Opinion
6:21-cv-00323-MK
01-31-2022
CHRISTINA VOGEL, O.D., Plaintiff, v. LANDMARK AMERICAN INSURANCE COMPANY, a New Hampshire Insurance Company, Defendant.
FINDINGS AND RECOMMENDATION
MUSTAFA T. KASUBHAI, UNITED STATES MAGISTRATE JUDGE
Plaintiff Dr. Christina Vogel (“Dr. Vogel” or Plaintiff) sought declaratory relief in state court after Defendant Landmark American Insurance Company refused to defend her against a medical malpractice suit. Notice of Removal, Ex. 1, ECF No. 1-2 at 6-9 (“Vogel Compl.”). Defendant removed to this Court in March 2021. See Notice of Removal, ECF No. 1. The parties have filed cross motions for summary judgment. Def.'s Mot. Summ. J., ECF No. 9 (“Def.'s Mot.”); Pl's Mot. Partial Summ. J., ECF No. 13 (“Pl.'s Mot.”). For the reasons that follow, Defendant's motion for summary judgment should be DENIED; Plaintiff's motion for partial summary judgment should be GRANTED
BACKGROUND
Non-party Eyemart Express LLC (“Eyemart”) operates eyewear stores throughout the United States. Eyemart contracted with Dr. Vogel, a licensed optometrist, to provide optometry services to patients at its location in Bend, Oregon. Shanks Decl. Ex. 1, ECF No. 11.
In 2018, Eyemart acquired a professional liability insurance policy from Defendant. Fagan Decl. Ex. 1 (“Landmark Policy”), ECF No. 10-1. The Landmark Policy was effective from December 18, 2019, through December 18, 2020, with a retroactive date of December 18, 2015. Id. Eyemart is the only identified insured entity in the Landmark Policy. Id. The coverage obligates Landmark to defend and indemnify the “Insured, ” defined as:
Throughout this document, the word “Insured” means any person or entity qualified as such under Part I. E. Covered Persons and Entities. The word “Company” refers to the Company providing the insurance shown on the Declarations.Id. (bolding in original).
The policy further provides in relevant part:
A. Covered Services
The Company will pay on behalf of the Insured . . . all sums that the Insured becomes legally obligated to pay as Damages and associated Claim Expenses arising out of a negligent act, error or omission, even if such Claim is groundless, false or fraudulent, in the rendering of or failure to render professional services. . . .
B. Defense and Settlement
The Company will have the right and duty to defend any Claim against an Insured seeking Damages to which this policy applies, even if any of the allegations of the Claim are groundless, false or fraudulent. . . .
***
E. Covered Persons and Entities
A. Named Insured as shown in the Declarations, and if the Named Insured is an individual, his or her spouse, or domestic partner, but only with respect to the professional services rendered by or on behalf of the Named Insured;
B. Any present or former principal, partner, officer, director, employee or volunteer worker of the Named Insured, but only as respects professional services rendered on behalf of the Named Insured, but only as respects professional services rendered on behalf of the Named Insured[.]Id. (bolding in original).
In October 2020, Julie Hayden filed a complaint in Deschutes County Circuit Court against Eyemart, Dr. Vogel, and another optometrist not a party to this suit, for medical negligence stemming from her treatment at Eyemart. See Notice of Removal, Ex. 1, ECF No. 1-2 at 10-20 (“Hayden Compl.”). The Complaint alleges, inter alia, that Dr. Vogel committed medical malpractice throughout 2018 and 2019 while Dr. Vogel treated Hayden as an Eyemart patient. Id. ¶¶ 5, 7-23, 34-38, ECF No. 1-2. The Complaint seeks damages of more than $5 million. Id. ¶ 37.
On October 29, 2020, Dr. Vogel tendered Hayden's complaint to Landmark. Fagan Decl. Ex. 2 ¶ 4. On November 3, 2020, Landmark responded to Dr. Vogel's letter, claiming Landmark did not have a duty to defend or indemnify Dr. Vogel due to her status as an “independent contractor” of Eyemart. Fagan Decl. Ex. 3 ¶ 5.
Dr. Vogel filed a declaratory judgment action in Deschutes County Circuit Court seeking a declaration that Landmark had a duty to defend her against the claims in the Hayden lawsuit. See Vogel Compl. Landmark removed the complaint to the U.S. District Court for the District of Oregon. Notice of Removal, ECF No. 1.
STANDARD OF REVIEW
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file, if any, show “that there is no genuine dispute as to any material fact and the [moving party] is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Substantive law on an issue determines the materiality of a fact. T.W. Elec. Servs., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party determines the authenticity of the dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 324.
Special rules of construction apply when evaluating a summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T.W. Elec., 809 F.2d at 630.
