Proselect Insurance Company v. Juan Fica, M.D. et al. (2009)

MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

The plaintiff, ProSelect Insurance Company, has moved for summary judgment on its complaint in which it seeks a declaration that it owes no duty to defend or to indemnify the defendants, Juan Fica, M.D. and Elie Nakouzi, in an underlying lawsuit filed against them by the defendant David P. Petruzzi.

Facts

By complaint dated June 29, 2005, David P. Petruzzi commenced an action in the Connecticut Superior Court, Judicial District of Tolland, against Juan Pica and Elie Nakouzi in which he alleged the following facts.   Dr. Fica, in the ordinary course of his medical practice, hired Elie Nakouzi, and thereafter, both Dr. Fica and Elie Nakouzi “held Elie Nakouzi out as a practicing licensed doctor in the State of Connecticut.”   It is further alleged that David Petruzzi “trusted and relied upon Dr. Fica in his representations of [Nakouzi's] credentials, licensing, experience and qualifications as a physician ․ so as to allow ․ Nakouzi to examine, treat, and diagnose” Mr. Petruzzi.

In Count One of the underlying lawsuit, Petruzzi alleges that Dr. Fica engaged in negligent hiring practices with respect to Elie Nakouzi, as Dr. Fica knew or should have known that Mr. Nakouzi had failed to pass the necessary licensing requirements in the United States and Connecticut and that he was not a doctor and was not qualified to practice medicine in the United States.   In Count Two Petruzzi alleges that Dr. Fica engaged in medical malpractice by allowing Mr. Nakouzi to “care [for], treat, examine, and diagnose [Petruzzi] and prescribe medication [to him] on behalf of” Dr. Fica's medical practice, and that, in doing so, Dr. Fica “violated the laws and regulations for practicing medicine in the State of Connecticut.”   In Count Three Petruzzi alleges that “the consent granted [by Petruzzi] to ․ Dr. Fica to allow ․ Elie Nakouzi to care [for], treat, exam[ine], and diagnose [Petruzzi] and prescribe medications [to him] was uninformed and improperly obtained by [them] based on the misrepresentations of Dr. Fica's licensing staff.”   In Count Four, Petruzzi alleges that Dr. Fica “misrepresented to his agents, servants and employees the licensing status of Elie Nakouzi,” which Mr. Petruzzi “relied upon in allowing ․ Dr. Fica's office to care [for], treat, exam[ine], [and] diagnose [him] and prescribe medications [to him].”   In Count Five Petruzzi alleges that Dr. Fica “through his agents, servants and employees, including Elie Nakouzi, assaulted [Mr. Petruzzi] each and every time ․ Elie Nakouzi cared [for], treated diagnosed, examined or prescribed medication for” Mr. Petruzzi.

Petruzzi alleges similar counts against Elie Nakouzi in Count Six through Eight.   He claims damages that consist of “economic damages in having to obtain confirmation medical treatment to confirm prior diagnosis of ․ Elie Nakouzi,” and “non economic damages of physical pain and suffering and emotion pain, anguish and suffering.”

Both Dr. Fica and Mr. Nakouzi were indicted on the charge of violation of 18 U.S.C. § 371, conspiracy to commit health care fraud, a felony.   On January 11, 2006 Elie Nakouzi pleaded guilty to the charge of health care fraud, admitting under oath and under penalty of perjury, that, although he was unlicensed to practice medicine, he, with Dr. Fica's knowledge, performed medical examinations of patients, diagnosed patients, and prescribed medication to patients with little or no oversight by Dr. Fica. On March 31, 2006, Dr. Fica pleaded guilty to the charge of healthcare fraud and admitted under oath and under penalty of perjury that when he hired Elie Nakouzi in 1996, he knew that Nakouzi was not licensed to practice medicine in the State of Connecticut.

