Free Motion for Summary Judgment - District Court of Arizona - Arizona

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Stephen Paul Forrest (No. 006341) HOLLOWAY ODEGARD FORREST KELLY & KASPAREK, P.C. 3101 N. Central Avenue, Suite 1200 Phoenix, Arizona 85012 Phone: (602) 240-6670 Facsimile: (602) 240-6677 Attorneys for Defendants Correctional Medical Services, Inc., a Missouri Corporation, Lorraine Lopez-Moreno, Trina Carrasco, and Jacqueline Cornwell

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Northland Insurance Company, a Minnesota Corporation, Plaintiff, vs. Correctional Medical Services, Inc., a Missouri Corporation, Dr. Antonio DiMaano, Dr. Reynaldo Figueroa, Nurse Lorraine Lopez-Moreno, Nurse Trina Carrasco, Nurse Jacqueline Cornwell, and ABC Insurance Company, Defendants. Defendants Correctional Medical Services, Inc. ("CMS"), Nurse Lorraine Lopez, Nurse Trina Carrasco, and Nurse Jacqueline Cornwell (collectively "the CMS Defendants") move for summary judgment with respect to Plaintiff Northland Insurance Company's ("Northland") Complaint seeking reimbursement for payment of a judgment in an underlying state court tort action that was brought by a prisoner, Jose Valdez alleging inadequate medical care during his incarceration in facilities operated by the State of Arizona and by Northland's insured, Correctional Services Corporation ("CSC'), under contract with the State. DEFENDANTS CMS, LOPEZ, CARRASCO, AND CORNWELL'S MOTION FOR SUMMARY JUDGMENT RE: GUARANTY FUND LAWS

No. CV 2004 0347 PHX FJM

(Oral Argument Requested)

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Northland brings this action, as it relates to the Valdez claim, as a subrogated insurer that satisfied the judgment entered against the State of Arizona in the Valdez suit. Plaintiff insured the State of Arizona as an additional insured under its policy issued to CSC which, pursuant to contract, operated one of the prisons wherein Valdez was incarcerated and allegedly suffered from inadequate medical care. CSC was contractually obligated to name the State as an additional insured under its liability insurance with plaintiff Northland. However, since CSC was dismissed with prejudice prior to trial from the Valdez suit, consequently Northland's satisfaction of the Valdez judgment was based solely on its coverage for the State. The CMS Defendants were not sued by Valdez, but CMS was brought into the case as a third-party defendant. The CMS Defendants were insured for the Valdez claim by the PHICO Insurance Company. PHICO, however, was ordered into

liquidation in February 2002. Thus, the CMS Defendants lost their insurance coverage for the Valdez claim. Subrogation claims against the insureds of an insolvent insurer are barred by the Arizona Property and Casualty Guaranty Fund Act, A.R.S. § 20-673(a), and the Missouri Property and Casualty Guaranty Association Act, § 375.772(a) RSMo. These two laws prohibit Northland's subrogation claim in this case. In addition, several of Northland's claims are unsupported by the facts. Consequently, the CMS Defendants are entitled to summary judgment on each of Northland's claims. This Motion is supported by the attached Memorandum and Separate Statement of Facts. Citations to the Statement of Facts are "SOF" herein.

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MEMORANDUM OF POINTS AND AUTHORITIES A. Introduction This is a subrogation case in which plaintiff seeks to recover amounts it paid to satisfy a judgment rendered against the State of Arizona in the state court action, Valdez v. Maricopa County, CV2000-000205. SOF 1. Valdez was an inmate in two State prisons, Alhambra and Florence West, as well as incarcerated in the Maricopa County Jail. SOF 2. The State of Arizona owned and operated Alhambra while CSC, under a contract with the State, operated Florence West. SOF 3. CMS provided services only at Florence West, the CSC operated prison, pursuant to a contract between CSC and CMS. SOF 4. Valdez filed a state court action in January 2000 against the State, CSC and others claiming both ordinary and medical negligence. SOF 5. Neither CMS nor the nurses named in this case were named as defendants in the state court action. SOF 6. However, CSC tendered its defense of the case to CMS, which in turn notified its

