Source: https://cbaclelegalconnection.com/tag/subrogation/
Timestamp: 2019-04-22 20:51:05+00:00

Document:
The Colorado Court of Appeals issued its opinion in Preferred Professional Insurance Co. v. The Doctors Co. on Thursday, April 5, 2018.
Medical Malpractice—Primary Insurance Policy—Excess Insurance Policy—Equitable Subrogation —Bad Faith.
A medical malpractice suit was filed against Dr. Singh and other parties. The Doctors Company (TDC), the primary insurer, defended Dr. Singh in the suit as required by its primary liability policy. Preferred Professional Insurance Company’s (PPIC) insurance policy was an “excess policy,” which would cover any losses that exceeded TDC’s $1 million coverage up to an additional $1 million. As an excess insurer, PPIC did not have any duty to defend Dr. Singh in the suit. The plaintiff in the medical malpractice suit offered to settle the case with Dr. Singh for $1 million, the amount of TDC’s policy limits. Dr. Singh conveyed his desire to accept the settlement offer to both insurers, but TDC declined to settle the case. PPIC told Dr. Singh he should accept, and it paid the $1 million settlement. PPIC then filed suit against TDC for equitable subrogation to recover the amount paid. The district court granted summary judgment in PPIC’s favor without addressing TDC’s argument that PPIC was required to prove that TDC refused to settle in bad faith.
On appeal, TDC contended that the district court erred as a matter of law because an equitable subrogation claim brought by an excess insurer against the primary insurer to recover the amount paid in settlement can only be derivative of the insured’s rights. Thus, PPIC’s refusal to plead and present evidence that TDC acted in bad faith in declining to settle required dismissal of PPIC’s claim. An excess insurer seeking recovery under equitable subrogation for a primary insurer’s failure to settle a case against their mutual insured “steps in the shoes of the insured” and must plead and prove the primary insurer’s bad faith. Here, without an assertion that TDC acted in bad faith, PPIC’s equitable subrogation claim is not legally viable.
The order granting summary judgment for PPIC was reversed and the case was remanded for entry of judgment of dismissal in TDC’s favor.
The Colorado Court of Appeals issued its opinion in American Family Mutual Insurance Co. v. American National Property & Casualty Co. on Thursday, September 24, 2015.
Inverse Condemnation—Motion for Limited Discovery.
Plaintiffs are 25 insurance companies (collectively, carriers). On March 22, 2012, the Colorado State Forest Service initiated a prescribed burn on land owned by Denver Water. On March 26, high winds carried embers from the burn onto land located outside the prescribed burn’s perimeter. What became known as the Lower North Fork Fire ignited and spread rapidly, resulting in loss of life and significant property damage.
This subrogation lawsuit followed and, with 25 insurance companies, the pleadings are “voluminous.” The carriers relied on inverse condemnation claims against the Colorado Department of Public Safety (Department) and the Denver Water Board (Denver Water).
The Department moved to dismiss for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted. To respond, the carriers moved to conduct limited discovery. The district court denied the motions to conduct discovery, granted the motions to dismiss, and certified the order for purposes of appeal. As to the motions to dismiss, the court found that the carriers had failed to allege a public purpose for the taking of their insureds’ properties.
The Court of Appeals first rejected the Department’s argument that the carriers had not established standing. The insureds had a right to pursue inverse condemnation claims and the carriers stood in their shoes by virtue of the alleged subrogation relationships.
The Court next addressed the carriers’ argument that the district court erred in dismissing the claims because they did plead a public purpose. To prove an inverse condemnation claim under the Colorado Constitution, a property owner must show (1) that there has been a taking or damaging of a property interest; (2) for a public purpose; (3) without just compensation; (4) by a governmental or public entity that has the power of eminent domain, but which has refuse to exercise that power. The finding of a public purpose requires inquiring into whether the condemnation’s essential purpose is to obtain a public benefit. None of the carriers’ allegations explained how the alleged taking of their insureds’ private property furthered the purposes for which the prescribed burn was initiated, and there were no allegations that the taking itself was accomplished for a public purpose. Therefore, the carriers failed to allege, and could not allege, a public purpose for the taking of their insureds’ properties.