Prior to the filing of the underlying lawsuit and the entry of guilty pleas by Dr. Fica and Elie Nakouzi, ProSelect issued a Medical Liability claims made policy to Dr. Fica with effective dates of October 1, 2004 to October 1, 2005 (the “Policy”).   Section 1 of the Policy provides, in pertinent part, that ProSelect will pay:

those sums which YOU become legally obligated to pay as DAMAGES, up to the applicable Limits of Liability stated in the DECLARATIONS, because of a CLAIM for an INCIDENT in the performance of PROFESSIONAL SERVICES by YOU or someone for whom YOU are legally responsible.

The Policy further provides that ProSelect “shall have the right and duty to defend any SUIT brought against [an insured] seeking DAMAGES that are covered by this POLICY.”

Section VII of the Policy also provides that the Policy does not apply to any liability of an insured or to any DAMAGES, INCIDENTS, CLAIMS or SUITS:

7(b). Arising from the willful, knowing, deliberate or intentional violation of any statute, ordinance, rule or regulation, regardless of whether or not the resulting injury was expected or intended.

However, this exclusion will not apply to any other INSURED arising out of such violations if such violations were not committed by or at the direction of or with the knowledge of such other INSURED.

* * *

12. Arising from any dishonest, fraudulent, criminal or malicious acts or omissions or deliberate intentional wrongdoing committed or alleged to have been committed by an INSURED.

* * *

16. Arising from any INCIDENT in the performance of any PROFESSIONAL SERVICES ․ [w]hich takes place while YOUR professional license is under suspension or has been revoked, surrendered or has otherwise terminated or is not in effect.

The Policy provides that words “YOU” and “YOURS” refer to the “INSURED,” and that the “Word ‘INSURED’ means any person or organization qualifying under Section IV. Definition of Insured.”   Section IV of the Policy defines “INSURED.” in relevant part, as “(1) The NAMED INSURED as listed in the DECLARATIONS” and “(2) An employee, or volunteer worker of the NAMED INSURED, except an intern, extern, resident, fellow ․ osteopathic or medical doctor, but only while action within the scope of their duties as such.”

The definition section of the Policy, Section IX, provides, in pertinent part, as follows:

INCIDENT means any negligent act, error or omission including repeated exposure to the same act, error, or omission.

* * *

PROFESSIONAL SERVICES means:

(a) Medical, surgical, dental or nursing treatment performed in the INSURED's profession described in the DECLARATIONS;

(b) Service by any INSURED as a member of a formal accreditation, peer review or credentialing committee of a hospital or professional society;  and

(c) Review on behalf of a MANAGED CARE ENTITY or other healthcare insurer of any proposed or actual total or per unit charges, fees or rates for medical, hospital or other healthcare services, or of the necessity, quality or utilization of such healthcare services.

After Petruzzi filed the underlying lawsuit, Dr. Fica and Eli Nakouzi made a demand under the Policy for a defense and indemnification in connection with the claims asserted in that suit.   ProSelect extended a defense to Dr. Fica under a reservation of rights.

Discussion of the Law and Ruling

Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.  Fojtik v. Hunter, 265 Conn. 385, 389, 828 A.2d 596 (2003);  Mytych v. May Dept. Stores Co., 260 Conn. 152, 158-59, 793 A.2d 1068 (2002);  Home Ins. Co. v. Aetna Life & Casualty Co., 235 Conn. 185, 202, 663 A.2d 1001 (1995).   Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact;  D.H.R. Construction Co. v. Donnelly, 180 Conn. 430, 434, 429 A.2d 908 (1980);  a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact, together with the evidence disclosing the existence of such an issue.  Practice Book §§ 17-45, 17-46;  Burns v. Hartford Hospital, 192 Conn. 451, 455, 472 A.2d 1257 (1984).   In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.  Town Bank & Trust Co. v. Benson, 176 Conn. 304, 309, 407 A.2d 971 (1978);  Strada v. Connecticut Newspapers, Inc., 193 Conn. 313, 317, 477 A.2d 1005 (1984).   The test is whether a party would be entitled to a directed verdict on the same facts.  Batick v. Seymour, 186 Conn. 632, 647, 443 A.2d 471 (1982);  New Milford Savings Bank v. Roina, 38 Conn.App. 240, 243-44, 659 A.2d 1226 (1995).

