Opinion
1:20-cv-02225-CL
03-28-2022
LIQUIDAGENTS HEALTHCARE, LLC, a Texas limited liability corporation, Plaintiff, v. EVANSTON INSURANCE COMPANY, an Illinois corporation, Defendant.
FINDINGS AND RECOMMENDATION
MARK D. CLARKE UNITED STATES MAGISTRATE JUDGE
Plaintiff LiquidAgents Healthcare, LLC, ("LiquidAgents") brings this cause of action against Evanston Insurance Company ("Evanston") for the failure to defend Plaintiff in connection with a lawsuit filed in Jackson County Circuit Court. This case comes before the Court on cross motions for summary judgment. On August 25, 2021, the Court heard oral argument on the motions. Plaintiffs motion for partial summary judgment (#34) should be granted, and the defendant's motion for summary judgment (#33) should be denied.
LEGAL STANDARD
Summary judgment shall be granted when the record shows that there is no genuine dispute as to any material of fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson*. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). The moving party has the initial burden of showing that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001) (en banc). The court cannot weigh the evidence or determine the truth but may only determine whether there is a genuine issue of fact. Playboy Enters., Inc. v. Welles, 279 F.3d 796, 800 (9th Cir. 2002). An issue of fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248.
When a properly supported motion for summary judgment is made, the burden shifts to the opposing party to set forth specific facts showing that there is a genuine issue for trial. Id. at 250. Conclusory allegations, unsupported by factual material, are insufficient to defeat a motion for summary judgment. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposing party must, by affidavit or as otherwise provided by Rule 56, designate specific facts which show there is a genuine issue for trial. Devereaux, 263 F.3d at 1076. In assessing whether a party has met its burden, the court views the evidence in the light most favorable to the non-moving party. Allen v. City of Los Angeles, 66 F.3d 1052, 1056 (9th Cir. 1995).
BACKGROUND
LiquidAgents is a healthcare staffing company that places employees at health systems throughout the nation, including in Oregon. LiquidAgents purchased Specified Medical Professions Insurance Policy no. SM928484 (the "Policy") from Evanston for the period December 1, 2018 to December 1, 2019 to protect against a variety of claims and liabilities, including, specifically, claims alleging sexual misconduct by its employees.
Asante Rogue Regional Medical Center ("Asante") is a health system with several hospital facilities, including one in Medford, Oregon. On January 4, 2016, LiquidAgents entered into an Affiliate Provider Agreement with FocusOne Solutions, LLC ("FocusOne") to provide professional staffing services to Asante under the terms of a separate Client Agreement between Asante and FocusOne. FocusOne agreed to serve as a single point of contact for the provision of such staffing professionals and engaged LiquidAgents to provide such assistance.
In August 2019, LiquidAgents and FocusOne were named as third-party defendants in an underlying lawsuit, styled S.W. v. Asante, et al, Circuit Court of Jackson County, Oregon, Case No. 19CV17144 (the "Asante Lawsuit), in which the plaintiff, S.W., alleges that she was sexually assaulted by a male nurse, Mark Bodnar, who was hired and employed by LiquidAgents, and placed at Asante's Medford hospital.
The Asante Lawsuit encompasses two complaints. First, the Original Complaint was filed by the plaintiff, S.W., against Asante and the nurse who allegedly assaulted her, Mr. Bodnar. The Original Complaint contains claims for battery and negligence. Second, Asante filed a Third-Party Complaint against LiquidAgents and FocusOne for contribution, indemnification, and breach of contract. On August 23, 2019, FocusOne requested that LiquidAgents defend it in the Asante Lawsuit. LiquidAgents then tendered defense of the Asante Lawsuit to Evanston.
In a denial letter dated September 11, 2019, Evanston initially declined coverage and defense of the suit based on Evanston's evaluation that the claims against LiquidAgents were for sexual acts. After Evanston was informed that it had overlooked the Policy's Sexual Act Liability Endorsement that extended coverage for sexual acts, Evanston re-assessed its characterization of the claim, but continued to deny coverage and defense.
As part of the September 11, 2019 denial letter, Evanston acknowledged FocusOne's request for defense and indemnity but declined to provide coverage to FocusOne because coverage of an Additional Insured is contingent upon coverage of the Named Insured.
