Free Motion to Intervene - District Court of Arizona - Arizona

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E.J. Kotalik, Jr. (009746) Thomas R. Nadzieja (015214) PESHKIN & KOTALIK, P.C. 3030 North Central Avenue Suite 1106 Phoenix, Arizona 85012 (602) 248-7770 (602) 248-0777 Fax Attorneys for North American Specialty Insurance Company UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Northland Insurance Company, No. CV-04-0347-PHX-FJM MOTION TO INTERVENE

Plaintiff, vs. Correctional Medical Services, Inc., a Missouri Corporation; Dr. Antonio DiManno, Dr. Reynaldo Figueroa, Nurse Lorraine Lopez-Moreno; Nurse Trina Carrasco; Nurse Jacqueline Cornwell; and ABC Insurance Company, Defendants.

(Oral argument requested)

Pursuant to Rule 24(a)(2) and 24(b)(2), Federal Rules of Civil Procedure, North American Specialty Insurance Company ("North American") moves to intervene in this lawsuit for the purpose of submitting special interrogatories and/or a special verdict form to the jury that identify the bases for the jury's verdict, if any, against its insured, defendant Correctional Medical Services, Inc. ("CMS"). Attached to this motion as Exhibit "A" is a copy of North American's proposed complaint in intervention. This motion is supported by the attached memorandum of points and authorities. ...

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MEMORANDUM OF POINTS AND AUTHORITIES BACKGROUND. This lawsuit involves a subrogation claim asserted by plaintiff Northland Insurance Company ("Northland") against CMS and others arising out of Northland's payments to resolve two separate medical malpractice lawsuits. Northland insured Correctional Services Corporation ("CSC") and the State of Arizona ("State") for the operation of two private prison facilities. CMS provided certain medical services for inmates at the prisons under a contract with CSC. CSC and the State were sued for alleged medical negligence involving two inmates (i.e., the "Valdez Action" and the "Perez Action"). On behalf of CSC and/or the State, Northland paid approximately $5.7 million to satisfy a judgment in the Valdez Action. Northland also paid $15,000 to settle the Perez Action. Northland is now seeking to recover those sums from CMS in this subrogation lawsuit. Northland's complaint alleges the following causes of action against CMS involving the Valdez Action: Count III - Breach of Contract for failing to name CSC as an additional insured; and Count IX - Fraud and Intentional Misrepresentation.1 Northland's causes of action against CMS arising out of the Perez Action are as follows: Count II ­ Contractual Indemnification; Count V ­ Breach of Contract for failing to provide medical services; and Count VI ­ Indemnity and Contribution. The trial of this matter is scheduled to begin on March 14, 2006. North American provided professional liability insurance to CMS. North

American filed a declaratory judgment lawsuit against CMS and Northland in the U.S. District Court in Missouri in order to resolve issues concerning its coverage obligations
1

Pursuant to this Court's Order dated January 26, 2006, summary judgment was granted in favor of CMS on Counts I, IV and VI.

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to CMS in this subrogation lawsuit.2 On January 26, 2006, the District Court in Missouri granted summary judgment in favor of North American declaring that North American does not owe a duty to defend or indemnify CMS in this lawsuit for any liability arising out of claims involving the Valdez Action. (Memorandum and Order attached hereto as Exhibit B). According to that Order, North American's only potential coverage

obligation to CMS in this lawsuit would be limited to the claims involving the Perez Action. In addition, North American reserved its right to deny coverage to CMS for the breach of contract cause of action (Count V) that arises from the Perez Action. Accordingly, it is North American's position that coverage may be available for some, but not all, of the causes of action herein that relate to the Perez Action. North American has a direct interest in this lawsuit because it could be bound by a judgment against CMS for damages that may be covered by the North American policy. The Missouri District Court's Order that was issued just days ago, dictates that North American's coverage obligations are limited if CMS is found liable in this lawsuit. Because a general verdict against CMS would fail to distinguish whether the damages relate to covered or non-covered claims, North American seeks to intervene for the limited purpose of submitting special interrogatories and/or a special verdict form to the jury in order to (1) segregate the jury's findings as between liability arising out of the Valdez and Perez Actions, and (2) segregate the jury's findings as to each cause of action involving the Perez Action. Without such intervention for this limited purpose, North American's ability to protect its interests is significantly impaired because none of the existing parties will seek the necessary special interrogatories and/or a special verdict form in order to identify the basis of the jury's findings.