Summary judgment should only be granted if the pleadings, affidavits and other proof submitted demonstrate that there is no genuine issue as to any material fact.  Scinto v. Stam, 224 Conn. 524, 530, cert. denied, 114 S.Ct. 176, 126 L.Ed.2d 136 (1993);  Connell v. Colwell, 214 Conn. 242, 246, 571 A.2d 116 (1991).   Summary judgment is “designed to eliminate the delay and expense of litigating an issue where there is no real issue to be tried.”  Wilson v. City of New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).

Interpretation of an insurance policy presents a question of law.  Wentland v. American Equity Ins. Co., 267 Conn. 592, 600, 840 A.2d 1158 (2004).   Under Connecticut law, the terms of an insurance contract are construed according to the general rules of contract construction.  Heyman Assocs.   No. 1 v. Insurance Co. of the State of Pa., 231 Conn. 756, 769-70, 653 A.2d 122 (1995).   If a policy's provisions are clear and unambiguous, then the language must be accorded its natural and ordinary meaning.  Id. at 770-71.  “There is no presumption that language in insurance contracts is inherently ambiguous.”   Buell Industries v. Greater New York Mutual Ins., 259 Conn. 527, 545, 791 A.2d 489 (2002).

Duty to Indemnify

While the plaintiff seeks a declaration that it has no duty to defend or indemnify, it has directed its arguments primarily at the duty to indemnify, whereas, the defendants argue mainly about the duty to defend.   These duties are not coextensive.

“[A]n insurer's duty to defend, being much broader in scope and application than its duty to indemnify, is determined by reference to the allegations contained in the [underlying] complaint ․ The obligation of the insurer to defend does not depend on whether the injured party will successfully maintain a cause of action against the insured but on whether he has, in his complaint, stated facts which bring the injury within the coverage.   If the latter situation prevails, the policy requires the insurer to defend, irrespective of the insured's ultimate liability ․ It necessarily follows that the insurer's duty to defend is measured by the allegations of the complaint ․ Hence, if the complaint sets forth a cause of action within the coverage of the policy, the insurer must defend ․ Indeed, [i]f an allegation of the complaint falls even possibly within the coverage, then the insurance company must defend the insured ․ On the other hand, if the complaint alleges a liability which the policy does not cover, the insurer is not required to defend.”  (Citations omitted;  internal quotation marks omitted.)  Community Action for Greater Middlesex County, Inc. v. American Alliance Ins. Co., 254 Conn. 387, 398-99, 757 A.2d 1074 (2000).   Our Supreme Court has concluded consistently that “the duty to defend means that the insurer will defend the suit, if the injured party states a claim, which, qua claim, is for an injury covered by the policy;  it is the claim which determines the insurer's duty to defend ․” (Internal quotation marks omitted.)  Hartford Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co., 274 Conn. 457, 464, 876 A.2d 1139 (2005).

Clinch v. Generali-U.S. Branch, 110 Conn.App. 29, 34, 954 A.2d 223 (2008), aff'd., 293 Conn. 774 (2009).

Coverage for Dr. Fica and Mr. Nakouzi is barred under the Policy's exclusion with respect to liability “7(b).  Arising from the willful, knowing, deliberate or intentional violation of any statute, ordinance, rule or regulation.”  “[I]t is generally understood that for liability for an accident or an injury to be said to ‘arise out of’ [an occurrence or offense], it is sufficient to show only that the accident or injury ‘was connected with,’ ‘had its origins in,’ ‘grew out of,’ ‘flowed from,’ or ‘was incident to’ [that occurrence or offense], in order to meet the requirement that there be a causal relationship between the accident or injury and [that occurrence or offense].  Hogle v. Hogle, 167 Conn. 572, 577, 356 A.2d 172 (1975).”  QSP, Inc. v. Aetna Casualty & Surety Co., 256 Conn. 343, 374, 773 A.2d 906 (2001).

