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Westfield Insurance Co. v. Matulis

United States District Court, S.D. West Virginia, Charleston

September 30, 2019




         Pending is plaintiff Westfield Insurance Company's (“Westfield”) motion for summary judgment, filed November 30, 2017.

         I. Background

         Westfield filed this declaratory judgment action on February 14, 2017, pursuant to 28 U.S.C. § 2201 and the West Virginia Uniform Declaratory Judgments Act, W.Va. Code 55-13-1 et seq. See Compl., ECF No. 1 (“Westfield Compl.”). The court has diversity jurisdiction over this matter pursuant to 28 U.S.C. § 1332. Defendants Dr. Steven Matulis and his former employer, Charleston Gastroenterology Associates, PLLC (“Charleston Gastroenterology”), have been sued in the Circuit Court of Kanawha County, West Virginia by several former female patients.[1] Ten patients are joined here as claimant defendants (“claimants”): T.W., K.H., T.F., J.L., A.G., B.D., A.H., A.M., C.S. and J.W. See id. ¶¶ 4-13, 16. These claimants are identified by their initials for privacy reasons.

         The state court lawsuits arise from medical procedures (e.g., colonoscopies) that Dr. Matulis performed on the claimants while each of them was anesthetized. See id. ¶ 17. The lawsuits allege that Dr. Matulis sexually assaulted the claimants while they were under anesthesia and incapacitated, and/or that Dr. Matulis performed the colonoscopies while distracted or impaired due to his alleged proclivity for sexually assaulting unconscious female patients, such that the colonoscopies were not medically reliable or failed to meet the standard of care owed by a doctor to a patient. See id.

         The facts giving rise to each alleged instance of misconduct vary from claimant to claimant. One or more of the claimants allege that an employee or employees of the Charleston Area Medical Center, Memorial Division, where their medical procedures were performed, witnessed the sexual assault by Dr. Matulis. See id. ¶ 18. One or more of the claimants also allege that the employee or employees who witnessed the sexual assault reported the incident to the hospital administration. See id. ¶ 19.

         The specific claims against Dr. Matulis include battery, tort of outrage, intentional and negligent infliction of emotional distress, false detention, invasion of privacy, and medical negligence. See, e.g., Pl.'s Mot. Summ. J., ECF No. 113-1 to ECF No. 113-11, Exs. A to K. The claims against Charleston Gastroenterology include negligent and reckless retention, intentional and negligent infliction of emotional distress, negligent supervision, invasion of privacy, and vicarious liability for Dr. Matulis's acts. See, e.g., id. In addition, certain claimants assert class claims on behalf of other female patients of Dr. Matulis who may not know whether they were sexually assaulted or otherwise physically injured during a medical procedure performed by Dr. Matulis. See, e.g., T.F.'s Compl., ECF No. 113-10, Ex. J, ¶¶ 36-49. Several claimants have not yet initiated lawsuits in state court but have filed a “Notice of Claim” to notify Dr. Matulis and Charleston Gastroenterology of a potential medical malpractice suit, as required by West Virginia Code § 55-7B-6(f). See, e.g., Pl.'s Mot. Summ. J., ECF 113-5 to ECF 113-8, Exs. E to H. These Notices of Claim contain similar factual allegations found in the complaints filed in state court.

         Westfield provided a general commercial liability insurance policy, Policy Number BOP 3157951 (“the Policy”), to Charleston Gastroenterology for coverage from March 21, 2015 through March 21, 2016. Westfield Compl., at 4-5. All the relevant incidents occurred during the time period of the Policy.[2] See id. The Policy provides liability coverage to “pay those sums that the insured becomes legally obligated to pay as damages because of” the following: (1) “bodily injury, ” (2) “property damage, ” or (3) “personal and advertising injury.” Pl.'s Mot. Summ. J., ECF 113-12, Ex. L (“Policy”), at 71 (Section II.A.1.a). The Policy also provides that Westfield has “the right and duty to defend the insured against any ‘suit' seeking those damages.” Id. The Policy covers both Charleston Gastroenterology and Dr. Matulis as an employee of Charleston Gastroenterology “for acts within the scope of [his] employment by [Charleston Gastroenterology] or while performing duties related to the conduct of [Charleston Gastroenterology's] business.” See id. at 82 (Section II.C.2.a).[3]

         The Policy applies to “bodily injury” and “property damage” only if three requirements are satisfied, two of which are particularly pertinent here: (1) the “bodily injury” or “property damage” is “caused by an ‘occurrence' that takes place in the ‘coverage territory, '” and (2) the “bodily injury” or “property damage” “occurs during the policy period.”[4] Id. at 71 (Section II.A.1.b(1). “Bodily injury” is defined as “bodily injury, sickness or disease sustained by a person, including death.” Id. at 85 (Section II.F.3). “Occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id. at 86 (Section II.F.13). The claimants did not allege property damage claims in the state court lawsuits or the Notices of Claim, so the court does not review further the relevant sections of the Policy on “property damage.”

