiff, the non-moving
party.
Plaintiff is an orthopedic spine surgeon whose medical

ORDER - page 2

malpractice policy No. 1087741372 (the policy) was issued by CCC
and produced by CNA (Producer's Code No.970-005054).
Ex.2,p.3; #50-Ex.l, p.28].

[#51-

The policy was current at all times

relevant to this matter and had a $5 million limit of liability
for each claim, a $5 million aggregate limit and a $5 million
combined single limit.

[#50-Ex.l].

Under the amended terms of

the policy, CCC has:
"the right and will defend any claim. We will do this even
if any of the charges of the claim are groundless, false or
fraudulent.
We will investigate any claim we feel is
appropriate.
We will not settle any claim without your
consent or the consent of the Association's Committee formed
for this purpose
"
[#50-Ex.l,p.96].
The Association is defined as:
"the Society, the Oregon Medical Association or any other
designation used to describe the sponsoring organization."
[#50-Ex.l,p.97].

The OMA PCC is empowered by the OMA to settle

lawsuits under the terms of individual policies and is the
liaison between the OMA and CNA.

[#51-Ex.l,pp.2-3].

On August 10, and August 13, 2005, plaintiff performed
surgeries on Ms. Mason's spine.

[#51-Ex.3,p.3].

Ms. Mason

subsequently suffered permanent loss of the use of her legs as
well as control of her bladder and bowels.

Id.

Ms Mason filed

suit on August 7, 2007, contending that her paralysis was caused
by plaintiff injuring her spinal cord during surgery and seeking
damages in excess of $4 million.

ORDER - page 3

Id.

Plaintiff denied liability

and contended that the paralysis resulted from Ms. Mason
suffering a stroke/ischemic event, cutting off the blood supply
to her anterior spinal column.

[#51-Ex. 2, pp. 4-6].

CCC agreed to provide a defense under the terms of the
policy.

[#49-p.2].

Defense counsel originally assessed the case

as 50/50 in terms of defensibility.

[#49-p.2 and Ex.1].

However,

later in an April 25, 2008, at a CCC Claims Legal Exposure
Management (CLEM) meeting, counsel gauged the chance for a
defense verdict as 60-75% and stated that Ms. Mason's potential
recovery could be close to $2 million.

[ #51- Ex . 2 , p . 18 ] .

On

June 3, 2008, Ms. Mason's counsel made a $2.2 million settlement
offer.

[#49-p.2 and Ex.2].

This offer was discussed with

plaintiff who did not agree to settle the case.

[#51-Ex.2, pp.8-

10J •

Another CLEM meeting was held on June 25, 2008 at which
defense counsel gauged a 65% chance of a defense verdict.
p.3 and Ex.4].
30, 2008.

[#49-

Plaintiff signed a non-consent to settle on June

[#49-p. 3 and Ex. 5].

At a July 9, 2008, CLEM meeting, defense counsel reduced the
defensibility to 60% because a neuroradiologist could not exclude
Ms. Mason's theory that Dr. Parvin had injured her spinal cord.
[#49-p.3, Ex.6].

By July 13, 2008, defense counsel advised

settlement as the best resolution because three neuroradiologists
had agreed that the CT scan showed a "surgical mishap."

ORDER - page 4

[#51-

Ex . 4 , pp . 2 2-2 4 ] .
Upon receiving the CT scan results, a CLEM meeting was held
on July 14, 2008, at which defense counsel dropped the chance of
a defense verdict to 30-40%.

[#49-p.3, Ex.7; #51-Ex.4,p.24].

He

communicated the likely unfavorable verdict to plaintiff when Dr
Campbell, plaintiff's mentor, did not support plaintiff's causal
theory.

[#51-Ex.4,pp.25-26].

Plaintiff remained adamant that he

wanted the case brought to trial.

[#51-Ex.4,p.27].

CCC instructed its OMA PCC liaison to coordinate a meeting
to seek the OMA PCC's consent to settle the case.
The meeting was held on July 16, 2008.

Id.

[#50 -p. 2] .

Plaintiff, defense

counsel, insurance representatives and the OMA PCC
representatives were present and agreed not to settle pre-trial
however, the OMA PCC wanted to have "somebody from CNA .
. present at trial with authority to settle if the trial did not
go well." [#51-Ex.l,p.S].
The trial began on July 21, 2008.

[#49-p.3].

Ms. Mason's

case rested on the third day of trial and all agreed it had been
presented very well.

[#49-p.4].

Plaintiff's case began the

afternoon of the third day and called its first expert witness,
who, to the defense counsel's surprise, testified that he agreed
with Ms. Mason's theory of the case- that plaintiff had injured
her spinal cord.

[ #51- Ex . 4 , pp . 1 6-1 7 ] .

defense case went reasonably well.

ORDER - page 5

Id.

The remainder of the

At the close of the fourth day of trial, Ms. Melanie
Spiering, a CNA representative attempted to call an OMA PCC
meeting regarding settlement of the case.