Finally, much later, LiquidAgents requested that Evanston defend Asante in an email dated January 29, 2021, and LiquidAgents amended its complaint on April 5, 2021 to reflect that request. The First Amended Complaint ("FAC") (#24) seeks a declaration that Asante is an Additional Insured and is owed the duty to defend by Evanston.
a. Original Complaint allegations
The Original Complaint contains the following pertinent allegations:
S.W.'s Complaint against Asante (the "Original Complaint") is filed in this case as Exhibit A to the FAC found at CM/ECF docket #24-1.
3. On or about April 14, 2017, S.W. presented to ASANTE to undergo a hysterectomy. Following the procedure, plaintiff was kept overnight for observation.
4. At the above time and place, plaintiff was attended and provided medical care by a male nurse, MARK BODNAR (hereinafter "BODNAR"), who was an agent, apparent agent or employee of ASANTE.
7. ...[U]nder the prextext of providing plaintiff a "sponge bath," while S.W. lay in her hospital bed, BODNAR sexually assaulted S.W. by sexually touching S.W., and intentionally inserting his finger into her vagina....
8. As a cause of plaintiff s injuries and damages alleged herein, ASANTE was negligent in one or more of the following particulars:
d. in failing to adequately screen, vet, or validate BODNAR'S professional history, qualifications, professional conduct, and character;
e. In hiring and entrusting patients into BODNAR'S care when substantial knowable risk existed to apprise ASANTE that BODNAR presented a threat to female patient's safety.
11. As a result of the above-described sexual abuse, plaintiff suffered great fear and humiliation, a sense of helplessness, loss of control, and personal violation, and has suffered, continues to suffer, and may permanently suffer from feelings of fear, humiliation, disgust, intrusive thoughts, hyper-vigilance, and feelings of vulnerability, all to her noneconomic damages in the amount of $2,000,000.
a. Third-Party Complaint allegations
The Third-Party Complaint contains the following pertinent allegations:
Asante's "Answer, Affirmative Defenses, Cross Claims, and Third-Party Complaint" (the "Third-Party Complaint") is filed in this case as Exhibit B to the FAC found at CM/ECF docket #24-2.
27. FocusOne and/or its staffing and recruiting agencies, selected and placed Defendant Bodnar at Asante Rogue Regional Medical Center. Defendant Bodnar was an employee or agent of FocusOne Solutions, LLC and/or LiquidAgents at all pertinent times.
28. Asante denies that Plaintiff was harmed in any way while receiving care at its facility. If, however, a jury finds otherwise, then Asante seeks contribution and/or contractual indemnity from FocusOne,
29. If Asante is found liable to Plaintiff, and Asante denies that there is any basis for such liability, then FocusOne is liable to Asante for all or part of Plaintiffs claims against Asante, including but not limited to Asante's reasonable costs and attorney fees incurred in defending Plaintiffs claims.
31. To the extent Plaintiff proves her claims, FocusOne's failure to provide the agreed upon services would constitute a breach of the Client Agreement.
32. To the extent Asante is found liable to Plaintiff for damages, Asante is entitled to contribution for FocusOne's pro-rata shares of fault as determined by the trier of fact pursuant to ORS 31.800.
45. LiquidAgents, pursuant to the terms of the Client Agreement between Asante and FocusOne, placed Defendant Bodnar at Asante Rogue Regional Medical Center on or about October 19, 2016, including, during Plaintiffs April 14, 2017 admission.:
46. Asante denies that Plaintiff was harmed in any way while I receiving care at its facility. If, however, a jury finds otherwise, then Asante seeks contribution and/or contractual indemnity from LiquidAgents.
47. If Asante is found liable to Plaintiff, and Asante denies that there is any basis for such liability, then Third-Party Defendant
LiquidAgents is liable to Asante for all or part of Plaintiffs claims against Asante, including but not limited to Asante's reasonable costs and attorney fees incurred in defending Plaintiffs claims.
49. To the extent Plaintiff proves her claims, LiquidAgents' failure to provide the agreed upon services would constitute a breach of the Client Agreement.
50. To the extent Asante is found liable to Plaintiff for damages, Asante is entitled to contribution for LiquidAgents' pro-rata shares of fault as determined by the trier of fact pursuant to ORS 31.800.
b. The Policy provisions
Evanston issued Specified Medical Professions Insurance Policy No. SM928484 to LiquidAgents for the policy period December 1, 2018 to December 1, 2019 (the "Policy"). The Policy contains a Specified Medical Professions Professional Liability Insurance Coverage Part (the "PL Coverage Part").