DISCUSSION
I. Whether Declaratory Judgment is Appropriate
Although not raised by the parties, the Court must assess one preliminary issues before reaching the substantive merits of the parties' cross-motions for summary judgment: whether declaratory relief is appropriate. See Pinnacle Architecture, Inc. v. Hiscox, Inc., No. 3:20-cv-01922-HZ, 2021 WL 2418561, at *3-4 (D. Or. June 14, 2021) (analyzing propriety of declaratory relief before addressing the plaintiff's request for declaratory judgment on the duty to defend).
The Declaratory Judgment Act provides: “In a case of actual controversy within its jurisdiction, . . . . any court of the United States. . . may declare the rights and other legal relations of any interested party seeking such declaration[.]” 28 U.S.C. § 2201(a). The exercise of jurisdiction under the Declaratory Judgment Act is at the discretion of the district court. Gov't Emp. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998). Thus, “[e]ven if the district court has subject matter jurisdiction, it is not required to exercise its authority to hear the case.” Huth v. Hartford Ins. Co. of the Midwest, 298 F.3d 800, 802 (9th Cir. 2002). However, “[a] District Court cannot decline to entertain such an action as a matter of whim or personal disinclination.” Dizol, 133 F.3d at 1223. When determining whether to retain jurisdiction in a properly filed declaratory-judgment action, the court “must make a sufficient record of its reasoning to enable appropriate appellate review.” Id. at 1225.
In Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942), the Supreme Court articulated three factors that courts consider when determining whether to exercise jurisdiction over a declaratory-judgment action: (1) avoiding needless determinations of state-law issues; (2) discouraging litigants from filing declaratory actions as a means of forum shopping; and (3) avoiding duplicative litigation. In addition to the established Brillhart factors, district courts must “balance concerns of judicial administration, comity, and fairness to the litigants.” Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1367 (9th Cir. 1991).
“Whether Defendant has a duty to defend Plaintiff in the underlying action presents a substantial controversy between the parties.” Pinnacle, 2021 WL 2418561, at *3-4. As to the first factor, because analyzing duty to defend claims under Oregon law is generally limited to examining the insurance policy and the operative complaint in the underlying liability action, “duty to defend claims generally do not raise the same Brillhart concerns as duty to indemnify claims.” Id. at *3 (citation omitted).
As to the second factor, there is no evidence that Plaintiff filed this declaratory judgment action as a means of forum shopping. As to the third factor, because Defendant removed the entire action to federal court there is no risk of duplicative litigation because there is no pending state action involving the same coverage issue and parties. The Court should therefore exercise its discretion and consider the request for declaratory relief.
II. Duty to Defend
A federal court, sitting in diversity, applies state law to interpret an insurance policy. Travelers Prop. Cas. Co. of Am. v. ConocoPhillips Co., 546 F.3d 1142, 1145 (9th Cir. 2008). Under Oregon law, an insurer's duty to defend is a question of law. Hunters Ridge Condo. Ass 'n v. Sherwood Crossing, LLC, 285 Or.App. 416, 422 (2017).
“Oregon law interprets the duty to defend broadly--an insurer has a duty to defend if the complaint in the underlying lawsuit has any basis for which the insurer provides coverage.” Great N. Ins. Co. v. Crown Pine Timber 4, L.P., No. 3:18-cv-2104-YY, 2021 WL 38187, at *3 (D. Or. Jan. 5, 2021) (emphasis in original; quotation marks omitted) (citing Bresee Homes, Inc. v. Farmers Ins. Exch., 353 Or. 112, 116 (2012)). The Oregon Supreme Court has explained:
An insurer's duty to defend, according to the widely accepted “four-corners” rule, is determined by comparing the complaint to the insurance policy. The rule refers to the four corners of the complaint; it also sometimes is referred to as the eight-corners rule (for the four corners of the complaint plus the four corners of the policy).W. Hills Dev. Co. v. Chartis Claims, Inc. Oregon Auto. Ins. Co. (“West Hills”), 360 Or. 650, 653 (2016) (citations omitted).
“An insurer has a duty to defend an action against its insured if the claim against the insured stated in the complaint could, without amendment, impose liability for conduct covered by the policy[.]” Breseei, 353 Or. at 116 (quoting Ledford v. Gutoski, 319 Or. 397, 399-400 (1994)). “The insurer has a duty to defend if the complaint provides any basis for which the insurer provides coverage. Even if the complaint alleges some conduct outside the coverage of the policy, the insurer may still have a duty to defend if certain allegations of the complaint, without amendment, could impose liability for conduct covered by the policy. Any ambiguity in the complaint with respect to whether the allegations could be covered is resolved in favor of the insured.” Id.