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insurer PHICO of the Valdez action. SOF 7. Unfortunately, PHICO's liquidation resulted in CMS and CSC losing the benefits of this coverage. In the Valdez suit, CSC and the State of Arizona named CMS as a non-party at fault. SOF 8. Later, in December 2000, the State and CSC filed third-party actions against CMS for indemnification. SOF 9. The State also filed a cross-action for indemnification against CSC.1 SOF 10. Neither the State of Arizona nor CSC developed any defense to plaintiff's claims with respect to the medical care provided to Valdez at the Florence West facility where CMS provided the nursing staff. SOF 11. Ultimately, CSC and Northland entered into a "high/low agreement"2 with Valdez which resulted in CSC

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Those third-party and cross claims were severed from the main action and ultimately dismissed without prejudice. The "high-low" agreement between Northland, CSC and Valdez called for a minimum payment of $1 million and a high payment of $5 million in the event the jury returned a verdict below or above these amounts.

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being dismissed with prejudice.3 SOF 12. The state court case was then tried on damages only against the State of Arizona. The jury awarded Valdez $6 million. SOF 13. The high-low agreement limited Valdez' recovery to $5 million.4 SOF 14. The State of Arizona appealed the verdict, but the verdict was upheld on appeal and

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Northland ultimately satisfied the judgment. SOF 15. CMS is domiciled in the State of Missouri. SOF 16. PHICO, the insolvent insurer of CMS, was subject to the insurance guaranty laws of Missouri. SOF 17. Northland filed a claim with the Missouri Insurance Guaranty Association ("MIGA") on behalf of its insured, CSC, for the attorneys' fees and costs expended in the Valdez case. SOF 18. MIGA denied Northland's claim on the basis that any claim by an insurer is not a "covered claim." SOF 19. Prior to the April 1, 2003 filing deadline, Northland filed a proof of claim with the Statutory Liquidator of PHICO in Mechanicsburg, Pennsylvania. Northland thereafter filed this suit. B. Relevant Underlying Facts 1. The CSC/CMS Florence West Contract SOF 20.

CSC and CMS entered into a Health Services Agreement on October 1, 1997, for the delivery of inmate health care services at CSC's Arizona State Prison-- Florence (the "Florence West Contract"). SOF 21. The contract does not state that

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CMS is required to indemnify CSC for any reason. SOF 22. Rather, CMS must maintain its own professional liability insurance with limits of not less than $3 million combined single limit and name CSC as an additional insured under the policy or policies. SOF 23. Accordingly, CMS obtained the required coverage with PHICO. SOF 24.

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Because CSC was alleged to be vicariously liable for CMS, dismissal of CSC with prejudice effectively dismissed any claims Valdez had based on any fault of CSC or CMS. 4 At the time the agreement was negotiated, CSC and the State of Arizona had preserved a defense on liability and damages. Later, the State of Arizona admitted negligence, and the case proceeded to trial on damages only.

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2.

The PHICO Policies

CMS, Nurse Lorraine Lopez, Nurse Trina Carrasco and Nurse Jacqueline Cornwell were insured under policies issued by PHICO. SOF 25. One PHICO policy, HCL 10335, provided coverage for medical incidents up to $1 million per occurrence

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and had an effective date of October 1, 1997. SOF 26. A second PHICO policy, PUP 10335, provided excess coverage for medical incidents up to $10 million and had an effective date of October 1, 1997. SOF 27. Under the PHICO policies, CMS was the "named insured," while the nurses were "persons insured" as "professional employees" of the "named insured." SOF 28. A "professional employee" was defined as any employee, other than a physician, who was authorized to provide health care or professional medical services. SOF 29. The nurses were all professional employees of CMS. SOF 30. The PHICO policies provided coverage for both bodily injury or property damages arising from a medical incident defined as "any act or omission in the furnishing of any professional health care service immediately incident to the care of patients including, but not limited to, the furnishing of food, beverages, medications or appliances in connection with such services and the post-mortem handling of human bodies by the insured, any employee of the insured or any person acting under the personal direction, control or supervision of the insured." SOF 31.