The Policy is filed in this case as Exhibit C to the FAC, found at CM/ECF docket #24-3.
The PL Coverage Part contains the following claims made and reported insuring agreement:
A. Professional Liability and Claims Made Clause: The Company shall pay on behalf of the Insured all sums in excess of the Deductible amount stated in the Declarations, which the Insured shall become legally obligated to pay as Damages as a result of a Claim first made against the Insured during the Policy Period or during the Extended Reporting Period, if exercised, and reported to the Company pursuant to Section CLAIMS A., Claim Reporting Provision, for Professional Personal Injury:
1. By reason of any act, error or omission in Professional Services arising out of the conduct of the Insured's Professional Services rendered or that should have been rendered by an Insured; or
2, By reason of any act, error or omission in Professional Services arising out of the conduct of the Insured's Professional Services rendered or that should have been rendered by a natural person, who is not and shall not be an Insured hereunder, and through whose acts the Insured controls the provider-patient relationship as of the time of such act, error or omission; provided:
a. The act, error or omission happens during the Policy Period or on or after the Retroactive Date stated in the Declarations and before the end of the Policy Period; and
b. Prior to the effective date of this policy the Insured had no knowledge of such act, error or omission or any fact, circumstance, situation or incident which may lead a reasonable person in the Insured's position to conclude that a Claim was likely.
The Policy defines Professional Personal Injury, in relevant part, as "[a]ny bodily injury, mental injury, sickness, disease, emotional distress or mental anguish, including death resulting therefrom of any natural person receiving Professional Services arising out of an act, error or omission in Professional Services rendered or that should have been rendered..."
The Policy's Sexual Acts Liability Endorsement amends the Professional Liability Coverage Part to provide coverage as follows:
Sexual Acts Liability: The Company shall pay on behalf of the Insured all sums in excess of the Deductible amount stated in the Declarations, which the Insured shall become legally obligated to pay as Damages as a result of a Claim first made against the Insured during the Policy Period or during the Extended Reporting Period, if exercised, and reported to the Company pursuant to Section CLAIMS A., Claim Reporting Provision, for Sexual Injury arising out of any Sexual Act perpetrated or alleged to have been perpetrated by the Insured natural person or by any person for whose actions the Insured is legally responsible, or for allegations that the Insured was negligent in hiring, training or supervising any Insured natural person who perpetrated or is alleged to have perpetrated a Sexual Act resulting in Sexual Injury provided:
1. Such Sexual Act is perpetrated or alleged to have been perpetrated during the Policy Period or on or after the Retroactive Date stated in the Declarations and before the end of the Policy Period; and
2. Prior to the effective date of this policy the Insured had no knowledge of such Sexual Act or any fact, circumstance, situation or incident involving such Sexual Act which may lead a reasonable person in the Insured's position to conclude that a Claim was likely.
Sexual Act means sexual abuse, sexual molestation or sexual exploitation arising out of the conduct of the Insured's Professional Services.
Sexual Injury means bodily injury, sickness, disease, unlawful detention, false imprisonment, humiliation, emotional distress, mental anguish, sexual dysfunction, invasion of right of privacy, assault or battery, solely when arising out of a Sexual Act.The Policy defines "Insured" as:
A. The Named Insured which is herein defined as the person(s) or organization(s) stated in Item 1. of the Declarations;
B. Any past or current principal, partner, officer, director, Employee or Volunteer Worker of the Named Insured solely while acting on behalf of the Named Insured and within the scope of their duties as such...
G. Any past or current independently contracted healthcare professional of the Named Insured, solely while acting on behalf of the Named Insured and within the scope of his/her professional duties on behalf of the Named Insured...
The Policy excludes coverage for "any Claim based upon or arising out of any liability of others assumed by the Insured under any contract or agreement; unless such liability would have attached to the Insured even in the absence of the contract or agreement."
The Policy contains an Additional Insured Endorsement - Professional Liability Primary/Non-Contributory (the "Additional Insured Endorsement") which defines Additional Insured as follows:
Any natural person or legal entity to whom the Named Insured is obligated by valid written contract or written agreement:
a. Executed prior to the date of an act, error or omission in Professional Services; and
b. To provide coverage as an additional insured, but only as respects Claims that arise out of the conduct of Professional Services rendered or that should have been rendered by an Insured that is not an Additional Insured and that are otherwise covered herein.The Additional Insured Endorsement provides that, "[w]here no coverage is afforded for the Insured which is not an Additional Insured, no coverage or defense shall be afforded to the Additional Insured."
