United States District Court, W.D. Washington, Seattle
ORDER DENYING MOTION FOR SUMMARY JUDGMENT
S. Lasnik United States District Judge.
matter comes before the Court on “Plaintiff's
Motion for Summary Judgment.” Dkt. # 18. Plaintiff PACO
provided Chiropractic Professional Liability coverage to
defendant Hanson in 2011 and 2012. Hanson was accused of
submitting misleading, false, and/or fraudulent bills and
supporting documentation in order to obtain Personal Injury
Protection (“PIP”) payments from State Farm, his
patients' auto insurance company. He tendered the defense
of the claim to PACO, which agreed to defend under a full
reservation of rights. PACO filed this lawsuit to obtain a
declaration regarding its defense obligations.
Court, having reviewed the memoranda, declarations, and
exhibits submitted by the parties,  finds as follows:
agreed to indemnify Hanson for all sums he becomes obligated
to pay as damages as a result of claims made during the
policy period “because of malpractice committed
by” Hanson. Dkt. # 19 at 32-33.
“Malpractice” is not defined in the policy, but
“malpractice incident” means “any act,
error, or omission by the Insured in the providing of or
failure to provide professional services.” Dkt. # 19 at
34. “Professional services” are defined as
“those services which are within the scope of practice
of a chiropractor in the state in which the chiropractor is
licensed.” Dkt. # 19 at 35.
In Washington, insurance policies are construed as contracts.
An insurance policy is construed as a whole, with the policy
being given a fair, reasonable, and sensible construction as
would be given to the contract by the average person
purchasing insurance. If the language is clear and
unambiguous, the court must enforce it as written and may not
modify it or create ambiguity where none exists. If the
clause is ambiguous, however, extrinsic evidence of intent of
the parties may be relied upon to resolve the ambiguity. Any
ambiguities remaining after examining applicable extrinsic
evidence are resolved against the drafter-insurer and in
favor of the insured. A clause is ambiguous when, on its
face, it is fairly susceptible to two different
interpretations, both of which are reasonable.
Panorama Village Condominium v. Allstate Ins. Co.,
144 Wn.2d 130, 137 (2001) (quoting Weyerhaeuser Co. v.
Commercial Union Ins. Co., 142 Wn.2d 654, 665-66 (2000))
(internal quotation marks omitted).
case, Hanson, as the insured, has the burden of showing that
the claims asserted in the underlying litigation trigger the
insuring provisions of the agreement. Moeller v. Farmers
Ins. Co. of Wash., 173 Wn.2d 264, 271-72 (2011). The
insurer's duty to defend is broader than the duty to
indemnify, however, because it is triggered by the mere
potential for liability: if the complaint against the insured
alleges facts which could, if proven, impose liability that
falls within the coverage provision, the duty to defend
arises. Expedia, Inc. v. Steadfast Ins. Co., 180
Wn.2d 793, 802-03 (2014). Any ambiguities in the complaint
must be liberally construed in favor of triggering the
insurer's duty to defend. Woo v. Fireman's Fund
Ins. Co., 161 Wn.2d 43, 53 (2007). “Only if the
alleged claim is clearly not covered by the policy is the
insurer relieved of its duty to defend.” Truck Ins.
Exchange v. Vanport Homes, Inc., 147 Wn.2d 751, 760
parties fundamentally disagree regarding the nature of the
claims asserted by State Farm against Hanson in the
underlying lawsuit. PACO argues that State Farm seeks damages
arising from fraudulent billing practices that are not
professional services and therefore do not involve a covered
malpractice incident. Hanson, on the other hand, argues that
State Farm is challenging his chiropractic treatment
decisions when it alleges that the medical care provided to
its insureds was not reasonable or necessary.
has the better of this argument. State Farm is not only
alleging that Hanson billed for services he did not perform
(which is the type of fraudulent billing practice generally
at issue in the cases on which PACO relies), but also alleges
that Hanson provided treatment that was not medically
necessary and/or was not reasonable given the diagnoses and
medical records. In particular, Hanson is accused of
utilizing a predetermined treatment plan whenever a patient
was eligible for no-fault benefits under a State Farm policy.
State Farm alleges that this treatment plan was not designed
“to appropriately examine, diagnose, and provide
medically necessary services to benefit each individual
plaintiff” but rather to enrich Hanson by exploiting
available insurance benefits. See, e.g.,
Dkt. # 19 at 5. The complaint contains allegations regarding
an appropriate treatment plan for patients with non-specific
neck and back pain and compares that to the treatment
provided by Hanson. State Farm also alleges that Hanson
over-treated patients, including the overuse of x-rays. These
allegations, liberally construed, place at issue the
appropriateness of the professional services Hanson provided
to State Farm's insureds. In order to prove its
allegations, State Farm will have to show that the treatment
plan was not only consistent (which would likely not be
enough to establish either fraud or unjust enrichment), but
also fell below the standard of care in some respect. Hanson,
for his part, will defend the case by defending his treatment
choices and protocols. The dispute involves alleged errors or
omissions in the services provided by a chiropractor and
therefore triggers the coverage provisions of the
hopes to avoid coverage, it has the burden of showing that
“the loss is excluded by specific policy
language.” McDonald v. State Farm Fire and Cas.
Co., 119 Wn.2d 724, 731 (1992). “Exclusions from
coverage are strictly construed against the insurer because
they are contrary to the protective purpose of
insurance.” Berkshire Hathaway Homestate Ins. Co.
v. SQI, Inc., 132 F.Supp.3d 1275, 1286 (W.D. Wash. 2015)
(citing Stuart v. Am. States Ins. Co., 134 Wn.2d
814, 818-19 (1998)). PACO identifies five exclusions which it
believes apply in this case.
(a) makes the policy inapplicable “to any claim based
upon or arising out of any dishonest, fraudulent, criminal,
malicious or knowingly wrongful acts, errors, or omissions
intentionally committed by or at the direction of the
Insured.” Dkt. # 19 at 35. In addition to a common law
fraud claim, State Farm asserts that Hanson was unjustly
enriched, a claim which can be proven without regard to
intent. PACO has not shown that this exclusion applies to all
of the related claims, and there is no right of allocation
under Washington law. See Bordeaux, 145 Wn.App. at
Violation of Law or Ordinance
(c) makes the policy inapplicable “to any act committed
in violation of any law or ordinance.” Dkt. # 19 at 35.
State Farm's unjust enrichment claim can be proven
without evidence of ...