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The PHICO policies also contain an endorsement providing that the coverage extends to any entity as an additional insured if CMS agrees under a written contract to provide that entity the insurance afforded for claims arising from the conduct of an insured for an event for which coverage is otherwise provided under the policies. SOF 32. Finally, the PHICO policies were issued for an initial term of one year, from October 1, 1997 through October 1, 1998. However, the terms of both policies were extended so that the policies, including the additional insured endorsements, provided coverage for medical incidents occurring through October 1, 2000. SOF 33.

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3.

The Valdez Claim

The Valdez claim was filed on January 5, 2000. SOF 34. CMS was not named as a defendant but on July 7, 2000, CSC named CMS as a non-party at fault. SOF 35. On September 29, 2000, CSC filed a motion for summary judgment requesting

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judgment in CSC's favor arguing that it was not vicariously liable for the conduct of CMS. SOF 36. Valdez opposed CSC's motion and filed a cross-motion, arguing that the duty to provide health care services was non-delegable by CSC and the State of Arizona. SOF 37. On December 15, 2000, the court denied CSC's motion for summary judgment and granted Valdez's cross-motion, finding the State and CSC vicariously liable for the alleged wrongful conduct of CMS. SOF 38. Thereafter, on December 22, 2000, CSC filed its Third-Party Complaint against CMS for indemnification. SOF 39. CMS moved for a trial continuance on January 10, 2001. On September 19, 2001, the first day of trial and pursuant to stipulation, the court dismissed Valdez' claims against CSC with prejudice. SOF 40. Also on that date, the State of Arizona, the only remaining defendant, admitted fault and the case proceeded to trial on damages alone. SOF 41. On September 21, 2001, the jury returned a $6 million verdict in favor of Valdez and against the State. SOF 42. On October 4, 2001, pursuant to the "high-low

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agreement" between Valdez and Northland, the court entered judgment against the State of Arizona for $5 million plus costs. SOF 43. 4. The PHICO Order of Liquidation

The Commonwealth Court of Pennsylvania placed CMS' insurer, PHICO, under an Order of Rehabilitation on or about August 16, 2001. SOF 44. PHICO was later placed under an Order of Liquidation by the same court effective February 1, 2002. SOF 45.

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C.

Analysis 1. Summary Judgment Standards

Under Fed.R.Civ.P. 56(c), summary judgment is proper if "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter
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of law." Harkins Amusement Enterprises, Inc. v. General Cinema Corp., 850 F.2d 477 (9th Cir. 1988) cert denied 488 U.S. 1019, 109 S.Ct. 817, 102 L.Ed.2d 806 (1989). The "materiality" of a fact is determined by the substantive law governing the claim or defense. Hernandez v. Johnston, 833 F.2d 1316 (9th Cir. 1987). 2. Choice of Law

To determine the applicable law in diversity cases, a federal district court is to apply the choice of law rules of the state in which it sits. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed 1477 (1941); General Accident Ins. Co. v. Namesnik, 790 F.2d 1397, 1398 (9th Cir. 1986). Arizona state courts apply the principles of the Restatement (Second) of Conflict of Laws (1971) to determine the controlling law for multi-state torts. See Bates v. Superior Court, 156 Ariz. 46, 749 P.2d 1367, 1369 (Ariz. 1988). Northland's claims herein, while pled in part as breaches of contract, are all essentially contribution and indemnification claims. Northland possesses no such rights on its own. It must bring this claim based on its insured's rights to which

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Northland is contractually and equitably subrogated. Under Arizona law, "courts are required to resolve tort issues under the law of the state having the most significant relationship to both the occurrence and the parties with respect to any particular questions." Bates v. Superior Court, 56 Ariz. at 49, 749 P.2d at1370 (Ariz. 1988). Courts look at four factors in making this determination: (1) the place where the injury occurred, (2) the place where the conduct causing the injury occurred, (3) the domicile of the parties, and (4) the place where the parties' relationship is centered. Id. Here, the alleged injuries all occurred in Arizona. Missouri and Arizona are the
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places where the conduct causing the alleged injuries occurred. CMS is domiciled in Missouri. Its nurses are domiciled in Arizona. CSC is domiciled in Florida.