[#50-p.2].

A meeting

did not happen, however CNA claims consultant Norene Quaam
negotiated a settlement of $1.5 million late that same evening.
[#49-p.4].
Mr. Frisch, OMA counsel testified that he agreed that CCC
had the authority to settle the Mason lawsuit as a result of his
communication with Dr Rosenblatt, an OMA PCC committee member.
[#51- Ex.6,pp.4-5].

Dr. Rosenblatt testified that although a

meeting of the OMA PCC was not held, he believed it was
unnecessary to do so because the OMA PCC committee at their
previous meeting had already "voted unanimously to allow cna
[sic] to settle the case at any time it seemed most appropriate."
[#51- Ex. 6, pp. 5-6, 8] .
Plaintiff disputes this recollection and therein lies the
material fact issue.

Viewing the record before the court in the

light most favorable to plaintiff, there is a question of
whether, CCC had the actual authority through consent by the OMA
PCC, to settle the Mason case for $1.5 million.

Without the

consent of either plaintiff or the OMA PCC, CCC unilaterally
settling the case would clearly breach of their contract with
plaintiff.
Finally defendant CNA's assertion that it should be

ORDER - page 6

dismissed because it has never done business with plaintiff seems
disingenuous given that they freely admit that CNA is the parent
of Continental Corporation, which is the parent of CCC - the
company that issued the policy to plaintiff.

[#50-Ex.1].

A

policy which incidentally, is emblazoned with the CNA logo.

[#50-

Ex .1-p .1] .
Defendant CNA contends that logo is merely a "service mark"
which CCC is permitted to use in its insurance underwriting and
claims.

[#15-p. 4].

However its web page says:

"CNA Financial Corporation is one of the largest commercial
property and casualty insurance organizations in the United
States providing insurance protection to more than one
million businesses and professionals in the U.S. and
internationally." And explains:
"CNA, a financial holding company, conducts its property and
casualty insurance operations primarily through Continental
Casualty Company (CCC)
"
[ # 1 7- Ex . 1 ] .

The page further explains that CNA's core business

is commercial property and casualty insurance operations which it
provides "both domestically and abroad through a network of
brokers, managing general underwriters and independent agencies."
Id.

Subsequent exhibits submitted by plaintiff demonstrate that
the officers of CCC and CNA are identical.

[#17-Exs.2-3].

For

example, Thomas Motamed is the CEO and president of both CCC and
CNA and Jonathan David Cantor is the executive vice president,
general counsel and secretary of both entities.

ORDER - page 7

[#17-Ex.2].

In

fact, the entire slate of officers is identical in both companies
with the sole exception of Dennis Hemme, who is senior vicepresident and treasurer of just CCC.

[#17- Exs. 2-3].

A parent-subsidiary relationship alone is insufficient to
attribute the contacts of the subsidiary to the parent for
jurisdictional purposes.

Bell

&

Harris Rutsky & Co. Ins. Serv.

Inc. V.

Clements Ltd, 328 F.3d 1122, 1134 (9th Cir. 2003).

However, a subsidiary's contacts may be imputed to its parent for
personal jurisdiction purposes where the subsidiary is the
parent's alter ego.

Id.

To demonstrate a parent and its subsidiary are alter egos,
the plaintiff must establish a prima facie case that the two
companies share "such unity of interest and ownership" that the
companies' separateness no longer exists and "failure to
disregard [their separate identities] would result in fraud or
injustice.
2001) .

Doe v. Unocal Corp., 248 F3d 915, 926

(9~h

Cir.

To demonstrate a unity of interest warranting disregard

of corporate separateness, the plaintiff must show the parent
controls its subsidiary to such a degree as to render the
subsidiary a "mere instrumentality" of its parent.

Id.

Typically, this would involve showing the parent controls the
subsidiary's internal affairs or daily operations.

Kramer Motors

Inc. V. British Leyland, Ltd., 628 F.2d 1175, 1177 (9th Cir.
1980) .
ORDER - page 8

To overcome the established common-law principle of
corporate law that directors and

office~s

holding. positions with

a parent and a subsidiary can·and do change hats to represent the
~wo

corporations separately despite their· common ownership,

plaintiff will need to show that the officers and directors wexe
acting as CNA officers rather than CCC officers when the all·eged
contract breach occurred.

U.S. v. Bestfoods,524 U.S. 51, 69

(1998) (lone fact of having identical directors may not serve to
expose corporate parent to liability for its subsidiary's acts),
Plaintiff has established sufficient facts to raise a
possibility that .CCC is simply an alter ego of CNA and avoid
summary dismissal of CNA.

Conclu.sion
For. the reasons detailed above, defendant's Motions for
Summary

Judg~ent[#47)

is DENIED.

Plaintiff's Motion for Partial

Summary Judgment [#60) is DENIED. ·
IT IS SO

ORDERED~

DATED this

ORDER - page 9

~ {-

day

of Octo}:)er, 2012.