Good Samaritan Hospital v. Lexington Insurance et al

Filing 35

ORDER by Judge Benjamin H Settle granting 12 Motion to Dismiss.(TG)

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1 2 3 4 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 5 6 7 GOOD SAMARITAN HOSPITAL, a Washington corporation, CASE NO. C12-5043BHS 8 9 10 11 Plaintiff, v. LEXINGTON INSURANCE, a Delaware corporation, et al., ORDER GRANTING MOTION TO DISMISS AND DISMISSING COMPLAINT WITH PREJUDICE Defendants. 12 13 14 15 16 This matter comes before the Court on Defendants USI Insurance Services, LLC, and USI Holdings’ (collectively “USI”) motion to dismiss (Dkt. 12) and Defendant Lexington Insurance’s (“Lexington”) (collectively “Defendants”) joinder in the motion 17 (Dkt. 15). The Court has reviewed the briefs filed in support of and in opposition to the 18 motion and the remainder of the file and hereby grants motion to dismiss for the reasons 19 stated herein. I. PROCEDURAL HISTORY 20 21 On December 21, 2011, Plaintiff Good Samaritan Hospital (“Hospital”) filed a 22 complaint in Pierce County Superior Court for the State of Washington against 23 Defendants alleging misrepresentation, bad faith, breach of duty of care, violations of 24 Washington State insurance regulations, and a violation of the Washington Consumer 25 Protection Act (“CPA”), RCW Chapter 19.86. Dkt. 2 at 4-10 (“Complaint”). On January 26 19, 2012, Defendants removed the case to this Court. Dkt. 1. 27 28 ORDER - 1 1 On January 24, 2012, USI filed a motion to dismiss (Dkt. 12) and Lexington joined 2 in the motion (Dkt. 15). On March 20, 2012, the Court granted the motion as to the 3 merits and reserved ruling on the appropriate relief. Dkt. 25. On March 30, 2012, the 4 Hospital filed a supplemental brief on whether any amendment to its complaint would be 5 futile. Dkt. 26. On April 6, 2012, Lexington responded. Dkt. 28. On April 11, 2012, 6 USI responded. Dkt. 30. On April 13, 2012, the Hospital replied. Dkt. 32. 7 8 II. FACTUAL BACKGROUND The Hospital contracted with Medical Services Network (“MSN”) to provide 9 temporary nursing staff. Complaint, ¶ 3.1. The contract required MSN to provide 10 11 12 13 professional liability insurance. Id. MSN obtained a contract of insurance from Lexington through an agent for Summit Global Partners of Florida, Inc. (“Summit). Id. ¶ 3.2. As proof of the insurance, Summit issued a Certificate of Insurance. Id., Exh. A 14 (“Certificate”). The Certificate provides that MSN had obtained professional liability 15 insurance and, under the category entitled “LIMITS,” it reads “$5,000,000 Each Act, 16 $5,000,000 Aggregate.” Id. The Certificate also provides that “THE INSURANCE 17 AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE 18 TERMS, EXCLUSIONS, AND CONDITIONS OF SUCH POLICIES . . . .” Id. 19 In January of 2008, the Iwamoto estate and family (“Iwamoto”) filed a lawsuit 20 against both the Hospital and MSN alleging negligence by an MSN nurse (“Lawsuit”). 21 Id. ¶ 3.4. Iwamoto and MSN submitted the Lawsuit to private arbitration, which has a 22 maximum award of one million dollars. Id. ¶ 3.5. The Hospital was dismissed from the 23 Lawsuit in April of 2009. Id. In December of 2009, the arbitrator entered an award in 24 25 26 favor of Iwamoto in the amount of $785,000 plus fees and costs. Id. ¶ 3.6. In February of 2010, Iwamoto notified the Hospital that MSN may not be able to pay the award and that Iwamoto intended to file a motion to vacate the order dismissing 27 the Hospital from the Lawsuit. Id. At the same time, Iwamoto informed the Hospital that 28 ORDER - 2 1 the MSN policy contained a one-million-dollar self-insured retention provision (“SIR”). 2 Id. The award against MSN was subsequently discharged in a bankruptcy proceeding. 3 Id. 4 On January 24, 2011, the Hospital contacted USI, the corporate successor of 5 Summit, and Lexington and requested indemnification and defense because the SIR 6 7 8 provision was not included in the Certificate. Id. ¶ 3.7. On March 13, 2011, the arbitrator vacated the judgment and award in the Lawsuit. Id. 3.9. 9 III. DISCUSSION 10 11 12 13 In the previous order, the Court concluded that the Hospital had failed to state a claim upon which relief may be granted for the tort of misrepresentation, either by a specific communication or by an omission, or for the tort of breach of the independent 14 duty of care. Dkt. 25. The Court reserved ruling on whether the Hospital’s complaint 15 should be dismissed without an opportunity to amend. Id. In its supplemental briefing, 16 the Hospital alleges that the “coverage represented as primary was actually excess 17 [coverage].” Dkt. 26 at 6. The Hospital argues that this allegation supports its claims of 18 misrepresentation and breach of the duty of care. Id. at 10-12; see also Dkt. 32 at 4-8. 19 However, “Washington courts have rejected the argument that self-insurance constitutes 20 ‘insurance.’” Bordeaux, Inc. v. American Safety Ins. Co., 145 Wn. App. 687, 695 (2008) 21 (citing Stamp v. Dep’t of Labor & Indus., 122 Wn.2d 536, 542–44 (1993) and Kyrkos v. 22 State Farm Mut. Auto. Ins. Co., 121 Wn.2d 669, 674 (1993)). Therefore, the Hospital’s 23 allegation does not support either claim. 24 25 26 The Hospital also argues that the Court made “factual conclusions that [the Hospital] believes are improper at this early stage in the litigation.” The Hospital contends that “the Court’s finding that this was ‘reasonable care in the particular 27 circumstance’ is a factual finding contravened by the allegations in the well pleaded 28 ORDER - 3 1 complaint by [the Hospital].” Id. The Court agrees with the Hospital that a finding of 2 whether a defendant exercised reasonable care should usually be left to the fact finder. 3 See Ranger Ins. Co. v. Pierce County, 164 Wn.2d 545, 553 (2008) (“Whether a defendant 4 has met the applicable duty is a question for the jury, unless reasonable minds could not 5 differ.”) (citing Hertog, ex rel. S.A.H. v. City of Seattle, 138 Wn.2d 265 (1999)). Taking 6 the Hospital’s allegations of fact as true, reasonable minds could not differ on the issue of 7 whether the insurance broker’s acts met any applicable duty to the Hospital. This 8 conclusion is made in addition to the conclusion that there is no applicable duty. Dkt. 26 9 at 6–7. 10 11 In the event a court finds that dismissal is warranted, it should grant the plaintiff leave to amend unless amendment would be futile. Eminence Capital, LLC v. Aspeon, 12 Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). The Court has allowed the Hospital an 13 opportunity to contest the futility of any amendment to its complaint, and the Court 14 15 16 concludes that any amendment would be futile to support the torts of misrepresentation and/or breach of the duty of care. IV. ORDER 17 18 19 20 Therefore, it is hereby ORDERED that Defendants’ motion to dismiss (Dkt. 12) is GRANTED and the Hospital’s complaint is DISMISSED with prejudice. DATED this 1st day of May, 2012. 21 22 A BENJAMIN H. SETTLE United States District Judge 23 24 25 26 27 28 ORDER - 4

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