DISCUSSION
Plaintiff LiquidAgents brings claims against Defendant Evanston for breach of insurance contract and now moves for summary judgment on Counts One and Two. Evanston also moves for summary judgment on LiquidAgents' claims. For the reasons below, the Court finds that Evanston has a duty to defend LiquidAgents, Focus One, and Asante in the Asante Lawsuit. Therefore, LiquidAgents' motion for partial summary judgment (#34) should be granted, and Evanston's motion for summary judgment (#33) should be denied.
I.Evanston has a duty to defend Plaintiff LiquidAgents in the Asante Lawsuit.
In Oregon, the primary goal in the interpretation of an insurance contract is to ascertain the intent of the parties. Schutt v. Farmers Ins. Group, 129 Or.App. 401 (1994); Totten v. New York Life Ins. Co., 298 Or. 765 (1985). When interpreting an insurance contract, a court will read the policy as it would be understood by a reasonable person in the position of the insured. Aetna Life & Cas. v. Ashe, 88 Or.App. 391 (1987). Under Oregon law, the duty to defend is broad and is determined by comparing the complaint with the governing insurance policy. Nw. Pump & Equip. Co. v. Am. States Ins. Co., 141 Or.App. 210, 214 (1996); Ledford v. Gutoski, 319 Or. 397, 399 (1994); Houston Specialty Ins. Co. v. Rodriguez Corp., No. 3:18-cv-01886-YY, 2019 WL 7630791 at *3 (D.Or. Oct. 25, 2019). An insurer's duty to defend its insured in an action arises "if the complaint provides any basis for which the insurer provides coverage." Bresee Homes Inc., 353 Or. at 116; Ledford, 319 Or. at 400. If an ambiguity exists as to whether coverage is required, that ambiguity is resolved in favor of the insured. Ledford, 319 Or. at 400; Nielsen v. St. Paul Companies, 283 Or. 277, 282 (1978) ("[I]f a complaint against the insured is ambiguous but yet may be reasonably interpreted to include an incident within the coverage of the policy, there is a duty to defend.").
In this case, the intent of the parties is clear and unambiguous. LiquidAgents purchased the Policy with a specific Sexual Acts Liability Endorsement in order to protect itself against potential claims that one of its employees perpetrated sexual misconduct, as well as claims that LiquidAgents was negligent in hiring, training, or supervising the perpetrating employee. The Asante Lawsuit is fundamentally just such a claim. S.W. alleges that she was sexually assaulted by Mr. Bodnar and that Asante was negligent in hiring and employing him. Asante claims that LiquidAgents and FocusOne share in the liability because they, too, were negligent in hiring, employing, and placing Mr. Bodnar at Asante's facility. Comparing the Asante Lawsuit to the Policy, as discussed below, it is clear that Evanston has a duty to defend LiquidAgents.
a. The Court considers both the Third-Party Complaint and the Original Complaint to determine if they provide a basis for which the insurer could provide coverage and therefore trigger Evanston's duty to defend.
Evanston argues that the Court should look only to the Third-Party Complaint, filed in the Asante Lawsuit by Asante against LiquidAgents and Focus One, to determine whether Evanston has a duty to defend LiquidAgents in that suit. The Court disagrees. The Third-Party Complaint contains a claim for contribution; therefore, the Court looks to both the Original Complaint and the Third-Party Complaint. Nw. Pump & Equip. Co. v. Am. States Ins. Co., 141 Or.App. 210, 215, 917 P.2d 1025, 1028 (explaining that the complaint and third-party complaint should be considered when the third-party complaint asserts a contribution claim), modified on other grounds, 144 Or.App. 222, 925 P.2d 1241 (1996) (en banc); see also Larsen Oil Co. v. Federated Serv. Ins. Co., 859 F.Supp. 434, 437 (D. Or. 1994), aff'd, 70 F.3d 1279 (9th Cir. 1995).
