Source: http://masslegalresources.com/tag/darwin
Timestamp: 2019-04-20 16:52:23+00:00

Document:
dismiss certain counts, the defendants ask this Court to stay the proceedings. For the reasons that follow, the Motion to Dismiss is Denied.
Plaintiffs have contracts with various Departments of Corrections (DOCs) throughout the United States to provide medical and mental healthcare services to their prisoner populations. MHM provides mental healthcare services for the Alabama DOC (ADOC). Centurion-MS provides medical and mental healthcare services for the Mississippi DOC (MSDOC). Centurion-MN provides medical and mental healthcare services for the Minnesota DOC (MNDOC). MPCH provides medical and mental healthcare services for the Massachusetts DOC (MADOC).
These DOCs are currently defendants in six federal class action lawsuits filed between 2010 and 2015 on behalf of incarcerated individuals. Those lawsuits are: Dunn v. Thomas (Dunn), No. 2:14-cv-00601-MHT-TFM; DePriest v. Walnut Grove Correctional Authority (DePriest), No. 3:10-cv-663 DPJ-FKB; Dockery v. Epps (Dockery), No. 3:13-cv-326-TSL-JMR; Ligons v. Minnesota Department of Corrections (Ligons), No. 15-cv-2210, PJT/BT; Paszko v. O’Brien (Paszko), No. 1:15-cv-12298-NMG; and Briggs v. Massachusetts Department of Corrections (Briggs), No. 1:15-cv-40162-GAO. Each of these lawsuits seeks injunctive and declaratory relief as well as attorney’s fees.
Both the MNDOC and Centurion-MN are defendants in Ligons. Both the MADOC and MPCH are defendants in Paszko and Briggs. The ADOC is a defendant in Dunn and the MSDOC is a defendant in DePriest and Dockery. MHM and Centurion-MS are not named defendants in Dunn, DePriest, or Dockery. However, pursuant to indemnification provisions in their service contracts with these DOCs, MHM and Centurion-MS have agreed to defend and indemnify them for losses arising from the lawsuits.
MHM will indemnify and hold harmless . . . the ADOC . . . from and against all claims, losses, or costs arising out of MHM’s negligence, gross negligence, wantonness, deliberate indifference, or criminal negligence, or from willful disregard of proper or lawful written instructions from the Commissioner of the ADOC and Associate Commissioner of Health Services. . . .
MHM will indemnify and hold harmless . . . the ADOC . . . from and against any and all loss or damage, including court costs and attorney fees, for liability claimed against or imposed upon the ADOC because of bodily injury, death, or property damage, real or personal, including the loss or the use thereof, arising out of or as a consequence of the breach of any duty or obligation of MHM included in this Agreement, negligent acts, errors or omissions, including engineering and/or professional error, fault or mistake, or negligence of MHM . . . . MHM’s obligation, under this Section, will not extend to any liability caused by the negligence of ADOC. . . .
To the fullest extent allowed by law, Centurion shall indemnify, defend, save and hold harmless, protect, and exonerate the [MSDOC] . . . from and against all claims, demands, liabilities, suits, actions, damages, losses, and costs of every kind and nature whatsoever, including without limitation, judgments, court costs, investigative fees and expenses, and attorney’s fees, arising out of or caused by Centurion . . . in the performance of or failure to perform this Agreement. . . . Centurion’s obligations, duties, and responsibilities under this section include, but are not limited to, the duty to defend and indemnify [MSDOC] . . . in [DePriest and Dockery].
disclaimed any obligations to defend and indemnify the MSDOC for any actions that occurred prior to July 1, 2015, when there was no contractual relationship between the two. Section 10.1 also arguably limits liability to Centurion-MS’s failure to perform its own obligations and duties. Thus, like the indemnification provision in the ADOC Contract, the indemnification provision in the MSDOC Contract would appear to be limited to those losses arising out of acts and omissions of Centurion-MS and not for those acts or omissions of a third party.
From 2013 through 2016, plaintiffs were insured by primary Locum Tenens and Contract Staffing Professional Liability Insurance Policies issued by Evanston Insurance Company (Evanston). Evanston has declined to provide coverage in connection with Dunn, DePriest, Dockery, and Briggs. It has provided a partial defense in connection with Ligons under a reservation of rights. Plaintiffs have filed a separate coverage action in Illinois state court against Evanston regarding coverage for the class action lawsuits. The Illinois action remains pending.
Evanston largely denied coverage in connection with the six class action lawsuits, plaintiffs sought coverage under these Policies. Defendants, however, declined to provide it.
