Free Trial Brief - District Court of Arizona - Arizona

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Stephen Paul Forrest (No. 006341) HOLLOWAY ODEGARD FORREST KELLY & KASPAREK, P.C. 3101 North Central Avenue, Suite 1200 Phoenix, Arizona 85012 Telephone: (602) 240-6670 e-mail: [email protected] Dennis E. O'Connell BRYAN CAVE LLP 211 North Broadway, Suite 3600 St. Louis, Missouri 63102 Telephone: (314) 259-2000 Facsimile: (314) 259-2020 e-mail: [email protected] Margaret B. LaBianca (No. 0191169) BRYAN CAVE LLP (No. 00145700) Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004 Telephone: (602) 364-7000 Facsimile: (602) 364-7070 e-mail: [email protected] Attorneys for Defendants Correctional Medical Services, Inc. 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 LopezMoreno, Nurse Trina Carrasco, Nurse Jacqueline Cornwell, and ABC Insurance Company, Defendants. ... DEFENDANTS' TRIAL MEMORANDUM OF LAW No. CV-04-347PHX FJM

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Pursuant to the Court's Rule 16 Scheduling Order of March 14, 2005, Defendants Correctional Medical Services, Inc., ("CMS") nurse Lorraine Lopez-Moreno, nurse Trina Carrasco, and nurse Jacqueline Cornwell submit this trial memorandum of law. I. FACTUAL BACKGROUND On January 5, 2000, Jose Valdez brought suit against the State of Arizona ("State") and Correctional Services Corporation ("CSC") in the Superior Court of the State of Arizona ("Valdez Suit") alleging he lost his eye sight while imprisoned in facilities operated by the State and CSC due to the negligence of the State and CSC in the provision of medical care in those facilities, among other issues. CMS was contracted with CSC to provide medical services at Florence West Prison ("Florence West") where Mr. Valdez was incarcerated for a portion of the time complained of in his suit. On April 25, 2000, CSC tendered its defense of the Valdez Suit to CMS. CSC did not provide a copy of the complaint in the Valdez Suit at that time. During the relevant timeframe, CMS was insured by the PHICO Insurance Company ("PHICO") for liability arising out of CMS' operations and its provision of medical services at Florence West. CMS notified PHICO of the Valdez Suit and, although CMS had no contractual obligation to tender CSC's defense to PHICO, CMS informed PHICO of CSC's tender of its defense to CMS. PHICO retained counsel in Arizona to represent CMS and investigate the Valdez Suit. CMS understood that its insurance policies with PHICO provided coverage for the Valdez Suit to CMS and also to CSC as an additional named insured to the extent CSC was held liable for any activities of CMS and/or CMS' employees.1 The complaint in the Valdez Suit alleged negligence on the part of CSC independent from the provision of medical care

CMS disputes Northland's assertions that any portion of CSC's payments to CMS according to contract was attributable to payment for including CSC as an additional insured under CMS' insurance.

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for which CMS was responsible.2 These allegations of independent negligence were finally resolved by the Superior Court on May 7, 2001, when it granted summary judgment with respect to any claims of independent negligence on the part of CSC. Plaintiff in this case, Northland Insurance Company ("Northland"), insured CSC for liability arising out of its operation of Florence West. CSC's insurance policy with Northland provided that CSC would pay the first $50,000.00 of costs with respect to a claim covered under the policy. Northland was first notified by CSC of the Valdez Suit on February 20, 2001. CSC's delay in notifying Northland of the Valdez claim resulted in additional costs to CSC over and above its self-insured retention. Northland provided for the defense of CSC in the Valdez Suit from and after the date it was notified of that suit. By correspondence dated June 25, 2001, Christopher Nelson of CSC contacted PHICO and requested that PHICO defend CSC in the Valdez Suit under its insurance policy with CMS. On July 19, 2001, PHICO agreed its insurance policy with CSC also covered CSC to the extent it was held liable for the actions of CMS. PHICO issued a clarifying endorsement to its CMS insurance policy that was effective as of the original date of the policy providing additional insured status to CSC. PHICO's temporary delay in acknowledging CSC's status as an additional insured did not result in any damages to CSC. Effective February 1, 2002, PHICO was placed under an order of liquidation by the Commonwealth Court of Pennsylvania. CMS had no awareness of PHICO's financial difficulties when CMS

contracted for the insurance.

Northland has made repeated references to the Court regarding the alleged negligence of the Defendant nurses but all such references are irrelevant to the issues remaining for trial in this case. Moreover, Defendants deny any negligence on the part of any of the Defendants.

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II.

LEGAL ANALYSIS A. Northland cannot prove breach of contract. Northland's complaint asserts a breach of contract claim based on the allegation that

CMS did not name CSC as an additional insured on CMS' PHICO policy. Northland has also referenced, although not in its complaint, a breach of contract claim based on an alleged failure by CMS to forward promptly CSC's tender to PHICO. It is well established that in an action based on breach of contract, plaintiff has the burden of proving (1) the existence of the contract, (2) breach of the contract, and (3) resulting damages. Chartone, Inc. v. Bernini, 207 Ariz. 162, 170, 83 P.3d 1103, 1111 (App. 2004). As to both assertions of breach of contract, Northland cannot prove the necessary elements. 1. Northland cannot show a breach of contract nor damages arising from CMS' obligation to name CSC as an additional insured on CMS' PHICO policy.