         The Policy also covers “‘personal and advertising injury' caused by an offense” arising out of Charleston Gastroenterology's business only if the offense was committed in the “coverage territory” during the Policy period. Id. at 72 (Section II.A.1.b(2)). “Personal and advertising injury” is defined as “injury, including consequential ‘bodily injury'” arising out of one or more enumerated offenses, including, inter alia: “[f]alse arrest, detention or imprisonment, ” “[o]ral or written publication, in any manner, of material that slanders or libels a person, ” and “[o]ral or written publication, in any manner, of material that violates a person's right of privacy.” See id. at 87 (Section II.F.14) (emphasis added).

         The Policy limits coverage based on three relevant exclusions. First, the “Expected or Intended Injury” exclusion applies to “‘[b]odily injury' or ‘property damage' expected or intended from the standpoint of the insured.” Id. at 74

         (Section II.B.1.a). Second, the “Professional Services” exclusion applies to “‘[b]odily injury', ‘property damage' or ‘personal and advertising injury' caused by the rendering or failure to render any professional service.” Id. at 76 (Section II.B.1.j). “Professional services” include, inter alia, “[m]edical, surgical, dental, X-ray or nursing services treatment, advice or instruction, ” and “[a]ny health or therapeutic service treatment, advice or instruction.” Id. (Section II.B.1.j(4)-(5)). The exclusion notably states that:

This exclusion applies even if the claims allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by an insured, if the “occurrence” which caused the “bodily injury” or “property damage”, or the offense which caused the “personal and advertising injury”, involved the rendering or failure to render of any professional service.

Id. at 78 (Section II.B.1.j) (emphasis added). Third and final, the “Personal and Advertising Injury” exclusion applies, inter alia, to any such injury “[c]aused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury.'” Id. at 79 (Section II.B.1.p(1)). Pursuant to the Policy, Westfield will not pay medical expenses for “bodily injury” excluded from coverage. See id. at 79 (Section II.B.2.g).

         Based on the Policy, Westfield filed this case seeking a declaratory judgment that the Policy does not provide coverage for the defense or indemnification of any of the claims asserted by the claimants in state court in connection with the alleged sexual assault and/or the provision of inadequate medical care by Dr. Matulis. See Westfield Compl., at 15. Westfield also asserts that the Policy does not provide coverage for the defense or indemnification of any future related claims that might be filed against Dr. Matulis or Charleston Gastroenterology, including any class actions that may be certified in any of the underlying state civil actions. See Id. Finally, based on the lack of coverage, Westfield asserts that it does not have a duty to defend or indemnify Dr. Matulis or Charleston Gastroenterology in the existing state civil actions or in related actions that might be brought. See id. at 16.

         Westfield filed the motion for summary judgment and a memorandum of law in support on November 30, 2017. See Pl.'s Mot. Summ. J., ECF 113 (“Motion”); Pl.'s Memo. Supp. Mot. Summ. J., ECF 114 (“Memo”). Four claimants -- J.L., K.H., J.W., and A.G. -- filed opposition briefs between December 14, 2017 and December 20, 2017. See J.L.'s Resp., ECF No. 120 (“J.L.'s Resp.”); K.H.'s Memo. Oppos., ECF No. 121 (“K.H.'s Resp.”); J.W.'s Resp., ECF No. 122 (“J.W.'s Resp.”); A.G.'s Resp., ECF No. 123 (“A.G.'s Resp.”). Westfield filed a combined reply on December 21, 2017 to address the opposition briefs collectively. See Pl.'s Combined Reply, ECF No. 124 (“Combined Reply”).

         It is undisputed that both Dr. Matulis and Charleston Gastroenterology are insured under the Policy and that the claims arose from the coverage territory during the Policy period. However, neither Dr. Matulis nor Charleston Gastroenterology has appeared in this action to oppose Westfield's position. Pursuant to Rule 55(a) of the Federal Rules of Civil Procedure, Westfield filed a motion for the entry of default judgment against Dr. Matulis and Charleston Gastroenterology on October 26, 2017. See Pl.'s Mot. Default J., ECF No. 95. The court granted the motion and entered default judgment against Dr. Matulis and Charleston Gastroenterology on February 14, 2018. See Order, ECF No. 128.