The Insurer will pay on behalf of the Insured . . . Loss and Defense Expenses. . . which the Insured becomes legally obligated to pay as a result of a Claim alleging a Medical Professional Incident, provided always that: 1. such a Claim is first made against the Insured during the Policy Period . . . ; and 2. notice of such Claim is given to the Insurer in accordance with . . . this Policy….
The Insurer will pay on behalf of the Insured . . . Loss and Defense Expenses. . . which the Insured becomes legally obligated to pay as a result of a Claim alleging Bodily Injury, Property Damage, or Personal or Advertising Injury caused by an Occurrence, provided always that: 1. such Bodily Injury, Property Damage, or Personal or Advertising Injury occurs during the Policy Period . . . ; and 2. notice of such Claim is given to the Insurer in accordance with . . . this Policy….
(Boldface in original). The relevant terms and conditions of the Policies are in most respects the same. To the extent there are differences, those differences will be discussed below.
them in connection with Ligons, Paszko and Briggs. Centurion-MN and MPCH are named defendants in the underlying complaints in those three cases. As to both categories, plaintiffs maintain they are entitled to coverage under both Insuring Agreement I.A and Insuring Agreement I.B. This Court concludes the Complaint survives the defendants’ Motion to Dismiss under Insuring Agreement I.A. It concludes that there is no coverage for any of the class actions under Insuring Agreement I.B.
1 It is important to note that these issues are raised by way of a motion to dismiss. The underlying lawsuits remain pending and the indemnification obligations have not been finally decided. This Court therefore makes no final determination in favor of plaintiffs as to coverage. Rather, the only question before the Court at this point is whether the plaintiffs have stated a claim upon which relief may be granted.
however. The question is rather whether the indemnification demands made against MHM and Centurion-MS as a result of those lawsuits constitute a “Claim” within the meaning of the policies and whether such a claim is covered.
The indemnification demands seek to recoup from MHM and Centurion-MS costs and expenses the DOCs incur as a result of any finding of liability against them in the class action lawsuits and that can be shifted to MHM and Centurion under their service contracts. As to whether that is covered, the applicable policies require the insurer to pay, on behalf of the insured, any “Losses or Defense Expenses” which the insured becomes legally obligated to pay “as a result of a Claim alleging a Medical Professional Incident….” A “Medical Professional Incident” means, among other things, “an actual or alleged act, error, or omission in the Insured’s rendering of or failure to render Medical Professional Services.” (Boldface in original). Dunn, DePriest and Dockery all allege a failure to render adequate medical care to inmates – medical care which MHM and Centurion-MS agreed to provide pursuant to their contracts with the DOCs. In demanding indemnification, the DOCs are seeking to shift liability to MHM and Centurion-MS for costs and expenses incurred by any determination in those lawsuits that inmate medical care was inadequate. As the Court construes the contractual indemnification provisions that form the basis for that demand, the DOCs will be able to shift those costs (and Centurion-MS and MHM are seeking coverage for) only those losses that arose from MHM’s or Centurion-MS’s acts or omissions in rendering inadequate medical services. In other words, it will be for losses incurred as a result of an “act, error or omission in the Insured’s rendering of or failure to render Medical Professional Services.” Accordingly, the indemnification demand would be a “Claim” that triggers coverage.
Defendants argue that the indemnification provisions are broader than that, however, and allow the DOCs to shift costs for acts or omissions in which the plaintiff insureds played no part. This Court disagrees. As to the ADOC Contract, MHM’s indemnity obligation extends only to losses incurred by the ADOC “arising out of or as a consequence of the breach of any duty or obligation of MHM … including negligent acts, errors or omissions” on MHM’s part. Similarly, the MSDOC Contract permits the MSDOC to seek reimbursement from Centurion-MS for any costs or expenses “arising out of or caused by Centurion . . . in the performance of or failure to perform this Agreement.” Although that contract was entered into after the DePriest and Dockery lawsuits began, Centurion-MS has specifically disclaimed any obligation to defend and indemnify the MSDOC for any actions that occurred prior to July 1, 2015, when there was no contractual relationship between Centurion-MS and MSDOC. In any event, the question before the Court at this juncture in the case is whether the plaintiffs have stated a claim for coverage. If it turns out that the DOCs seek to be indemnified for costs that arise out of acts and omissions by other entities (and a court determines that the DOC is entitled to do that), then the defendants might well be correct to deny coverage. To assume that would occur, however, would be premature, particularly where the contractual indemnification provisions at issue could be more narrowly construed, and (as this Court understands it) plaintiffs are not seeking coverage for costs and expenses which are attributable to the acts or omissions of others.
by reason of the assumption of liability of another in any Express Contract or Agreement.