In Northwest Pump, the Oregon Court of Appeals addressed an insurer's defense obligation in the context of third-party claims against the insured for contribution and indemnity. Nw. Pump & Equip. Co., 141 Or.App. at 213. The court reasoned that the third-party complaint sought to hold the insured liable "to the extent that [the insured's] acts contributed to the damage to and contamination of [the underlying plaintiffs] property." Id. at 215. The insured would incur liability to the third-party plaintiff if and only if the third-party plaintiff were liable to the underlying plaintiff. Id. As such, the court found that both the complaint and third-party complaint should be considered: "Newell's complaint [the underlying complaint] against Weston is therefore relevant in this action and must be examined to determine whether Weston's third-party complaint against plaintiff [the insured] may reasonably be interpreted to include conduct covered by defendant's insurance policy." Id. See also, Larsen Oil Co., 859 F.Supp. at 437 ("In this case, the allegations that determine whether there was a duty to defend are those in [the] third-party complaints. Also, because [the parties] sought contribution and indemnity, the allegations in [the underlying] complaint are also relevant to determining whether there was a duty to defend"); see also Willmar Development, LLC v. Illinois Nat. Ins. Co., 726 F.Supp.2d 1280, 1284 (D. Or. 2010), aff'd, 464 Fed.Appx. 594 (9th Cir. 2011) (analyzing both the amended complaint and third-party compliant).
Here, it is undisputed that the Original Complaint brings claims for negligence and battery, arising out of sexual misconduct and sexual injury. In the Third-Party Complaint, Asante brings claims for contribution, indemnification, and breach of contract, alleging specifically: "If Asante is found liable to Plaintiff... then Third-Party Defendant(s) [LiquidAgents and FocusOne are] liable to Asante for all or part of Plaintiffs claims against Asante." Asante's contribution claim is a statutory claim based in tort and applicable to claims against joint tortfeasors. See Or. Rev. Stat. § 31.800(1) ("where two or more persons become jointly or severally liable in tort for the same injury to person . .. there is a right of contribution among them"). Thus, the Third-Party Complaint seeks to hold LiquidAgents and FocusOne liable to the extent that their actions contributed to the damage done by the sexual misconduct and negligence alleged in the Original Complaint. As in Northwest Pump, LiquidAgents and FocusOne will only incur liability to Asante only if Asante is liable to the original Plaintiff. For this reason, the Court will look to both the Original Complaint and the Third-Party Complaint to determine if Evanston has a duty to defend.
b. The allegations in the Asante lawsuit trigger Evanston's duty to defend because the Policy's Sexual Acts Liability Endorsement provides a basis for coverage.
The Policy at issue in this case provides a basis for coverage for the claims asserted in the Asante Lawsuit, triggering Evanston's duty to defend LiquidAgents in the suit.
The Original Complaint asserts claims for battery and negligence. In particular, the plaintiff, S.W., alleges that a nurse, Mr. Bodnar, sexually molested her while she stayed at the hospital overnight, recovering from a hysterectomy. S.W. alleges that Asante was negligent in hiring and employing Mr. Bodnar, and she claims injuries in the form of battery, anxiety, emotional distress, and mental anguish. The Third-Party Complaint alleges that LiquidAgents and FocusOne should be jointly liable for these injuries because they were responsible for hiring and placing Mr. Bodnar at Asante's facility.
The Policy's Sexual Acts Liability Endorsement provides coverage:
for Sexual Injury arising out of any Sexual Act perpetrated or alleged to have been perpetrated by the Insured natural person or by any person for whose actions the Insured is legally responsible, or
for allegations that the Insured was negligent in hiring, training or supervising any Insured natural person who perpetrated or is alleged to have perpetrated a Sexual Act resulting in Sexual Injury.
An insurer's duty to defend its insured in an action arises "if the complaint provides any basis for which the insurer provides coverage." Bresee Homes Inc., 353 Or. at 116; Ledford, 319 Or. at 400. Here, the basis for coverage is clear. LiquidAgents' employee is alleged to have perpetrated a sexual act against S.W., causing her sexual injury. Moreover, LiquidAgents is alleged to have contributed to the negligent hiring of that perpetrator, providing a second basis for coverage under the endorsement. The Court notes that this second basis can be found even if the Court is restricted to examining the four corners of the Third-Party Complaint; thus, a basis for coverage exists even if the Original Complaint is excluded from consideration. Finally, if there was any ambiguity that the endorsement may or may not provide coverage, that ambiguity would resolve in favor of LiquidAgents, again creating Evanston's duty to defend.
c. No. exclusions apply to preclude coverage that would negate the duty to defend.
