(Defendant's Motion for Summary Judgment — ECF No. 26; Plaintiff's Motion for Partial Summary Judgment — ECF No. 29)
MIRANDA M. DU, UNITED STATES DISTRICT JUDGE.
This dispute relates to coverage for a qui tarn action under a professional liability insurance policy and its relevant endorsements. Defendant Certain Underwriter's at Lloyd's London Subscribing to Policy No. HAH15-0632 ("Underwriters" or "Defendant") has filed a Motion for Summary Judgment ("Defendant's Motion"). (ECF No. 26.) Plaintiffs My Left Foot Children's Therapy, LLC's ("My Left Foot") and Jon and Ann Marie Gottlieb (collectively "Plaintiffs") have filed a Motion for Partial Summary Judgment ("Plaintiffs' Motion"). (ECF No. 29.) The Court has reviewed the parties' respective responses (ECF Nos. 37, 38) and replies (ECF Nos. 39, 40). The Court has also considered the arguments presented at the September 13, 2016, hearing on the parties' Motions. For the reasons discussed below, Defendant's Motion (ECF No. 26) is denied in part and granted in part and Plaintiffs' Motion (ECF No. 29) is denied.
A. The Insurance Policy
Plaintiffs maintained a Professional Liability Insurance Policy ("Policy") with Underwriters for the coverage period of April 15, 2015, through April 15, 2016. (ECF No. 1 at 2.) The Policy includes a Retroactive Date of Coverage of April 15, 2014. (ECF No. 30-9 at 5.) The Policy is a "claims made" policy, meaning that the Policy provides professional liability coverage to Plaintiffs for covered claims made and reported to Underwriters during the policy
Plaintiffs purchased additional endorsements, including a Billing Errors Endorsement and a Claims Expenses Endorsement, to provide supplemental coverage in addition to what was covered under the Policy. (ECF No. 1 at 18.)
B. The Qui Tarn Action
On June 30, 2015, Plaintiffs received notice of a qui tam action filed against them in the District of Nevada ("Qui Tarn Action").
C. Coverage Dispute
The Complaint asserts three claims for declaratory relief, seeking a declaration that Underwriters has a duty to indemnify for Claim Expenses (Count I), a duty to defend (Count II), and a duty to indemnify for damages (Count III). (ECF No. 1 at 8-11.) Plaintiffs' Motion seeks summary judgment on the first two claims. (ECF No. 29.) Plaintiffs contend that the Policy requires Underwriters to defend them and provide up to 15 $2 million for defense expenses. (See id. at 6.) Defendants' Motion seeks summary judgment, contending that the Qui Tarn Action falls outside of the Billing Errors Endorsement's coverage period or, if the Qui Tarn Action falls within the Endorsement's coverage period, that coverage is limited to the sub-limit of $25,000 identified in the Billing Errors Endorsement. (ECF No. 26.)
III. LEGAL STANDARD
The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as to the facts before the court. Nw. Motorcycle Ass'n v. U.S. Dep't of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994). Summary judgment is appropriate when
The moving party bears the burden of showing that there are no genuine issues of material fact. Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982). "In order to carry its burden of production, the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). Once the moving party satisfies Rule 56's requirements, the burden shifts to the party resisting the motion to "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256, 106 S.Ct. 2505. The nonmoving party "may not rely on denials in the pleadings but must produce specific evidence, through affidavits or admissible discovery material, to show that the dispute exists," Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991), and "must do more than simply show that there is some metaphysical doubt as to the material facts." Orr v. Bank of Am., 285 F.3d 764, 783 (9th Cir. 2002) (internal citations omitted). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient." Anderson, 477 U.S. at 252, 106 S.Ct. 2505.
Further, "when parties submit cross-motions for summary judgment, `[e]ach motion must be considered on its own merits." Fair Hous. Council of Riverside County, Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001) (quoting William W. Schwarzer, et al., The Analysis and Decision of Summary Judgment Motions, 139 F.R.D. 441, 499 (Feb. 1992) (citations omitted). "In fulfilling its duty to review each cross-motion separately, the court must review the evidence submitted in support of each crossmotion." Id.
A. Qui Tam Action Falls Within the Endorsement Period
As a preliminary matter, both parties concede that absent the Billing Errors Endorsement, coverage for the Qui Tam Action is not available under the professional liability insurance portion of the Policy. (See ECF No. 29 at 14; see also ECF No. 26 at 4.)