(Boldface in original). There are two exceptions to the exclusion. First, it does not apply to liability for damages “that the Insured would have in the absence of the contract or agreement.” (Boldface in original) (Exception A). Second, the contractual liability exclusion does not apply to liabilities “assumed in a contract or agreement that is an Insured Contract, provided the Bodily Injury or Property Damage occurs subsequent to the execution of such contract or agreement.” (Boldface in original) (Exception B). This Court concludes that the indemnification demands arguably fall within Exception A, so that the contract exclusion provision would not apply.
The allegations in the underlying complaints suggest that, as the entities that carried out the DOCs’ healthcare-related policies, MHM and Centurion-MS played a role in the alleged failures to deliver adequate care. Moreover (as already noted above) the contractual indemnification provisions can be construed to permit a shifting of costs and expenses only as to MHM’s and Centurion-MS’s own failure to provide the medical care that they promised to the DOCs pursuant to their contracts. Thus, the demands concern conduct for which MHM and Centurion-MS could be liable even absent the indemnification provisions, and therefore fall within Exception A. In short, these claims for coverage are not so clearly outside the scope of the relevant policies as to be subject to dismissal at this stage of the case.
under that same policy and as to Briggs, under the 2015 Allied World MHM Health Professionals Policy (the Allied World Policy). Defendants make three arguments as to why plaintiffs’ coverage claims have no merit and must be dismissed. First, they contend that MPCH and Centurion-MN did not provide them with timely notice in connection with either the Paszko or Ligons litigation. Under the 2014 Darwin Policy, “prompt” notice is required. Second, the defendants argue that MPCH cannot make a claim for coverage under the Allied World Policy as to the Briggs lawsuit because the claim was not “first made” under that policy. Third, the defendants assert that they are not required to provide coverage to MPCH or Centurion-MN under either the 2014 Darwin Policy or under the Allied World Policy because the underlying complaints in Paszko and Briggs request only declaratory and injunctive relief, which is not a covered “Loss.” This Court will discuss each of these arguments in turn.
As to the notice issue, this Court must decide as an initial matter whether to apply Massachusetts or Virginia law, since there is a material difference between those two states on this issue. Under Massachusetts law, an insurer can prevail on a defense of late notice only if it proves both that the late notice was in breach of the policy’s notice provision and that the breach resulted in actual prejudice. Johnson Controls, Inc. v. Bowes, 381 Mass. 278, 282 (1980); Darcy v. Hartford Ins. Co., 407 Mass. 481, 485 (1990). Under Virginia law, however prejudice to the insurer is only a factor that a court should consider; it is not in and of itself determinative. State Farm Fire and Cas. Co. v. Wallace, 997 F. Supp. 2d 439, 446-447 (W.D. Va. 2014).2 That is, an insurer may deny coverage even in the absence of actual prejudice.
2 Plaintiffs suggest that there is potentially no conflict between Massachusetts and Virginia law because Virginia law has yet to determine whether this rule applies to excess carriers. Plaintiffs emphasize that the Virginia cases on this issue all involve primary insurance policies. However, this Court fails to see why defendants should be treated any differently than the primary insurer, especially since plaintiffs are seeking coverage under the applicable policies under a theory that they should “drop down” to provide a defense of these actions. In other words, plaintiffs are asking that the defendants effectively assume the primary insurer’s obligations.
In determining which law is applicable, the Court looks to the conflict-of-law rules of the forum state – here, Massachusetts. OneBeacon America Ins. Co. v. Narragansett Elec. Co. (OneBeacon), 90 Mass. App. Ct. 123, 125 (2016). Massachusetts applies a functional choice-of-law analysis, guided by the Restatement (Second) of Conflict of Laws (Restatement). Id. In insurance cases, the first step is to ascertain whether Section 193 of the Restatement will resolve the matter. Clarendon Nat’l Ins. Co. v. Arbella Mut. Ins. Co. (Clarendon), 60 Mass. App. Ct. 492, 496 (2004). Under Section 193, “the rights created by a contract of casualty insurance are to be determined by the local law of the State that the parties to the insurance contract understood would be the principal location of the insured risk during the term of the policy, unless some other State has a more significant relationship under the principles of § 6.” Id. The insured risk will typically be located in the state where the policyholder is domiciled. OneBeacon, 90 Mass. App. Ct. at 125. Where the principal location of the risk cannot be ascertained, the next step is to apply Section 188 of the Restatement. Clarendon, 60 Mass. App. Ct. at 496. Under Section 188, “the rights and duties of the parties, with respect to a contract issue, [are to] be determined by the local law of the State which, as to that issue, has the most significant relationship to the transaction and to the parties under the principles of § 6.” Id. at 497.3 In applying Sections 193 and 188, the Court looks to the circumstances surrounding the procurement and issuance of the policy, not the circumstances that prompted the claim for which coverage is sought. See OneBeacon, 90 Mass. App. Ct. at 126-127.