To the extent the parties raise arguments that rely on evidence beyond the Landmark Policy and the Hayden Complaint, the Court finds such reliance inappropriate. See Def.'s Mot. 11-12; Pl.'s Mot. 6. The Oregon Court of Appeals articulated an exception to the “four corners” rule in Fred Shearer & Sons, Inc. v. Gemini Ins. Co. (“Shearer”), 237 Or.App. 468 (Or. Ct. App. 2010). Shearer “concluded that extrinsic evidence could be used to show that a person who claimed to be an ‘additional insured' under a liability policy was in fact an insured entitled to a defense.” West Hills, 360 Or. at 654. That exception, however, “is narrow and limited to determining whether the entity tendering the complaint for defense is an additional insured- when qualifying as an additional insured is contingent on membership in an open class.” Great N., 2021 WL 38187, at *7 (citing PIH Beaverton LLC v. Red Shield Ins. Co., 289 Or.App. 788, 799 (2018)). The Court finds this exception inapplicable here and therefore limits its consideration to the relevant complaint and policy.
The Hayden Complaint alleges that Dr. Vogel “failed to follow the applicable standard of medical care” owed to Hayden when providing medical services. Hayden Compl. ¶ 35. The Complaint also alleges that Dr. Vogel was an “agent[ ] of Eyemart and [was] acting within the scope of [her] agency when [Dr. Vogel] saw and treated [Hayden] between November 28, 2018 and January 7, 2019.” Hayden Compl. ¶ 5.
The Landmark Policy applies to claims “arising out of a negligent act, error or omission . . . in the rendering of or failure to render professional services[.]” Landmark Policy § A. Covered Services, ECF No. 10-1. The policy thus obliges Defendant to defend and indemnify “[a]ny present or former principal, partner, officer, director, employee or volunteer worker of” Eyemart, so long as the act or omission related to “professional services rendered on behalf of the Named Insured[.]” Id. at § E. Covered Persons and Entities.
Here, Dr. Vogel's medical care to Hayden falls squarely within the type of occurrence covered under the Landmark Policy-i.e., Dr. Vogel rendered medical services on behalf of Eyemart to a third party who subsequently filed a lawsuit based on those services.
Dr. Vogel also qualifies as a covered person under the Landmark Policy. Although the precise scope of the association between Dr. Vogel and Eyemart is somewhat ambiguous based upon the description of the doctor as an “agent, ” at a minimum a clear principal-agent relationship is alleged in the Hayden Complaint. Under Oregon law, agents can qualify as employees depending on the circumstances, as Defendant correctly acknowledges. Def.'s Mot. Summ. J. 8 (citing Vaughn v. First Transit, Inc., 346 Or. 128, 137 (2009)).
Further, given that all ambiguities must be resolved in Plaintiff's favor, the Court concludes that Dr. Vogel could potentially meet several of the categories listed in the Landmark Policy depending on the precise nature of the doctor's relationship to Eyemart. West Hills, 360 Or. at 667 (concluding that “the complaint's allegations . . . reasonably interpreted, could have resulted in West Hills being held liable for damages covered by the policy”); see also 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.”).
Defendant's argument that this case is controlled by State ex rel. Sisemore v. Standard Optical Co. of Or. (“Sisemore”), 182 Or. 452 (1947), is misplaced. Def.'s Mot. 8-10. Sisemore held that “a corporation could not lawfully operate an optometry business through licensed optometrist employees.” Neiss v. Ehlers, 135 Or.App. 218, 231 (1995). In Sisemore, the state of Oregon sought to enjoin a corporation that sold eyeglasses and related goods from employing optometrists in violation of the Oregon Optometry Act (the “Act”). Sisemore, 182 Or. at 454. After discussing the practical impact of the Act on optometry services throughout the state, the court explained that “[o]ne who consults an optometrist for ocular examination is entitled to the same undivided loyalty that he should receive from a physician.” Id. at 460. Ultimately, the court concluded that because optometry is a profession requiring a practitioner's undivided loyalty to a patient, selling optical goods could adversely affect an optometrist's professional judgment and loyalty to the patient-effectively prohibiting corporations from employing optometrists. Id. at 460.
Sisemore, however, has no bearing on the Court's assessment of whether Defendant has a duty to defend under the Oregon caselaw that supplies the relevant legal framework. In other words, even if Sisemore prohibited an employee-employer relationship between Dr. Vogel and Eyemart based on the company's corporate status, the case does not stand for the proposition that such a relationship would void the terms of an otherwise valid insurance contract or permit the Court to disregard controlling authority on the issue of whether Defendant had a duty to defend.
In sum, the Court should find that Defendant has a duty to defend Plaintiff based on the allegations contained in the Hayden Complaint and the Landmark Policy.
RECOMMENDATION
For the reasons above, Defendant's motion for summary judgment (ECF No. 9) should be DENIED; Plaintiff's motion for partial summary judgment (ECF No. 13) should be GRANTED.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Federal Rule of Appellate Procedure 4(a)(1) should not be filed until entry of the district court's judgment or appealable order. The Findings and Recommendation will be referred to a district judge. Objections to this Findings and Recommendation, if any, are due fourteen (14) days from today's date. See Fed.R.Civ.P. 72. 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).