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Lind-Hernandez v. Hospital Episcopal San Lucas Guayama

United States Court of Appeals, First Circuit

August 2, 2018

NILDA ESTHER LIND-HERNANDEZ; JOEL LIND-HERNANDEZ, Plaintiffs,
v.
HOSPITAL EPISCOPAL SAN LUCAS GUAYAMA, a/k/a Hospital Episcopal Cristo Redentor; DR. PEDRO RAMOS-CANSECO; DR. ALBERT MATOS; DR. RUBEN ANTONIO PÉREZ-RAMIREZ; DR. JOSE ALFREDO CEBOLLEROMARCUCCI; ADMIRAL INSURANCE COMPANY, as insurer of Hospital Episcopal San Lucas Guayama; CONJUGAL PARTNERSHIP RAMOS-DOE; JOHN DOE; CORPORATION X, Y & Z; CONJUGAL PARTNERSHIP MATOS-DOE; CONJUGAL PARTNERSHIP PEREZ-DOE; CONJUGAL PARTNERSHIP CEBOLLERODOE, Defendants. DR. GERSON JIMÉNEZ-CASTANER, as Medical Director of Hospital Episcopal San Lucas Guayama, Defendant/Third-Party Plaintiff-Appellant,
v.
LIBERTY MUTUAL INSURANCE COMPANY, Third-Party Defendant-Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Jay A. García-Gregory, U.S. District Judge]

          Juan M. Martínez Nevárez, with whom González & Martínez, PSC was on brief, for appellant.

          Eric Pérez-Ochoa, with whom Adsuar Muñiz Goyco Seda & Pérez-Ochoa, P.S.C. was on brief, for appellee.

          Before Howard, Chief Judge, Thompson and Barron, Circuit Judges.

          BARRON, Circuit Judge.

         This appeal concerns the dismissal of a suit that Dr. Gerson Jiménez-Castaner ("Jiménez") brought against Liberty Mutual Insurance Company ("Liberty"). Jiménez alleges that Liberty breached his contractual rights by wrongfully denying his request for coverage under the Directors and Officers ("D&O") insurance policy that Liberty had issued to a hospital in Puerto Rico where Jiménez served as the medical director.[1] The District Court granted Liberty's summary judgment motion on the ground that, under the policy, the "Claim" that would give rise to the "Loss" for which Jiménez sought coverage should be deemed to have been "first made" before the policy at issue took effect and thus was not covered by that policy. We now vacate the grant of summary judgment.

         I.

         Jiménez filed his suit for breach of contract under Puerto Rico law against Liberty in the United States District Court for the District of Puerto Rico in August of 2013. On appeal, the core of the parties' dispute concerns the legal significance, if any, of two amended complaints that had been filed in a related lawsuit. An understanding of the parties' dispute, therefore, first requires that we provide a brief description of certain undisputed facts concerning that suit. And so we begin there.

         On March 21, 2011, Lind Hernández and his sister, Nilda Ester Hernández, (the "Hernándezes") filed a lawsuit in the United States District Court for the District of Puerto Rico against a Puerto Rico hospital and several of its employees. That hospital is Hospital Episcopal San Lucas Guayama, which is also known as Hospital Episcopal Cristo Redentor ("Hospital").

         On the same day that the Hernándezes filed their original complaint in their suit, they also amended their complaint. In that first amended complaint, they claimed that, while Lind Hernández was a patient at the Hospital, the negligence of the Hospital and certain of its employees led to the amputation of both of his legs and entitled the Hernándezes to, among other damages, compensation for physical and emotional injuries. The Hospital was served with the Hernándezes' first amended complaint on June 24, 2011.

         During the time period in which the events alleged in the Hernándezes' first amended complaint occurred, Jiménez was serving as the medical director of the Hospital. He was not, however, named as a defendant in either the Hernándezes' original complaint or their first amended complaint. Nor was any other director or officer of the Hospital. Moreover, the Hernándezes' first amended complaint was "devoid of any allegations of wrongful acts" against such persons or Jiménez.

         The next event that is relevant to this appeal occurred on February 28, 2012. That day, the Hernándezes, in connection with their lawsuit, deposed Jiménez and questioned him "extensively about his supervisory and managerial duties as the Hospital's medical director, as well as the Hospital's bylaws and other purely administrative matters."

         After the deposition, but on the same day, Jiménez conferred with the legal counsel for the Hospital. The two of them concluded that the Hernándezes might either file a new lawsuit, or amend their complaint in their existing suit, to bring claims against Jiménez in his capacity as the medical director of the Hospital. Accordingly, that same day -- February 28, 2012 --the legal counsel for the Hospital forwarded a copy of the Hernándezes' first amended complaint to the Hospital's insurance broker. The insurance broker, also that same day, then forwarded the Hernándezes first amended complaint to Liberty, on behalf of "the insured," and requested that it be "process[ed] under the [Hospital's November 2011 to November 2012 D&O] policy and any other issued policy that might apply."[2]

         At that time, Liberty had issued the Hospital a D&O policy with a policy period that ran from November 30, 2011 through November 30, 2012.[3] Subject to certain exclusions, this policy obligated Liberty to provide coverage for "all Loss," including damages, that various "Insured[s]" became legally obligated to pay as a result of certain types of "Claim[s]" brought in a civil lawsuit against them. Among the "Insured[s]" the policy covered was the Hospital's medical "director[]."