In the present case, the Court cannot locate the principal location of the insured risk in one state because the relevant policies cover multiple insureds that provide services to prisons in multiple states. See Restatement §193, Comment b, para. Third (noting that the location of the insured risk cannot be determined “where the policy covers a group of risks that are scattered throughout two or more states.”). Accordingly, this Court looks to the law of that state which has the most significant relationship to the notice issue, which is Virginia. The policyholders (MHM Services and MHM Health Professionals) have their principal place of business in that state and the policies were delivered there. See W.R. Grace Co. v. Hartford Accident & Indem. Co., 407 Mass. 572, 585-586 (1990) (holding that New York law governed coverage of nationwide asbestos claims, where most of the policies were negotiated in New York and the insured, which had multistate operations, was incorporated and domiciled in New York); General Elec. Co. v. Lines, 2008 Mass. Super. LEXIS 284 (Mass. Super. July 10, 2008) (Gants, J.) at *6-*13 (applying law of insured’s domicile to late notice issue arising out of more than a hundred different environmental claims nationwide in scope). The Court is also mindful of the fact that in the Evanston coverage litigation, plaintiffs have taken the position that, if a conflict of law arose, Virginia law would control. See MHM Insureds’ Memorandum of Law in Support of Their Re-Filed Motion for Summary Judgment on the Duty to Defend and Indemnify at 9, n.4.
requiring that an insurer be notified whenever it should reasonably appear to the insured that the policy may be implicated.” Penn-America Ins. Co. v. Mapp, 461 F. Supp. 2d 442, 453 (E.D. Va. 2006). In most cases, the reasonableness of the delay is an issue to be resolved by a fact finder. Wallace, 997 F. Supp. 2d at 447.
Defendants contend that the failure to notify was substantial and material because Paszko was reported to the defendants approximately ten months after the action was filed and Ligons was reported almost twelve months after the action was filed. However, defendants do not assert that they suffered any prejudice as a result of the delay and plaintiffs may be able to show that any delay was reasonable. In particular, plaintiffs maintain that the delay can be explained because they reasonably believed that Evanston would provide a complete defense for these actions and that Evanston would notify the defendants of the lawsuits. This argument could have merit. See Munchenbach v. Nationwide Mut. Fire Ins. Co., 2007 WL 6002108 at *5 (Va. Cir. Feb. 13, 2007) (“If there is a reasonable explanation for the insured’s delay in notifying the insurance company, the insured is not barred from a recovery because of the delay.”); Mount Vernon Realty, Inc. v. St. Paul Ins. Co., 1990 WL 10039273 at *1 (Va. Cir. Mar. 26, 1990) (“Prompt notice under an insurance contract means notice within a reasonable time, and compliance is measured by reference to the facts and circumstances.”). At the very least, this fact-specific determination requires the development of an evidentiary record and cannot be decided on a motion to dismiss.
The defendants’ second argument relates only to Briggs and raises the question of when the claim was “first made.” The Briggs lawsuit was filed on November 24, 2015 and MPCH provided notice of that action to the defendants on April 20, 2016. Both dates are within the period covered by the Allied World policy, which runs from July 1, 2015 to July 1, 2016.
Defendants, however, argue that the claim was first made on March 20, 2015 – before the Allied World Policy took effect. On that date, the MPCH and the MADOC received a letter from Prisoners’ Legal Services (PLS) accusing them of mistreating or inadequately treating deaf and hard of hearing prisoners in violation of their constitutional and statutory rights. This Court concludes that the PLS letter cannot constitute a “Claim” within the meaning of the Policy.
4 Plaintiffs argue in the alternative that if the letter were a “Claim,” then MPCH can seek coverage under the 2014 Darwin Policy. Because this Court agrees with the plaintiffs that the PLS letter is not a Claim, this alternative avenue of coverage is not available to MPCH in connection with the Briggs litigation.
legally obligated to pay as a result of a Claim.” (Boldface in original). Each of the Policies expressly states that certain things are excluded from this definition and therefore do not constitute a “Loss.” The Policies differ, however, as to what is excluded.