Exclusions are strictly construed against the insurer. Collins, 312 Or. at 357. Insurers have the burden to show that the policy excludes coverage for a loss. Employers Ins. of Wausau, 211 Or.App. at 509. The insurer has a duty to defend unless all allegations of conduct or damage are excluded. Rogowski v. Safeco Ins. Co. of Oregon, 306 Or.App. 505, 511, 473 P.3d 111, 115 (2020). "[I]f some allegations reasonably can be interpreted as falling within the coverage, the insurer owes a duty to defend-even if other allegations of conduct or damage are excluded." Id.
While the Policy here includes a number of exclusions, none of them apply to preclude Evanston's duty to defend.
i. Exclusion B for Intentional Acts does not apply.
The Policy's "Exclusion B" for Intentional Acts allows Evanston to deny coverage for "any Claim based upon or arising out of any dishonest, fraudulent, criminal, malicious, knowingly wrongful, deliberate, or intentionakacts, errors or omissions committed by or at the direction of the Insured." This issue has not been fully or well-briefed. While Evanston raised this exclusion as a reason to deny coverage in the denial letter, Evanston did not assert it in the motion for summary judgment, and only briefly addressed the exclusion as applicable in a footnote in the response to Plaintiffs motion. Nevertheless, after careful consideration of the issue, the Court concludes that the exclusion does not apply because the Asante Lawsuit includes a claim for negligence against Asante, with contribution against FocusOne and LiquidAgents. These claims provide a basis for coverage separate and apart from any claims for intentional acts. Therefore, this exclusion is not applicable to avoid Evanston's duty to defend.
The underlying suit does not include a claim for an intentional act against any of the three entities, but Evanston raises the issue of whether Nurse Bodnar should be considered an Insured by virtue of his employment with LiquidAgents. Likely this exclusion would still not apply to preclude coverage because of the Sexual Acts Endorsement, which clearly applies to Nurse Bodnar's alleged actions. It is not necessary for the Court to reach this issue, however. As long as the underlying suit contains a claim for negligence, a basis for coverage and thus, the duty to defend, remains.
ii. Exclusion I for Contractual Liability does not apply.
The Policy's Exclusion I for "Contractual Assumption of Liability" excludes "any Claim based upon or arising out of any liability of others assumed by the Insured under any contract or agreement; unless such liability would have attached to the Insured even in the absence of the contract or agreement." This exclusion applies to claims where the insured has assumed the liability of another, such as an indemnification agreement. See Allstate Ins. Co. v. Hudler, 2011 WL 1498370, at *10 (D. Or. Feb. 25, 2011), report and recommendation adopted, 2011 WL 1498367 (D. Or. Apr. 18, 2011).
Evanston asserts that this exclusion applies here but has not identified how LiquidAgents contractually assumed any liability belonging to others that would not have attached otherwise. The claims at issue in the Third-Party Complaint are styled in the alternative - they are based on statutory laws of contribution and, alternatively, they arise out of the contractual agreements between the parties. Under the Client Agreement, FocusOne provided professionals for temporary staffing services to Asante. Pursuant to a second agreement, the Affiliate Provider Agreement, FocusOne then engaged LiquidAgents to provide healthcare workers to Asante. These agreements required FocusOne and LiquidAgents to exercise due care in hiring and placing staff in hospitals, and they obligated LiquidAgents to provide coverage as additional insureds under the Policy. None of this means that LiquidAgents assumed all liability arising out of Asante's own conduct, or that of FocusOne.
Similarly, Asante's claims do not allege that LiquidAgents contractually assumed Asante's liability. Rather, Asante alleges that LiquidAgents is liable based on Mr. Bodnar's acts and LiquidAgents' alleged negligence in vetting, hiring him, and placing him. Thus, while the claims are styled as arising out of the parties' contractual agreements to responsibly staff the hospital, they are not based on any agreement that LiquidAgents will assume all liability on behalf of Asante. Instead, the claims seek to hold LiquidAgents responsible for its own share of fault. This exclusion does not apply.
d. Conclusion
A basis for coverage exists in the Policy, and no exclusions apply to negate Evanston's duty to defend LiquidAgents in the Asante Lawsuit. Evanston's refusal to defend is therefore a breach of the policy. LiquidAgents is entitled to summary judgment.