         Soon after, claimant J.W. filed a civil action in the Circuit Court of Kanawha County on March 1, 2018 (civil case no. 18-c-205). See J.W.'s Compl., ECF No. 134-1, Ex. 1. On March 8, 2018, J.W. filed a motion for leave to amend her answer in this case to assert a counterclaim for declaratory judgment against Westfield, pursuant to Rule 15(a)(2) of the Federal Fules of Civil Procedure and Rule 16.1(f)(1) of the Local Rules of Civil Procedure for the United States District Court for the Southern District of West Virginia. See Def. J.W.'s Mot. Leave Am. Answer, ECF No. 134. J.W.'s motion seeks a declaratory judgment finding that the Policy “provides coverage for some claims asserted by J.W.” against Dr. Matulis and Charleston Gastroenterology in her state court lawsuit. Def. J.W.'s Am. Answer, ECF No. 134-2, Ex. 2, at 10.

         II. Legal Standard

         A. Summary judgment.

         A party is entitled to summary judgment “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). Material facts are those necessary to establish the elements of a party's cause of action. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         B. Leave to amend answer.

         Under Rule 15(a) of the Federal Rules of Civil Procedure, the court “should freely give leave [to amend] when justice so requires.” Alternatively, under Rule 15(d) of the Federal Rules of Civil Procedure, the court “may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented.” Rule 16(b) of the Federal Rules of Civil Procedure directs that “a schedule may be modified only for good cause.” Similarly, Rule 16(f)(1) of the Local Rules of Civil Procedure for the Southern District of West Virginia permits amendments to pleadings “for good cause.”

         J.W.'s motion for leave to amend her answer to assert a counterclaim for declaratory judgment against Westfield is based on J.W.'s filed complaint in the Circuit Court of Kanawha County, which she filed well after briefings had completed on Westfield's motion for summary judgment. See J.W.'s Compl., ECF No. 134-1, Ex. 1. The court takes notice of A.G.'s filed complaint in state court. The claims that J.W. alleges in her complaint are fully considered by the court in this opinion as they are identical to claims alleged by other claimants, including violation of the right of privacy; false detention; medical negligence; negligent hiring, retention, and supervision; negligent infliction of emotional distress; and battery. See id. ¶¶ 14-31. Inasmuch as these claims are already considered, leave to amend on this basis is futile and the court does not find good cause to allow the amendment.

         J.W.'s complaint also raises an additional claim from J.W.'s husband, alleging that the husband “has been deprived of the consortium, society and comfort of his wife” such that he has suffered and will continue to suffer mental anguish. Id. ¶ 33. J.W. listed her husband as a potential claimant in her Notice of Claims against Dr. Matulis and Charleston Gastroenterology. See J.W.'s Notice of Claim, ECF 115-1, Ex. M (against Dr. Matulis); J.W.'s Notice of Claim, ECF 115-2, Ex. N (against Charleston Gastroenterology). However, the listing of this additional “claimant” does not change the court's analysis or conclusion regarding summary judgment because the husband's claim arises from the same conduct as J.W.'s claim.

         III. Discussion

         In cases grounded in diversity jurisdiction, “federal courts are to apply the substantive law the State in which they are sitting would apply if the case had originated in a State court.” Stonehocker v. Gen. Motors Corp., 587 F.2d 151, 154 (4th Cir. 1978) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). Under West Virginia law, “[d]etermination of the proper coverage of an insurance contract when the facts are not in dispute is a question of law.” Syl. Pt. 1, Tennant v. Smallwood, 568 S.E.2d 10, 11 ( W.Va. 2002).

         Language in an insurance policy should be given its “plain, ordinary meaning.” Syl. Pt. 8, Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508, 511 ( W.Va. 2013) (citation omitted). “The interpretation of an insurance contract, including the question of whether the contract is ambiguous, is a legal determination . . . .” Syl. Pt. 2, Riffe v. Home Finders Assocs., Inc., 517 S.E.2d 313, 314 ( W.Va. 1999); see also Syl. Pt. 4, W. Virginia Fire & Cas. Co. v. Stanley, 602 S.E.2d 483, 486 ( W.Va. 2004) (“The question as to whether a contract is ambiguous is a question of law to be determined by the court.”). “Where the provisions of an insurance policy contract are clear and unambiguous they are not subject to judicial construction or interpretation, but full effect will be given to the plain meaning intended.” Syl. Pt. 1, Christopher v. U.S. Life Ins. Co. in City of New York, 116 S.E.2d 864, 864 ( W.Va. 1960); see also Glen Falls Ins. Co v. Smith, 617 S.E.2d 760, 767-68 ( W.Va. 2005). However, an insurance contract is ambiguous if “reasonable people can differ about the meaning.” Syl. Pt. 1, D'Annunzio v. Sec.-Connecticut Life Ins. Co., 410 S.E.2d 275, 276 ( W.Va. 1991). All ambiguities are construed in favor of the insured. Id.; see also Horace Mann Ins. Co. v. Leeber, 376 S.E.2d 581, 584 ( W.Va. 1988) (“. . . any ambiguity in the language of an insurance policy is to be construed liberally in favor of the insured.”). “An insurance policy should never be interpreted so as to create an absurd result, but instead should receive a reasonable interpretation, consistent with the intent of the parties.” Syl. Pt. 2, D'Annunzio, 410 S.E.2d at 276.