Northland is domiciled in Minnesota.
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Although, the Florence West Contract was

executed in Missouri, its fulfillment was centered in Arizona, where the Florence West Prison is located. Based on this analysis, Arizona has the greatest contacts with the issues and the parties. Missouri has the second greatest contacts. 3. Claims The Arizona Property and Casualty Guaranty Fund Act defeats an insurer's right of subrogation in the precise circumstances before the court here. The Arizona legislature's enactment of the Act followed recognition by the National Association of Insurance Commissioners of a need for protective legislation to prevent hardship on insureds of companies that become insolvent. See Firemen's Fund Ins. Co. v. Ariz. Ins. Guar. Ass'n, 528 P.2d 839, 841 (Ariz. Ct. App. 1974), rev'd on other grounds, 536 P.2d 695 (Ariz. 1975). The Arizona Insurance Guaranty Fund was created "to assume the liability of insolvent insurers." Betancourt v. Arizona Prop. & Cas. Ins. Guar. Fund, 170 Ariz. 296, 298, 823 P.2d 1304, 1306 (Ariz. Ct. App. 1991). "[T]he Fund is obligated, within limits, to pay all `covered' claims of insolvent
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Arizona Guaranty Fund Law Prohibits Northland's Subrogation

insurers." A.H. v. Arizona Prop. & Cas. Ins. Guar. Fund, 190 Ariz. 526, 527, 950 P.2d 1147, 1148 (Ariz. 1997). "A `covered claim' is an unpaid claim arising `out of' and `within the coverage' of a policy written by an insolvent insurer to which the statutes apply." Id. "Sections 20-661 to 20-680 obligate the Fund to step into the shoes of insolvent insurers and adjust, compromise, settle, and pay covered claims that arise under insurance contracts. It may also deny claims, and defend and indemnify as necessary."5 (Emphasis added.) Id., 190 Ariz. at 530, 950 P.2d at 1150-51.
However, the Fund is not available to benefit solvent insurers that pay claims pursuant to their policies and Northland, standing in the shoes of its insured CSC or State of Arizona is not covered. A "[c]overed claim does not include any amount due any reinsurer, insurer, insurance pool or underwriting association as subrogation recoveries or otherwise nor shall it
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Section 20-673 of the Arizona Property and Casualty Guaranty Fund Act provides in relevant part: § 20-673. Nonduplication of recovery; exhausting all other applicable coverages; rights of fund and member insurer; definition A. Any person having a claim against an insurer under any provision in an insurance policy that is also a covered claim shall be required to exhaust first all rights under such policy. Any amount payable on a covered claim pursuant to this article shall be reduced by the amount of such recovery under the claimant's insurance policy. Any recovery pursuant to this article shall be reduced by the amount of the recovery under the claimant's insurance policy. A member insurer or other insurer which pays such insurer's own policy, shall have no right of subrogation or recovery against the insured of an insolvent insurer. * * * C. When more than one policy may be applicable, a policy issued by the insolvent insurer shall be deemed excess coverage. The claimant shall be required to exhaust all rights under other applicable coverage or coverages. Any recovery pursuant to this article shall be reduced by the amount of recovery under the claimant's insurance policy. Any amount payable on a covered claim shall be reduced by the amount of such recovery under the applicable insurance. A.R.S. § 20-673 (emphasis added). More than one policy was applicable to the Valdez claim--the Northland policy that insured both CSC and the State, and the PHICO policies that insured CMS and CSC. Under subsection C of A.R.S. §20-673, claimants, such as CSC or the State, are required to exhaust all of their rights under other applicable coverage. Here, that other applicable coverage was afforded by Northland. Northland's payment satisfied the entire judgment. Thus, any amount that would have been payable to the claimants as a covered claim is reduced to zero.
include any obligations of the insolvent insurer arising out of any reinsurance contracts nor shall it include attorneys' fees or adjustment expenses incurred prior to the determination of insolvency." See A.R.S. § 20-661(3).

