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Wyoming Medical Center, Inc. v. Wyoming Insurance Guaranty Association

February 26, 2010

WYOMING MEDICAL CENTER, INC., A WYOMING CORPORATION, APPELLANT (DEFENDANT),
v.
WYOMING INSURANCE GUARANTY ASSOCIATION, A WYOMING NON-PROFIT UNINCORPORATED LEGAL ENTITY, APPELLEE (PLAINTIFF).



Appeal from the District Court of Natrona County. The Honorable David B. Park, Judge.

The opinion of the court was delivered by: Kite, Justice

Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.

[¶1] After the Wyoming Medical Center's (WMC) insurer became insolvent, the Wyoming Insurance Guarantee Association (WIGA) paid claims made against WMC. WIGA then filed a complaint against WMC claiming that it was obligated to pay the deductibles for each claim. Asserting that WIGA stood in the shoes of the insurer, WMC argued that WIGA's claim was barred by an earlier district court ruling that WMC was not obligated to pay the deductibles to its insolvent insurer. WIGA filed a summary judgment motion which the district court granted, ruling that WMC was obligated to pay the deductibles. WMC appealed. We affirm.

ISSUES

[¶2] WMC states the issues for this Court's determination as follows:

1. In light of the trial court's prior ruling "[t]hat [Wyoming Medical Center ("WMC")] does not have any obligation to pay [Phico Insurance Company ("Phico")] any deductible on claims settled by the Wyoming Insurance Guaranty Association [("WIGA"),]" is WIGA's complaint in the same court to collect those same deductibles from WMC under a canceled professional liability insurance policy on behalf of the liquidated insurer, Phico, barred by the doctrine of res judicata?

2. Is WMC entitled to a setoff for attorneys' fees incurred in the defense of various covered claims?

WIGA contends the district court properly granted summary judgment in its favor and res judicata does not apply.

FACTS

[¶3] PHICO Insurance Company (PHICO) issued a Health Care Providers Liability Policy to WMC effective from July 16, 1999, to July 16, 2000. The parties renewed the policy twice, and it remained in effect until July 16, 2002. The policy provided that PHICO would pay all sums which WMC became legally obligated to pay as damages because of bodily injury or property damage caused by a medical incident occurring and reported during the effective date of the policy. The policy also provided that PHICO's obligation to pay damages under the policy applied only in excess of a deductible amount of $50,000.

[¶4] On February 1, 2002, while the policy was still in effect, a Pennsylvania court entered an order of liquidation against PHICO. The order stated that all insurance policies issued by PHICO were cancelled and terminated for all purposes. Prior to the liquidation, PHICO had been providing a defense to WMC on several claims made against it.

[¶5] After entry of the liquidation order, WIGA stepped in to pay the covered claims pursuant to the Wyoming Insurance Guaranty Association Act, Wyo. Stat. Ann. § 26-31-101 through 26-31-117 (1991).

The Act . . . is based upon the Post-Assessment Property and Liability Insurance Guaranty Association Model Act . . . prepared by the National Association of Insurance Commissioners . . . .

The Act creates an involuntary nonprofit unincorporated legal entity, [WIGA], whose members are insurers qualified to transact business in Wyoming. Wyo.Stat. § 26-31-104(a) and (b). Each member contributes an assessment, based on a percentage of premiums from insurance policies written in Wyoming, to a fund which is used to pay claims. Wyo.Stat. § 26-31-107(a). When an insurance company is determined to be insolvent, [WIGA] "steps into the shoes of the insolvent insurer." [WIGA] is deemed the insurer to the extent of its obligation for covered claims . . . . Wyo.Stat. § 26-31-106(a)(ii).

Wyoming Ins. Guar. Ass'n v. Woods, 888 P.2d 192, 195 (Wyo. 1994) (some citations omitted).

[¶6] In the present case, WIGA paid three claims against WMC, the first in June of 2002 for $25,000; the second in July of 2002 for $165,000; and the third in August of 2002 for $150,000. After paying the claims, WIGA demanded payment from WMC of $125,000, the sum of the deductibles for the claims paid in June ($25,000), July ($50,000) and August ($50,000) of 2002. WMC refused the demand, claiming that it had no obligation to pay the deductibles.

[¶7] Subsequently, WMC filed a complaint for declaratory judgment against PHICO in Wyoming district court. WMC sought a declaration that PHICO's liquidation was a breach of the insurance contract and, upon the insurer's breach, WMC had no obligation to pay PHICO any deductible on the claims WIGA paid. PHICO failed to appear in the action and WMC moved for entry of default. The clerk of court entered default and ultimately, in 2004, the district court entered a default judgment declaring that PHICO breached the insurance contract and WMC had no obligation to pay PHICO any deductible on claims paid by WIGA.

[¶8] WIGA then filed its complaint requesting judgment against WMC for the $125,000 plus interest and costs. WMC answered, denying any obligation to pay the deductibles on the ground that the default judgment, holding it did not have to pay PHICO, applied also to WIGA. WMC also filed a counterclaim against WIGA alleging that, under § 26-31-106(a)(ii) of the Insurance Guaranty Association Act, WIGA was deemed the insurer upon PHICO's insolvency and was obligated to pay any damages WMC sustained as a result of PHICO's breach of the insurance contract, including $50,000 in settlement costs WMC had paid that PHICO was obligated to pay and $45,000 in legal fees. WMC asked that WIGA's complaint be dismissed and judgment be awarded in its favor on the counterclaim.

[¶9] WIGA denied that it was obligated to pay WMC any amounts. WIGA subsequently filed a motion for summary judgment in its favor on both the complaint and the counterclaim.*fn1 The parties filed briefs and, after a hearing, the district court issued a decision letter in which it concluded WIGA was entitled to judgment against WMC in the amount of $125,000 plus prejudgment interest and WMC was not entitled to a set-off for its payment of $50,000 in settlement of a different claim made against it under the insurance policy. The district court requested additional briefing on the question of whether WMC was entitled to a set-off against the judgment in the amount of fees it had paid directly to attorneys who had defended claims against it.

[¶10] The parties subsequently filed cross motions for summary judgment on the attorney fees issue. After considering the parties' briefs and arguments at a hearing, the district court entered an order granting summary judgment for WIGA on that claim as well. WMC appealed both orders.

STANDARD OF REVIEW

[¶11] When reviewing an order granting summary judgment, we consider the record de novo. Stone v. Devon Energy Prod. Co., L.P., 2009 WY 114, ¶ 10, 216 P.3d 489, 492 (Wyo. 2009).

[W]e have exactly the same duty as the district judge; and, if there is a complete record before us, we have exactly the same material as did [the district judge]. We must follow the same standards. The propriety of granting a motion for summary judgment depends upon the correctness of a court's dual findings that there is no genuine issue as to any material fact and that the prevailing party is entitled to judgment as a matter of law. This court looks at the record from the viewpoint most favorable to the party opposing the motion, giving to him all favorable inferences to be drawn from the facts contained in affidavits, depositions and other proper material appearing in the record.

McGarvey v. Key Prop. Mgmt. LLC, 2009 WY 84, ¶ 10, 211 P.3d 503, 506 (Wyo. 2009). The question of whether res judicata bars a claim is one of law. Osborn v. Kilts, 2006 WY 142, ¶ 6, 145 P.3d 1264, 1266 (Wyo. 2006). Statutory construction is also a question of law, which we review de novo. Luhm v. Bd. of Trustees of Hot ...


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