The Court also held that the district court did not err in denying the carriers’ motion to conduct discovery to respond to the motions to dismiss. In denying the motion, the district court cited CRCP 16(b)(1), which states that, except as provided in CRCP 26(d), discovery may commence 42 days after the case is at issue, and this case was “not close to being at issue . . .” Moreover, the purpose of a CRCP 12(b)(5) is to test the legal sufficiency of a claim that, by definition, does not involve factual matters outside the pleadings. The Court agreed with the district court’s reasoning and found no abuse of discretion. The order and judgment were affirmed.
The Tenth Circuit Court of Appeals issued its opinion in ASARCO LLC v. Union Pacific Railroad Co. on Monday, June 23, 2014.
ASARCO, along with Union Pacific Railroad Corp. and Pepsi Co., operated in a four-square-mile area in Denver known as the Vasquez site, which was found to be environmentally contaminated. The EPA brought a CERCLA action against ASARCO. The CERCLA action was still pending when ASARCO filed for Chapter 11 bankruptcy in the Southern District of Texas. The EPA filed proofs of claim in ASARCO’s bankruptcy case to recover its expenses for cleaning the Vasquez site. ASARCO eventually moved for approval of a settlement agreement, in which it would agree to pay over $1.5 million to resolve its CERCLA claims at the Vasquez site and other sites, and the bankruptcy court approved the settlement on June 5, 2009. The bankruptcy plan was also approved, which reorganized ASARCO as ASARCO LLC and noted that all claims, including any pending environmental claims, would be paid in full on the effective date of December 9, 2009.
ASARCO LLC filed a lawsuit against Union Pacific and Pepsi on December 10, 2012, asserting that it paid more than its fair share for environmental remediation at the Vasquez site. ASARCO LLC brought two claims: a direct contribution claim under CERCLA, and a contribution claim as debtor-ASARCO’s subrogee under CERCLA. The magistrate judge recommended dismissal of both claims – as to the first claim, it found that the claim was untimely, as it was brought more than three years after the date the bankruptcy court approved the settlement. As to the second claim, the magistrate judge rejected ASARCO’s argument that it was a separate legal entity from debtor-ASARCO and it could not be subrogated to itself. The magistrate judge also noted that CERCLA provided the exclusive legal remedy to ASARCO’s claims. The district judge accepted the magistrate judge’s recommendations and dismissed the complaint in its entirety. ASARCO appealed to the Tenth Circuit.
ASARCO first argued that its claim was not barred by the statute of limitations. The Tenth Circuit commented that the plain language of the statute did not support ASARCO’s argument, since the statute refers to the date the judicially approved settlement is entered. The Tenth Circuit also noted that all of the case law cited by ASARCO counseled the same result, that the statute of limitations had expired prior to ASARCO’s filing of the complaint. As to the second argument, the Tenth Circuit denied that ASARCO became a separate legal entity after bankruptcy reorganization, and noted that an entity cannot become subrogated to itself. Because the direct contribution claim was time-barred and because ASARCO is not a subrogee, the Tenth Circuit affirmed the district court’s order.
The Tenth Circuit Court of Appeals published its opinion in Yousuf v. Cohlmia on Tuesday, January 21, 2014.
Dr. Ashard Yousuf sued Dr. George Cohlmia and Cardiovascular Surgical Specialists Corporation (CVSS) in Oklahoma state court for defamation, tortious interference with business relations/contract, intentional infliction of emotional distress/outrage, negligence, and breach of contract. Dr. Yousuf alleged that Dr. Cohlmia made a series of false statements to local media disparaging Dr. Yousuf’s professional reputation. Dr. Cohlmia denied that the statements he made were false.
CVSS held a professional liability policy with Physicians Liability Insurance Company (PLICO) and two identical general commercial liability policies with American National Property and Casualty Company (ANPAC) (one for each business location), each of which covered Dr. Cohlmia as an additional insured. Dr. Cohlmia demanded that both insurers provide for his defense, pursuant to their respective policies. PLICO agreed to defend the lawsuit under a reservation of rights and requested ANPAC to share in the defense. ANPAC refused, contending its policy did not cover the alleged wrongdoing and that it owed no duty to defend. ANPAC further claimed that even if it erred in refusing to defend Dr. Cohlmia, PLICO had no right to indemnification or contribution for the defense costs it incurred.