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Most importantly, A.R.S. § 20-673(A) provides that an insurer, such as Northland, that has made payments under its own policy, shall have no right of subrogation or recovery against the insured (CMS) of an insolvent insurer (PHICO). Regardless of how styled, Northland brings this claim against CMS and its nurses as subrogee of CSC or the State of Arizona. Even if Northland should argue that its claim is not as a subrogee, A.R.S. § 20-673(A) prohibits this action by its broad pronouncement that the insurer "shall have no right of subrogation or recovery against the insured of an insolvent insurer" (emphasis added). Whether Northland styles its claims as a subrogation or an independent action, Arizona law prohibits Northland from seeking recovery from CMS or its nurses. 4. Missouri Law Prohibits Northland's Claims

Choice of laws analysis may suggest that Missouri law applies because CSC and CMS entered into the Florence West Contract in Missouri. Just as in Arizona, Missouri law prohibits Northland from maintaining any claim against CMS, or its nurses, arising from the Valdez lawsuit. The Missouri Act states in pertinent part: 1. There is created a nonprofit unincorporated legal entity to be known as the "Missouri Property and Casualty Insurance Guaranty Association", hereinafter referred to as "association". All member insurers shall be and remain members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under a plan of operation and through a board of directors established by section 375.776. 2. As used in sections 375.771 to 375.779, the following terms mean: *** (7) "Covered claim", an unpaid claim including those for unearned premiums, presented by a claimant within the time specified in accordance with subsection 1 and subdivision (2) of subsection 2 of section 375.775, and is for a loss arising out of and is within the coverage of an insurance policy to which sections 375.771 to 375.779 apply made by a person insured under such policy or by a person

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suffering injury or for which a person insured under such policy is legally liable, if: *** (c)"Covered claim" shall not include: c. Any amount due any reinsurer, insurer, insurance pool, or underwriting association, health maintenance organization, hospital plan corporation, health services corporation, or self-insurer as subrogation recoveries, reinsurance recoveries, contribution, indemnity, or otherwise. To the extent of any amount due any reinsurer, insurer, insurance pool, or underwriting association, health maintenance organization, hospital plan corporation, health services corporation, or self-insurer as subrogation recoveries or otherwise there shall be no right of recovery by any person against a tortfeasor insured of an insolvent insurer, except that such limitation shall not apply with respect to those amounts that exceed the limits of the policy issued such tortfeasor by the insolvent insurer; § 375.772 RSMo. Section 375.772.2(2) RSMo. protects the insured of an insolvent insurer. In Garrett v. Overland Garage & Parts, Inc., 882 S.W.2d 188 (Mo. Ct. App. 1994), the Missouri appellate court held: "The primary purpose of the various guaranty funds is to protect the insured and the public from the effects of insolvent insurers." Qualls v. Missouri Insurance Guaranty Association, 714 S.W.2d 732, 735 (Mo.App.E.D.1986). Therefore, § 375.772.2(2) is to be interpreted with a view toward protection of the insured and the public. Second, "the intent of the legislature is to be determined from the language used and the words are to be considered in their plain and ordinary meaning." Springfield Park Central Hospital v. Director of Revenue, 643 S.W.2d 599 (Mo.1983). Section 375.772.2(2), states that "a covered claim shall not include any amount due ... any insurer ... as subrogation recoveries or otherwise, and to the extent of any amount due ... any insurer as subrogation recoveries or otherwise there shall be no recovery by any person against a tortfeasor insured of an insolvent insurer." (emphasis added). The plain meaning of the statute is as follows. First, when a tortfeasor's insurer is insolvent, any insurer who has paid a claim that would ordinarily entitle it to

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subrogation will not be reimbursed by MIGA and second, no one may recover the subrogation amount from the tortfeasor of the insolvent insurer. 188 S.W.2d at 192-193 (emphasis added). Other Missouri decisions are in accord. In Tillman v. Cam's Trucking, Inc., 20 S.W.3d 579 (Mo. Ct. App. 2000), the Missouri appellate court held that any amount ordinarily due any insurer as a "subrogation" recovery against a tortfeasor whose insurer has been adjudicated insolvent is not a "covered claim" under the Missouri Act. Consequently, (1) no one can recover that amount from the tortfeasor or MIGA, and (2) any judgment the injured party obtains against the tortfeasor must be deemed satisfied to the extent of such amount. The Missouri Act further provides that "there shall be no right of recovery" against CMS or its nurses so long as the amount sought does not exceed the limits of the PHICO policies issued to CMS. PHICO issued policies totaling limits of $11 million. Northland paid the Valdez judgment, which is well within the limits of the policies issued to CMS by the insolvent insurer, PHICO. Therefore, Northland is prohibited from seeking recovery from CMS or its nurses for payments made in satisfaction of the Valdez judgment. 5. The CMS Defendants Are Entitled to Summary Judgment on Each