Defendant argues that because the qui tam Action was filed on October 28, 2014, it falls outside of the Billing Errors Endorsement's coverage period, which covers April 15, 2015, to April 16, 2016. (ECF No. 26 at 4.) More specifically, Underwriters point to section III.2. of the Billing Errors Endorsement, which states that coverage "does not apply to
The Court disagrees. Underwriters' position is tenuous given the unique procedural stature of qui tam lawsuits under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. Indeed, Underwriters acknowledge that the FCA contemplates that complaints will remain under sel for at least 60 days after being filed. (See ECF No. 26 at 17.) Yet, Defendant relies on various non-FCA cases in support of its position that if the Billing Errors Endorsement were to apply to the Qui Tam Action, then the Endorsement would have clearly stated that it applied to lawsuits that had been filed but not served. (See id. at 16-17.) The language of the Billing Errors Endorsement is clear that the Endorsement specifically applies to a "Billing Error Proceeding," which Defendant admits covers qui tam lawsuits. (See ECF No. 26 at 5, 16.) It would be superfluous for the Endorsement to explicitly state that the date of service is the date of notice for purposes of coverage as it is commonly understood that a qui tam suit under the FCA becomes active once the defendant has notice of the lawsuit and that notice most often occurs at the time of service.
The Court therefore finds that the Qui Tam Action was served on Plaintiffs in June 2015 and falls within the endorsement period in the Billing Errors Endorsement.
B. Billing Errors Endorsement is Unambiguously Clear
An insurance policy "must be enforced according to its terms." Farmers Ins. Exch. v. Neal, 119 Nev. 62,64 P.3d 472, 473 (2003) (the court must "give plain and ordinary meaning to the terms" of the insurance policy "from the perspective of one not trained in law").
Plaintiffs concede that there is no coverage for the qui tam Action under the professional liability portion of the Policy and that coverage is available only because of the Billing Errors Endorsement. (See ECF No. 29 at 14.) However, Plaintiffs argue that the Billing Errors Endorsement is ambiguous on its face because it does not expressly disclaim a duty to defend. (See id. at 19.) And, because the Endorsement is silent as to the duty to defend, Plaintiffs argue that the Billing Errors Endorsement's $25,000 sublimit applies only to indemnification for Loss. (See id. at 6-7.) They point to the first sentence of the second paragraph in the Endorsement to argue that the phrase "Claim Expenses which the Insured incurs" creates a separate obligation for Claim Expenses that is not subject to the sub-limit identified in the Endorsement. (See id. at 7.) Plaintiffs then look to the Claims Expenses Endorsement to argue that the $2 million Limit of Liability in the Policy applies to Claim Expenses in the qui tam Action. (See id.)
However, the Court must look first to the language of the Billing Errors Endorsement. The first paragraph in Section I states as follows:
(ECF No. 30-9 at 36 (emphasis in original).) The Qui Tam Action is a "Billing Error Proceeding," an interpretation which is not subject to dispute. Section I unambiguously provides that "a sub-limit of liability of $25,000 per occurrence and $25,000 in the aggregate, and subject to a $2,500 deductible, applies to any
The Court disagrees with Plaintiffs that the Billing Errors Endorsement is silent as to Underwriters' duty to defend. Section I of the Billing Errors Endorsement goes on to state that "Underwriters shall indemnify the
In sum, the Court finds that the Billing Errors Endorsement is unambiguous in providing both that there is a duty to defend and that the sub-limit of liability for that duty is $25,000. Accordingly, the Court must construe the Billing Errors Endorsement as written and reject Plaintiffs' proposed construction which involves an interwoven reading of the Policy, the Billing Errors Endorsement and the Claims Expenses Endorsement.
The Court notes that the parties made several arguments and cited to several cases not discussed above. The Court has reviewed these arguments and cases and determines that they do not warrant discussion because they do not affect the outcome of the parties' Motions.
It is therefore ordered that Defendant's Motion for Summary Judgment (ECF No. 26) is denied in part and granted in part. It is denied with respect to Defendant's argument that the Qui Tam Action falls outside of the Billing Errors Endorsement's coverage period. It is granted with respect to Defendant's argument that coverage for the Qui Tam Action is available under the Billing Errors Endorsement up to the sub-limit of liability of $25,000.
It is further ordered that Plaintiffs' Motion for Partial Summary Judgment (ECF No. 29) is denied.
The parties are directed to confer on the effect this Order has on Plaintiffs' pending motion for leave to file the first amended complaint (ECF No. 45). Accordingly, Plaintiffs' motion for leave to file the first amended complaint (ECF No. 45) is denied without prejudice.