Under the 2014 Darwin Policy, “non-monetary relief or redress in any form other than monetary compensation or damages, including, but not limited to, injunctive, declaratory and administrative relief” does not constitute a “Loss” and therefore is not covered. In other words, non-monetary relief is not a covered Loss. Although that is stated to include injunctive relief, this Policy language does not expressly exclude monetary costs associated with such relief. Keeping in mind that exclusions from coverage must be strictly construed, this Court concludes that this exclusion would not prevent coverage for expenditures that plaintiffs would be required to make to comply with any equitable relief that is ordered. Both Ligons and Paszko seek an injunction ordering defendants to implement and adhere to a comprehensive treatment protocol with regard to prisoners who are infected with the Hepatitis C virus. Because this will likely require the expenditure of money, this Court concludes that Centurion-MN and MPCH’s claims for coverage under the 2014 Darwin Policy in connection with these two lawsuits state a claim upon which relief may be granted.
5 That this language was included in the Allied World Policy supports this Court’s conclusion that the 2014 Darwin Policy does cover costs associated with injunctive relief. That is, had the parties intended to exclude those costs, they clearly knew how to do that.
the Briggs litigation that are incurred by MPCH as a result of its compliance with any equitable order. However, the Briggs lawsuit also seeks attorney’s fees, and those costs are arguably covered.
In contending that such costs are not covered, defendants rely on a policy provision which excludes “Defense Expenses” from the definition of Loss so that these expenses are not covered. The Allied World Policy defines Defense Expenses, however, as “reasonable fees, costs and expenses incurred by or on behalf of the Insured in connection with the defense of a Claim.” (Boldface in original, underline added). An award of attorney fees whereby the insured (here MPCH) is required to pay the inmate plaintiffs’ attorney’s fees is therefore not a “Defense Expense.” As to whether attorney’s fees are covered, the Allied World Policy (like the other policies) provide coverage if it is for “Losses or Defense Expenses” which the insured becomes legally obligated to pay “as a result of a Claim alleging a Medical Professional Incident.” Plaintiffs in the Briggs litigation ask the court to require MPCH to pay their attorney’s fees (as required by statute for constitutional violations). This is therefore a claim that seeks monetary compensation. If the Court then ordered MPCH to pay those fees as a result of its failure to provide adequate medical care, then that would fall within the definition of a Loss as defined by the Policy. See UnitedHealth Group Inc. v. Hiscox Dedicated Corp. Member Ltd., 2010 WL 550991 at *10-*11 (D. Minn. Feb. 9, 2010) (applying similar policy language, court concluded that attorney’s fees awarded against the insured in underlying litigation come within insurer’s coverage obligations).
Briggs allege “Bodily Injury.” This Court disagrees. Under the Policies, Bodily Injury means “physical injury, sickness or disease sustained by a person other than a Patient, including mental anguish, emotional distress or death resulting therefrom.” (Boldface in original, underline added). Patient, in turn, means “any persons or human bodies admitted or registered to receive Medical Professional Services from an Insured, whether on an inpatient, outpatient or emergency basis.” (Boldface in original). In each of the underlying actions, the prisoner plaintiffs allege that they did not receive adequate medical and/or mental health services. The complaints also allege – either explicitly or implicitly – that plaintiffs were complicit in that failure. The services the prisoner-plaintiffs claimed they should have received were those that plaintiffs were contractually obligated to provide them. Thus, the prisoners-plaintiffs are properly viewed as plaintiffs’ Patients. Accordingly, there is no coverage under Insuring Agreement I.B.
That there is no coverage is made clearer when Insuring Agreements I.A and I.B are read together. Insuring Agreement I.A provides coverage for a Medical Professional Incident, which is defined as, “an actual or alleged act, error, or omission” connected to the “rendering of or failure to render” Medical Professional Services. (Emphasis added). Thus, it envisions coverage for situations where individuals do not receive any medical care. Insuring Agreement I.B is intended to provide coverage for conduct that lies entirely outside the provision of medical care. The underlying lawsuits (and the indemnification demands that arise from them) stem from the failure to render proper medical care. Any coverage obligations would therefore fall under Insuring Agreement I.A.
For the forgoing reasons, Defendants’ Motion to Dismiss is DENIED in that plaintiffs have stated a claim for coverage under Insuring Agreement I.A, at least with respect to some portion of the monetary losses they could incur as a result of the six class action lawsuits. This matter is scheduled for a Rule 16 conference on January ___, 2018 at 2:00 p.m. at which time the defendants can (if they choose) raise the issue of whether this litigation should be stayed pending resolution of the Evanston action.

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