of the Counts Based on the Valdez Suit a. Count I: Contractual Indemnification is Subject to Summary Judgment Count I of the Complaint is a claim for contractual indemnification against CMS. Northland alleges that it is contractually and equitably subrogated to CSC's right to pursue claims under the Florence West Contract. Northland claims that it is subrogated to those rights because it paid the judgment in favor of Valdez. Northland further alleges that the Florence West Contract required CMS to indemnify CSC for

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any liability arising from the conduct of CMS. Finally, Northland alleges that because CSC's liability was vicarious and not direct, Northland is entitled to recover contractual indemnity for the liability incurred by CSC. As the procedural history establishes, CSC was dismissed with prejudice from the Valdez lawsuit without incurring any liability whatsoever. Only the State of Arizona incurred any liability. The State of Arizona had no contract with CMS. Further, the Florence West Contract contained no indemnification provision between CSC and CMS. Consequently, while Northland may be subrogated to the State, its claim is, in any event, barred by A.R.S. § 20-673 and Section 375.772 RSMo. b. Count III: Breach of Contract for Failure to Name CSC as An Additional Insured Northland, again the alleged subrogee of CSC, claims CMS breached the Florence West Contract by failing to name CSC as an additional insured under the PHICO policy. Northland alleges that, as a result, CSC incurred attorneys' fees and costs to defend the Valdez lawsuit and the declaratory judgment action the State of Arizona filed against Northland. Northland further alleges CSC could not settle the Valdez lawsuit on more favorable terms. Finally, Northland alleges that because CMS did not name CSC as an additional insured, CSC was held liable to the State of Arizona for the $5 million judgment. The evidence establishes that the PHICO policies included a blanket additional insured endorsement and PHICO ultimately acknowledged CSC was an additional insured. Because CMS obtained the additional insured coverage, it did not breach the contract and CMS and the nurses are entitled to summary judgment.6
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During the summer of 2001, when CSC asserted its rights as an additional insured under the PHICO policies, CMS asserted to PHICO that PHICO was wrong in denying coverage to CSC. Further, Northland incurred attorneys' fees and costs in the Valdez lawsuit while defending the actions of its insured, CSC related to CSC's independent fault. It was not until the court entered judgment in favor of CSC regarding its independent negligence on May 11, 2001, did any defense costs arguably become attributable solely to the defense of CMS. By this time, CSC contacted PHICO asserting its claim as an additional

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Further, Northland claims that CMS' failure to name CSC as an additional insured caused CSC to be held liable for the Valdez judgment. In fact, CSC was dismissed from the Valdez lawsuit on September 19, 2001, and the judgment was entered only against the State of Arizona. Northland's payment of the judgment was solely on behalf of the State of Arizona, as the only remaining defendant to the action. Count III has no basis in law or fact and the CMS Defendants are entitled to summary judgment. c. Count IV: Breach of Contract for Failure to Provide Medical Services In Count IV, Northland, as the alleged subrogee of CSC, claims CMS failed to provide health care services to Valdez in accordance with CSC's procedures and in compliance with existing community standards as required by the Florence West Contract. Northland alleges it incurred attorneys' fees, expenses and court costs to defend the Valdez lawsuit and the declaratory judgment. Northland further alleges CSC was held vicariously liable to the State of Arizona for the $5 million judgment. CSC did not incur attorneys' fees and costs in either the Valdez lawsuit or the declaratory judgment action because of the alleged wrongful conduct of CMS. Those costs were incurred defending either CSC's alleged negligence in the Valdez action or Northland's coverage position in the declaratory judgment action. Moreover, CSC has never been determined to be liable for the Valdez judgment. There is no judgment making CSC liable to the State of Arizona. Northland's claim is one of common law indemnification based on its claim of subrogation to the rights of CSC, but CSC has no claim because it has incurred no liability and any such subrogation claim is barred in any event.

insured. Previously, CSC had taken the position that it could not ethically contact CMS' nurses, so CSC had done nothing in furtherance of CMS' defense.