After various state proceedings, PLICO sought to recover its defense costs in federal district court. The court concluded the defense costs should be evenly divided between the insurers and granted summary judgment for PLICO. Once summary judgment for PLICO was granted, PLICO and ANPAC negotiated an agreement, stipulating that ANPAC’s portion was $206,698.78. PLICO then moved for prejudgment interest in the amount of $149,110.57, contending that the district court was required to include prejudgment interest of fifteen percent per year from the date of the judgment pursuant to title 36, section 3629(B) of the Oklahoma Statutes. The court denied prejudgment interest.
ANPAC appealed from the district court’s grant of summary judgment in favor of PLICO. PLICO cross-appealed the district court’s denial of its motion for prejudgment interest. The Tenth Circuit applied Oklahoma law in interpreting the insurance policies at issue and concluding ANPAC breached its duty to defend Dr. Cohlmia.
The court concluded that the provision in ANPAC’s policy providing coverage for “personal injury” resulting from “the publication or utterances of a libel or slander or of other defamatory or disparaging material” was broad enough to encompass the tort of intentional interference with business relations. It rejected ANPAC’s contention that such an interpretation is against public policy because it extends coverage to include intentional wrongdoing.
The court affirmed the district court’s grant of summary judgment requiring ANPAC to reimburse PLICO for one-half of its defense costs.
In response to PLICO’s cross-appeal on the district court’s failure to award prejudgment interest, ANPAC argued the district court was correct in concluding that prejudgment interest was barred under the Tenth Circuit’s decision in Regional Air because PLICO prevailed on a summary judgment rather than a jury verdict, and also because prejudgment interest is unavailable in Oklahoma where the damages are not certain, liquidated, or reasonably ascertainable. The Tenth Circuit overruled Regional Air on its interpretation of the Oklahoma statute providing for prejudgment interest. It held that PLICO’s claim for prejudgment interest was not defeated simply because the judgment was entered pursuant to summary judgment rather than a jury verdict. It did affirm the district court’s denial because the attorney fees were not liquidated under Oklahoma law as they were subject to a reasonableness determination.
The Colorado Court of Appeals issued its opinion in Hertz Corp. v. Industrial Claim Appeals Office on September 13, 2012.
In this workers’ compensation proceeding, the Colorado Insurance Guaranty Association (CIGA) appealed from the final order issued by the Industrial Claim Appeals Office (Panel), which disallowed it from taking a credit or offset against interest earned on the multiple third-party recoveries obtained by claimant. The order was affirmed.
Claimant received a workers’ compensation award of ongoing medical benefits and permanent total disability (PTD) benefits. He also received third-party recoveries for malpractice. The interest earned by claimant included both the investment income generated by the several lump-sum malpractice settlements and the interest component embedded in a statutorily required, court-ordered annuity investment. Claimant later moved for an order compelling CIGA to begin payments for PTD and medical benefits on a continuing basis and to pay past-due benefits without offsetting any of the interest earned or any interest contained in the annuitized payments for loss of future earnings and medical costs.
CIGA contended that the Panel erred in interpreting CRS § 8-41-203(1) to preclude a credit or offset against the interest component earned on the judgments against the hospital and physicians who caused claimant’s damages. CRS § 8-41-203(1) provides the workers’ compensation insurance carrier with a subrogation right to the proceeds received by the claimant for economic damages awarded in a third-party lawsuit against the tortfeasor. Here, purchase of the annuities essentially constitutes an investment of claimant’s previous judgment, and the interest earned on the annuity is funded by the original investment, not by the third-party tortfeasor’s liability obligation. Thus, the interest earned on the annuity is not the equivalent of the economic and medical benefits recovered from the tortfeasor or owed by the workers’ compensation provider. Rather, the interest component compensates claimant for the loss of use of funds during the accrual period. Further, CIGA was not entitled to any interest earned on claimant’s lump sum payments from the physicians. If CIGA received a credit or offset for the interest earned on these amounts, it would be permitted to recover a sum in excess of the amount of compensation for which it would be liable, in contravention of the statute. Therefore, the Panel properly determined that CIGA’s subrogation rights did not extend to that part of the periodic payments.

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