2

North American Specialty Insurance Company v. Correctional Medical Services, Inc. and Northland Insurance Company, U.S. District Court, Eastern District of Missouri, Eastern Division, Case No. 4:04CV798 CDP.

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II.

NORTH AMERICAN IS ENTITLED TO INTERVENE IN THIS LITIGATION AS A MATTER OF RIGHT. Pursuant to Rule 24(a)(2), Federal Rules of Civil Procedure, intervention as a

matter of right is permitted under the following circumstances: Rule 24(a). Intervention of Right. Upon timely application anyone shall be permitted to intervene in an action: * * * (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest, unless the applicant's interest is adequately represented by existing parties. In determining whether intervention under Rule 24(a)(2) is appropriate, the Court is guided primarily by practical and equitable considerations. Donnelly v. Glickman, 159 F.3d 405, 409 (9th Cir. 1998). Moreover, the requirements of Rule 24(a)(2) should be interpreted broadly in favor of intervention. Id. (citing McGough v. Covington Techs. Co., 967 F.2d 1391 (9th Cir. 1992) A. North American has an "interest" relating to this lawsuit because it may be bound by a judgment rendered against CMS.

Rule 24(a)(2) requires that the applicant have an interest in the property or transaction that is the subject of this lawsuit. As demonstrated above, North American's coverage obligations to CMS are derived from the liability of CMS in this lawsuit. North American could be bound by a judgment rendered against CMS in this lawsuit. Just days ago, the Missouri District Court ruled, as a matter of law, that North American has no duty to defend or indemnify CMS for liability arising out of the Valdez Action and coverage issues still remain with respect to the liability of CMS for the Perez Action. Accordingly, North American has a definitive and substantial interest in this lawsuit for purposes of Rule 24.

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B.

The disposition of this action will impair or impede North American's ability to protect its interest because North American's interests are not adequately protected by existing parties.

Another requirement of Rule 24(a)(2) is a showing that the ability of the intervenor to protect its interest will be impaired or impeded and that its interest is not adequately represented by the existing parties. Because a general verdict rendered

against CMS may include damages that are not covered, North American has an obvious interest in presenting the jury with special interrogatories and/or a special verdict form in order to properly segregate the non-covered damages from any damages that may be covered. As a practical matter, neither Northland nor CMS would be willing to submit the necessary special interrogatories and/or special verdict forms in order to protect North American's interests because a segregation of damages may not advance the interests of these parties. CMS may not be willing to submit special interrogatories or a special verdict form to the jury because it is personally liable for any damages that are not covered. For similar reasons, it is unlikely that Northland would submit a special verdict form or special interrogatories because Northland would have to seek payment of any non-covered damages directly from CMS. Therefore, unless North American intervenes in this lawsuit, there will be no segregation of damages between covered and noncovered claims. Because North American's interests will not be adequately protected by the existing parties, intervention is mandated pursuant to Rule 24(a)(2). III. ALTERNATIVELY, PERMISSIVE INTERVENTION IS APPROPRIATE UNDER RULE 24(B)(2) BECAUSE COMMON QUESTIONS OF LAW AND FACT EXIST. This Court has discretion to order permissive intervention under Rule 24(b)(2) if the applicant's claim or defense and this litigation have a "question of law or fact in common." The Court has broad discretion to allow permissive intervention under Rule