         Liability insurance under West Virginia law creates two duties for the insurer: a duty to defend and a duty to provide coverage (i.e., to indemnify). See Aetna Cas. & Sur. Co. v. Pitrolo, 342 S.E.2d 156, 160 ( W.Va. 1986). Generally, an insurer's duty to defend is broader than the duty to indemnify. Leeber, 376 S.E.2d at 584; Donnelly v. Transportation Ins. Co., 589 F.2d 761, 765 (4th Cir. 1978). An insurer must defend its insured “if the claim stated in the underlying complaint could, without amendment, impose liability for risks the policy covers.” Bowyer v. Hi-Lad, Inc., 609 S.E.2d 895, 912 ( W.Va. 2004); see also Pitrolo, 342 S.E.2d at 160 (“As a general rule, an insurer's duty to defend is tested by whether the allegations in the plaintiff's complaint are reasonably susceptible of an interpretation that the claim may be covered by the terms of the insurance policy.”). An insurer must look beyond the bare allegations contained in the pleadings and “conduct a reasonable inquiry into the facts in order to ascertain whether the claims asserted may come within the scope of the coverage that the insurer is obligated to provide.” Syl. Pt. 6, Farmers & Mechs. Mut. Ins. Co. v. Cook, 557 S.E.2d 801, 803 ( W.Va. 2001) (citation omitted). For the duty to defend to arise, “[t]here is no requirement that the facts alleged in the complaint specifically and unequivocally make out a claim within the coverage.” Pitrolo, 342 S.E.2d at 160 (citation omitted); see also Leeber, 376 S.E.2d at 584. An insurer must defend all the claims “[i]f part of the claims against an insured fall within the coverage of a liability insurance policy and part do not.” Leeber, 376 S.E.2d at 584 (citing Donnelly, 589 F.2d at 765). However, the insurer is not required to defend a case against the insured “if the alleged conduct is entirely foreign to the risk insured against.” Id.

         A court must liberally construe any questions regarding an insurer's duty to defend in favor of the insured. See Pitrolo, 342 S.E.2d at 160. Furthermore, “[w]here the policy language involved is exclusionary, it will be strictly construed against the insurer in order that the purpose of providing indemnity not be defeated.” Syl. Pt. 4, Cook, 557 S.E.2d at 803 (citation omitted).

         A. Claims for the intentional sexual misconduct of Dr. Matulis.

         Several claimants allege the intentional tort of battery for having suffered bodily injury as a result of being sexually assaulted by Dr. Matulis during their respective medical procedures.[5] See, e.g., T.W.'s Am. Compl., ECF No. 113-2, Ex. B, ¶¶ 5-12; J.L.'s Compl., ECF No. 113-3, Ex. C, ¶¶ 19- 23; K.H.'s Compl., ECF No. 113-4, Ex. D, ¶ 8; B.D.'s Notice of Claim, ECF No. 113-6, Ex. F, at 2. For these claims to be covered under the Policy, the claims of bodily injury must have been caused by an “occurrence” that took place in the “coverage territory, ” during the period of the Policy coverage, and was not known to have occurred before the Policy period. See Policy, at 71 (Section II.A.1.b(1)). It is undisputed that the claims of bodily injury took place in the “coverage territory” during the Policy period and were not known before the Policy period. The court therefore considers whether the conduct giving rise to the claims is an “occurrence.”

         The Policy defines an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id. at 86 (Section II.F.13). The Policy does not define “accident.” In another case in which the insurance policy at issue had the same definition of “occurrence, ” the Supreme Court of Appeals of West Virginia noted the following definition for “accident”:

[a]n ‘accident' generally means an unusual, unexpected and unforeseen event.... An accident is never present when a deliberate act is performed unless some additional unexpected, independent and unforeseen happening occurs which produces the damage.... To be an accident, both the means and the result must be unforeseen, involuntary, unexpected, and unusual.

State Bancorp, Inc. v. U.S. Fid. & Guar. Ins. Co., 483 S.E.2d 228, 234 ( W.Va. 1997) (per curiam) (citations omitted) (alteration in original); see also Columbia Cas. Co. v. Westfield Ins. Co., 617 S.E.2d 797, 800 ( W.Va. 2005) (applying this definition of “accident”). “[T]he definition of an ‘occurrence' does not include actions which are intended by the insured.” State Bancorp, 483 S.E.2d at 235 (emphasis in original). Based on these definitions, the court in StateBancorp found that the intentional acts of the insured -- tort of outrage, tort of civil conspiracy, and ...

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