There is no breach of contract where a party has substantially performed the obligation owed according to the contract. Matson v. Bradbury, 40 Ariz. 140, 144, 10 P.2d 376, 144 (1932). Defendants do not dispute that CMS' contract with CSC obligated CMS to include CSC as an additional insured on CMS' insurance policy to the extent CSC was held liable for any activities of CMS and/or CMS' employees. The undisputed evidence shows that PHICO confirmed that CSC was an additional insured on the CMS policy. In view of CMS'

substantial performance of its obligation under the contract, there can be no breach of the contract arising from this obligation. In addition, the damages recoverable in a contract action are those proximately caused by the alleged breach or within the contemplation of the parties. Thunderbird Metallurgical Inc. v. Arizona Testing Laboratories, 5 Ariz. App. 48, 49, 423 P.2d 124, 127 (App. 1967) (affirming conclusion that plaintiff suffered no compensable damages as a result of a breach of contract). Northland cannot show that CMS' execution of its obligation to name CSC as an additional insured on CMS' PHICO policy proximately caused any damages to CSC for

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the several reasons. First, the fact that PHICO, to the extent it was obligated to cover CSC's losses, did not do so has no relation to any breach by CMS. CSC was an additional insured under the PHICO policy, and the extent to which it has been denied any benefits of the PHICO policy to which it was entitled is due entirely to PHICO's insolvency. CMS ­ itself harmed by PHICO's insolvency -- cannot be held to have breached its contract with CSC due to this independent, intervening event. Second, to the extent CSC actually suffered any damages, they were incurred before CSC tendered its defense to PHICO and after CSC had expended more than the $50,000.00 in defense expenses as required by CSC's Northland insurance policy. Here again, the possible incurrence of such damages has no relation to CMS' obligation to include CSC as an additional insured on its PHICO policy. Third, there is no evidence that CMS has caused CSC to incur any damages whatsoever. 2. Northland cannot show that CMS was obligated to tender CSC's defense to PHICO.

Northland's statements regarding an alleged breach of contract due to an alleged failure to tender promptly CSC's defense to PHICO are completely unfounded because CMS had no contractual obligation to make such tender, and Northland is unable to present evidence to the contrary. In any event, here again, Northland can produce no evidence of damages proximately caused by this alleged breach of contract. B. Northland's fraud claim fails because, among other reasons, there is a complete absence of evidence that CMS knowingly made a false representation with the intent that CSC should act upon it.

Northland makes various claims of fraud related to naming CSC as an additional insured on the PHICO policy, and the faulty allegation that CMS had an obligation to tender CSC's defense to PHICO.3 The elements of a common law fraud claim are as follows: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or Northland has also made assertions regarding fraud in relation to the actions of the Defendant nurses. Such assertions are not relevant to this case as they are subrogation claims barred by Arizona Property and Casualty Insurance Guaranty fund Act, as held by this Court in its Order of January 26, 2006.
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ignorance of its truth; (5) the speaker's intent that it should be acted upon by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) the hearer's reliance on its truth; (8) the hearer's right to rely thereon; and (9) the hearer's consequent and proximate injury. Carrel v. Lux, 101 Ariz. 440, 444, 420 P.2d 564, 568 (1966); Nielson v. Flashberg, 101 Ariz. 335, 338-39, 419 P2d 514, 517-18 (1966). Northland cannot demonstrate these required elements as to any of their claims of fraud. With respect to naming CSC as an additional insured, among other missing elements, Northland cannot show that CMS knowingly made any false statements. In fact, it is

undisputed that CSC was named an additional insured on CMS' PHICO policy. In addition, as discussed above, Defendants were under no obligation to provide notice to PHICO of CSC's claim and, therefore, cannot have committed fraud related thereto. Moreover, as a general matter, Northland has not identified any representation or concealed material fact that has caused injury to CSC.

RESPECTFULLY SUBMITTED this 1st day of March, 2006. HOLLOWAY ODEGARD FORREST KELLY & KASPAREK, P.C By: _/s/_______________________________ Stephen Paul Forrest 3101 North Central Avenue, Suite 1200 Phoenix, Arizona 85012 Attorneys for Defendants Correctional Medical Services, Inc. Lorraine Lopez-Moreno, Trina Carrasco, and Jacqueline Cornwell

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CERTIFICATE OF SERVICE

I hereby certify that on March 1, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the CM/ECF registrants. Karl M. Tilleman, Esquire P. Bruce Converse, Esquire Janice K. Crawford, Esquire Steptoe & Johnson, LLP 201 East Washington, Suite 1600 Phoenix, Arizona 85004 Attorneys for Plaintiff By___/s/________________________ Stephen Paul Forrest Holloway Odegard Forrest Kelly & Kasparek, PC 3101 N. Central, Suite 1200 Phoenix, Arizona 85012 Dennis E. O'Connell BRYAN CAVE LLP 211 North Broadway, Suite 3600 St. Louis, Missouri 63102 Margaret B. LaBianca BRYAN CAVE LLP Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004 Attorneys for Defendants

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