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24(b). High Plains Co-op. Ass'n v. Mel Jarvis Constr. Co., 137 F.R.D. 285, 287 (D.Neb. 1991). Moreover, permissive intervention under Rule 24(b) should be construed

liberally and any doubts should be resolved in favor of the intervenor. Thomas v. Henderson, 297 F.Supp.2d 1311, 1326 (S.D.Ala. 2003) (citing Turn Key Gaming, Inc. v. Oglala Sioux Tribe, 164 F.3d 1080, 1081 (8th Cir. 1999)). Because North American's obligations are dependent upon the liability of CMS to Northland, it is undeniable that common questions of law or fact exist within the meaning of Rule 24(b). Thomas v. Henderson, 297 F.Supp.2d at 1326. Federal District Courts have repeatedly permitted insurers to intervene under Rule 24(b)(2) for purposes of submitting special interrogatories to facilitate the resolution of coverage issues under circumstances substantially similar to this case. Id.; Fidelity Bankers Life Ins. Co. v. Wedco, Inc., 102 F.R.D. 41 (D.Nev. 1984); Plough, Inc. v. International Flavors and Fragrances, Inc., 96 F.R.D. 136 (W.D. Tenn. 1982). North American's intervention will not delay the trial of this matter, nor will it prejudice the parties. North American is not asserting any claims or defenses, or seeking to conduct any discovery. North American will not participate in the trial, other than submitting its special interrogatories or special verdict form to the Court outside the presence of the jury. The jury will not be asked or required to interpret insurance policies or analyze insurance coverage questions. North American simply seeks to have the jury segregate its verdict, if any, in order to assist the parties in (1) applying the recent Order of the Missouri District Court and (2) determining what damages, if any, must be paid by North American in the event of a judgment against CMS herein. Without a segregated verdict, there would be no practical way of determining what portion of the general verdict is covered or not covered by North American and it would unduly complicate the resolution of these issues between the parties.

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IV.

CONCLUSION. For the reasons set forth above, North American respectfully requests that the

Court grant its motion to intervene in this lawsuit either as a matter of right or pursuant to the Court's discretion. Dated this 2nd day of February, 2006. PESHKIN & KOTALIK, P.C.

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 By: s/E.J. Kotalik, Jr. E.J. Kotalik, Jr. Thomas R. Nadzieja 3030 North Central Avenue Suite 1106 Phoenix, Arizona 85012 Attorneys for North American Specialty Insurance Company

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CERTIFICATE OF SERVICE I HEREBY CERTIFY that on February 2, 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 following CM/ECF registrants: Karl L. Tilleman, Esq. Janice K. Crawford, Esq. STEPTOE & JOHNSON, LLP 201 East Washington Street, Suite 1600 Phoenix, AZ 85004-2382 Attorneys for Plaintiffs Dennis E. O'Connell, Esq. BRYAN CAVE LLP 1 Metropolitan Square 211 North Broadway, Suite 3600 St. Louis, MO 63102-2750 Attorneys for Defendants Correctional Medical Services, Lopez-Moreno, Carrasco and Cornwell Stephen Paul Forrest, Esq. HOLLOWAY ODEGARD FORREST KELLY & KASPAREK, PC 3101 North Central Avenue, Suite 1200 Phoenix, AZ 85012 Attorneys for Defendants Correctional Medical Services, Lopez-Moreno, Carrasco and Cornwell Vera E. Munoz, Esq. SANDERS & PARKS, PC 3030 North Third Street, Suite 1300 Phoenix, AZ 85012-3099 Attorneys for Defendant Correctional Medical Services, Lopez-Moreno, Carrasco and Cornwell Margaret B. LaBianca, Esq. BRYAN CAVE LLP 2 North Central Avenue, Suite 2200 Phoenix, AZ 85004-4406 Attorneys for Defendant Correctional Medical Services, Lopez-Moreno, Carrasco and Cornwell

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1 2 3 4 5 6 7 s/E.J. Kotalik, Jr. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 I HEREBY CERTIFY that on February 2, 2006, I hand-delivered a courtesy copy to the following: The Honorable Frederick J. Martone United States District Court of Arizona 401 West Washington Street, SPC 62 Phoenix, Arizona 85003

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