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d. Count VI: Indemnity and Contribution against CMS and the Nurses In Count VI, Northland, as the alleged subrogee of CSC, claims, among other things, that CMS and the nurses provided inadequate health care to Valdez. Northland claims that such subrogation rights became enforceable at the time Northland satisfied the Valdez judgment. Northland claims it is entitled to common law indemnity from CMS and its nurses because CSC was not actively negligent. Alternatively, Northland claims if CSC was actively negligent, then Northland is entitled to contribution from CMS and the nurses in proportion to their fault. Northland continues to ignore the indisputable fact that CSC was dismissed with prejudice before the Valdez judgment was entered. Because CSC has incurred no liability, the CMS Defendants are entitled to summary judgment on the indemnity claim. Further, Northland acknowledges that it brings the claim as subrogee and all such claims as against the CMS defendants are barred. e. Count IX: Fraud and Intentional Misrepresentation by CMS In Count IX, Northland, as the alleged subrogee of CSC, claims CMS committed fraud by intentionally misrepresenting to CSC that CMS named CSC as an additional insured. Northland also claims CMS committed fraud by intentionally misrepresenting that it notified PHICO that CSC tendered its defense to CMS. Finally, Northland alleges CMS committed fraud by concealing from CSC that PHICO did not have a record of CSC being an additional insured. As with the other claims, Northland alleges that as a result of these acts of fraud, upon which CSC "detrimentally relied," Northland had to pay the Valdez judgment. All of the alleged conduct involved CSC and Northland is only acting in the capacity of subrogee of CSC with respect to any claims alleged in Count IX. Because CSC has incurred no liability, this claim fails as a matter of law and further is barred by statute.
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D.

Conclusion Northland has brought this action as one founded on subrogation to the interests of

its insured, CSC or its additional insured, State of Arizona. Under both the Arizona and Missouri Insurance Guaranty Fund Acts, Northland is prohibited from pursuing CMS or its nurses for any judgment it paid in the Valdez matter because CMS' insurer for the Valdez claim, PHICO, has been declared insolvent. Both the Arizona and the Missouri Acts prohibit Northland from pursuing CMS or its nurses for any recovery because its insurer, PHICO, is insolvent. Therefore, even if Northland purports to assert an

"independent" "non-derivative" claim against CMS or its nurses, such claim is also barred. For the foregoing reasons, Defendants CMS and its nurses respectfully request this Court grant their motion for summary judgment. DATED this 31 day of October, 2005. HOLLOWAY ODEGARD FORREST KELLY & KASPAREK, P.C.

By:_/s/____________________________________ Stephen Paul Forrest 3101 N. Central Avenue, Suite 1200 Phoenix, Arizona 85012 Attorneys for Defendants Correctional Medical Services, Inc., Lorraine Lopez-Moreno, Trina Carrasco, and Jacqueline Cornwell

ORIGINAL of the foregoing filed this 31st day of October, 2005, with: The Clerk of Court United States District Court 401 W. Washington Phoenix, AZ 85003
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COPY st the foregoing hand-delivered of this 31 day of October, 2005, to: The Honorable Frederick J. Martone United States District Court Sandra Day O'Connor U.S. Courthouse 401 W. Washington Street Phoenix, Arizona 85003 COPY of the foregoing mailed this 31st day of October, 2005, to: Karl M. Tilleman, Esq. Janice K. Crawford, Esq. Steptoe & Johnson, L.L.P. Collier Center 201 East Washington Street, Ste. 1600 Phoenix, Arizona 85004-2382 Attorneys for Plaintiff Northland Keith R. Ricker, Esq. Ricker and Bustamente, LLP. 4530 East Shea Blvd., Suite 150 Phoenix, AZ 85028 Attorneys for Defendants Antonio DiMaano and Reynaldo Figueroa

By_/s/ ____________________________

Case 2:04-cv-00347-FJM

Document 98 - 17 - 10/31/2005 Filed

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