         Significantly, this policy is a "claims made" policy, which is a type of policy that typically "covers acts and omissions occurring either before or during the policy term, provided the claim is discovered and reported to the insurer during the same policy term." See DiLuglio v. New Eng. Ins. Co., 959 F.2d 355, 358 (1st Cir. 1992) (emphasis omitted).[4] This type of policy, we have explained, is premised on the notion that, "[a]s it is often difficult to ascertain the precise date of the act or omission which constituted the alleged [wrongful act] on the part of the insured, . . . the pivotal event for insurance coverage purposes becomes the date the claim is made against the insured, rather than the date of the act or omission forming the basis for the claim." Id. (internal citation and alternations omitted).

         The policy thus contained the following important qualifications regarding when "Insureds" must notify Liberty of any "Claim" made against them. The policy provided that any such "Claim" for which an "Insured" sought coverage must not be "first made" prior to the start of the policy period for that policy. The policy further provided that a "Claim will be deemed first made on the date an Insured receives a written . . . complaint." Finally, the policy provided that a "Claim" must be reported to Liberty "as soon as practicable but in no event later than 60 days after the end of the Policy Period or [the twelve-month] Discovery Period, if applicable."

         Liberty denied the insurance broker's request for coverage under the D&O policy on March 26, 2012. Liberty explained that it was doing so for three reasons. First, Liberty cited what it termed "the late notice" to Liberty of the first amended complaint in the Hernándezes' lawsuit.[5] Second, Liberty cited an endorsement in the policy that excluded medical malpractice claims from being covered. And, third, Liberty stated that the damages sought by the Hernándezes in the first amended complaint related to a loss for which there is no coverage under the policy.[6]

         There is one more sequence of events that relates to the issues presented in Jiménez's appeal of the District Court ruling dismissing his suit against Liberty. This sequence begins almost a month after Liberty had informed the insurance broker that it was denying the request for coverage of "all Loss" resulting from the Hernándezes' first amended complaint.

         Specifically, on April 23, 2012, the Hernándezes filed a second amended complaint in their lawsuit. This complaint, for the first time, named Jiménez, as a co-defendant in the Hernándezes' lawsuit. In doing so, the second amended complaint alleged negligence by Jiménez in violation of Puerto Rico law due to his conduct as the medical director of the Hospital. Jiménez was served with the Hernándezes' second amended complaint on May 3, 2012.

         On June 19, 2012, the insurance broker sent a copy of the Hernándezes' second amended complaint to Liberty with a request for coverage concerning the allegations against Jiménez as the medical director of the Hospital.[7] That same day, Liberty reiterated to the insurance broker that Liberty was denying coverage. Liberty also thereafter denied a request by the broker for reconsideration.

         Jiménez then filed, on August 21, 2013, this lawsuit against Liberty in federal court. In the suit, he alleges that Liberty breached the Hospital's 2011-2012 D&O policy by denying him the requested coverage for the "Loss" that he would incur as a result of the "Claim" made against him by the Hernándezes' in their second amended complaint, and he seeks a declaratory judgment that he "should be afforded coverage under the insurance agreement," monetary damages, and attorney' fees.

         Jiménez's lawsuit was consolidated with the Hernándezes suit. Liberty then filed a motion for summary judgment as to Jiménez's claims alleging that Liberty had breached the terms of the D&O policy, and the District Court granted that motion. Jiménez subsequently filed a motion for reconsideration and a motion to set aside the judgment, both of which the District Court denied.

         Jiménez now appeals the District Court's order granting Liberty's summary judgment motion.[8] Our review is de novo. See Hill v. Walsh, 884 F.3d 16, 21 (1st Cir. 2018). "We may decide in favor of the moving party -- here, [Liberty] -- 'only if the record reveals that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" Soto-Feliciano v. Villa Cofresi Hotels, Inc., 779 F.3d 19, 22 (1st Cir. 2015) (quoting Avery v. Hughes, 661 F.3d 690, 693 (1st Cir. 2011)). Moreover, we note that "[t]he construction of an insurance policy is a question of law, and the legal conclusions of the district court are, of course, not binding on the court of appeals." Nieves v. Intercontinental Life Ins. Co. of P.R., 964 F.2d 60, 63 (1st Cir. 1992), as amended (May 18, 1992). We, therefore, "may make an independent examination of [the] insurance policy." Id.

         II.

         We first provide a description of the law that guides our construction of the D&O policy issued by Liberty. We then describe the policy's relevant provisions. With that background in place, we then explain why we agree with Jiménez's argument that the District Court wrongly construed the policy in concluding that Liberty did not breach it by denying Jiménez coverage for the "Loss" that he would incur in consequence ...


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