II. FocusOne is an Additional Insured under the Policy, and Evanston has a duty to defend.
On August 23, 2019, FocusOne requested that LiquidAgents defend and indemnify it in the Asante Lawsuit. FocusOne's request was based upon the January 2016 Affiliate Provider Agreement between FocusOne and LiquidAgents. That agreement required FocusOne and Asante to be designated as additional insureds on LiquidAgents' professional liability insurance policy. The Policy has an Additional Insured Endorsement for Professional Liability that requires Evanston to recognize as an additional insured any entity for which LiquidAgents is obligated by contract to obtain coverage as an additional insured. LiquidAgents requested that Evanston provide coverage to FocusOne under the Policy, including a defense in the Asante Lawsuit, based on FocusOne's status as an additional insured.
As part of its September 11, 2019 denial letter, Evanston acknowledged FocusOne's request for defense and indemnity and implied that FocusOne would qualify as an additional insured under the Policy. Evanston declined to provide coverage to FocusOne, invoking a Policy provision that states: "[w]here no coverage shall apply herein for the Insured which is not an Additional Insured, no coverage or defense shall be afforded to the Additional Insured."
Now, Evanston disputes FocusOne's status as an additional insured, claiming that Asante's suit against FocusOne is limited to claims for contribution and indemnity and for breach of the Client Agreement, and these claims do not "arise out of the conduct of Professional Services rendered or that should have been rendered" by LiquidAgents. This assertion is unavailing. The claims arise directly out of LiquidAgents and FocusOne's alleged failure to properly vet, hire, train, and place Nurse Bodnar at Asante's facility. In other words, the claims allege that LiquidAgents and FocusOne negligently rendered professional services as defined by the Client Agreement. Therefore, the Additional Insured Endorsement applies here.
For all of the reasons stated above, and in particular, because Evanston owes a duty to defend LiquidAgents, Evanston owes a duty to defend FocusOne as an additional insured.
III. Asante is an Additional Insured under the Policy, and Evanston has a duty to defend.
Evanston's duty to defend Asante is slightly less straightforward because LiquidAgents did not request that Evanston defend Asante until much later via an email exchange between counsel, dated January 29, 2021, well after the initial Complaint in this federal case had been filed. LiquidAgents then amended its complaint in this case on April 5, 2021 to reflect that request. The First Amended Complaint seeks a declaration that Asante is an additional insured and is owed the duty to defend by Evanston. Evanston claims that LiquidAgents "never" tendered defense of Asante's Claim, but LiquidAgents claims that both the email and the First Amended Complaint constitute tender.
Evanston's evidentiary objection to the January 29 email, Exhibit C to the Declaration of Dieter J. Juedes, is overruled. While the email may have been exchanged due to settlement negotiations, the contents are not being used here to prove the validity of a claim or its amount, nor to impeach a prior inconsistent statement. See Federal Rule of Evidence 408(a). But the court may admit this type evidence for another purpose, FRE 408(b); in this case, to show that Asante's defense was tendered to Evanston.
Under Oregon law, "[a]n insurer is not obligated to defend any action not tendered to it." Am. Cas. Co. v. Corum, 139 Or.App. 58, 63 n3, 910 P.2d 1151, 1153 n3 (1996). See also Century Indem. Co. v. Marine Group, LLC, No. 08-1375, 2015 WL 810987 (D. Or. Feb. 25, 2015) (holding that defense costs incurred prior to form tender of the action to the insurer are prohibited).
While it is clear that under Oregon law LiquidAgents cannot claim defense costs on behalf of Asante that were incurred prior to January 29, 2021, Evanston has failed to show that, either communication was insufficient to tender Asante's defense from that date forward. Therefore, the Court holds that defense was tendered to Evanston at least by April 5, 2021. Asante qualifies as an additional insured for the same reasons FocusOne qualifies, as discussed above. Evanston has a duty to defend Asante, and the failure to do so is a breach of the Policy.
RECOMMENDATION
For the reasons above, Plaintiffs motion for partial summary judgment (#34) should be granted, and the defendant's motion for summary judgment (#33) should be denied. Specifically, the Court finds that: (a) under Count 1 of LiquidAgents' Amended Complaint, Evanston had a duty to defend LiquidAgents, FocusOne, and Asante in the underlying lawsuit; and (b) under Court 2 of the Amended Complaint, Evanston breached the contract between it and LiquidAgents by failing to defend LiquidAgents, FocusOne, and Asante in the Asante Lawsuit.
SCHEDULING
This Findings and Recommendation will be referred to a district judge. Objections, if any, are due no later than fourteen (14) days after the date this recommendation is entered. If objections are filed, any response is due within fourteen (14) days after the date the objections are filed. See FED. R. CIV. P. 72, 6. Parties are advised that the failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).