Connecticut General Statutes § 20-9 provides, in relevant part:  “[n]o person shall, for compensation, gain or reward, ․ diagnose, treat, operate or prescribe for any injury, deformity, ailment or disease, ․ of another person, ․ until he has obtained such a license as proved in section 20-10 ․”

While Petruzzi has couched the allegations of his complaint in terms of negligence and malpractice, all claims arise out of Nakouzi's willful violation of § 20-9.   In Clinch v. Generali-U.S. Branch, supra, the plaintiff attempted to circumvent the “assault and battery” exclusion in an insurance policy by couching his complaint in terms of negligence.   The Court rejected such an attempt, stating:

Reading the complaint in its entirety, as we must, the only cause of action alleged in the first count is for injury arising from assault and battery that stemmed from the insured's negligence.   The plaintiff argues that on the basis of the language of the complaint, one could entertain a variety of causes for some of his injuries unrelated to assault and battery.   The negligent acts that he describes, however, are tied inextricably by the language of the complaint to assault and battery.   He describes no other manner in which he sustained his injuries.   Thus, we conclude that the only causes reasonably construed from the plaintiff's complaint, that is to say, that do not unreasonably contort the meaning of the language of the complaint, are for injury arising out of assault and battery.

Clinch v. Generali-U.S. Branch, supra at 37-39.

The underlying lawsuit arose from Mr Nakouzi's knowing and intentional violations of Connecticut General Statutes § 20-9 and, therefore, Exclusion 7(b) bars coverage to Dr. Fica and Mr. Nakouzi.

Coverage is also barred under Exclusion 12 which excludes coverage for damages “Arising from any dishonest, fraudulent, criminal or malicious acts or omissions or deliberate intentional wrongdoing committed or alleged to have been committed by an INSURED.”   The plaintiff has provided evidence, which the defendants have not disputed, that both Dr. Fica and Mr. Nakouzi pled guilty and were convicted of health care fraud in violation of 18 U.S.C. § 371.

It is also undisputed that the Petruzzi complaint arises from dishonesty on the part of both Dr. Fica and Nakouzi.   It is undisputed that Dr. Fica and Nakouzi both knew that Nakouzi was unlicensed to practice medicine and yet they allowed patients to believe that Mr. Nakouzi was a licensed doctor.

An additional basis for the lack of coverage is the underlying lawsuit's failure to allege a claim for an “Incident,” as that term is defined under the Policy (“any negligent act, error or omission including repeated exposure to the same act, error, or omission”).   The use of the word “negligence” in a complaint does not create coverage where the same count alleges patently intentional conduct.  DaCruz v. State Farm Fire & Casualty Co., 268 Conn. 675, 681, 846 A.2d 849 (2004).  “[A] court should not attempt to impose the duty to defend on an insurer though a strained, implausible reading of the complaint that is linguistically conceivable, but tortured and unreasonable.”   Schilberg Integrated Metals Corp. v. Continental Casualty Co., 263 Conn. 245, 259-60, 819 A.2d 773 (2003).

All of the allegations against Nakouzi in the underlying complaint allege Nakouzi's intentional conduct in holding himself out as a licensed physician when he knew that he was not.   The damages allegedly incurred by Petruzzi because of Nakouzi's conduct do not stem from Nakouzi's negligent acts.   They are, instead, inextricably connected to Nakouzi's intentional conduct and, therefore, the plaintiff has no duty to defend or indemnify Nakouzi.

Finally, there is no coverage for Nakouzi under the Policy because the Policy excludes coverage for damages “Arising from any INCIDENT in the performance of any PROFESSIONAL SERVICES ․ [w]hich takes place while YOUR professional license is under suspension or has been revoked, surrendered or has otherwise terminated or is not in effect.”

It is apparent on the face of the underlying complaint that Nakouzi's conduct occurred while he had no license.

For the foregoing reasons, the plaintiff has no duty to indemnify Dr. Fica and no duty to indemnify or defend Mr. Nakouzi for the claims made in the underlying lawsuit.

Duty to Defend

Dr. Fica claims that the plaintiff has waived its right to deny the duty to defend him and/or is estopped from denying the duty to defend him based on the conduct of the attorneys who represented Dr. Fica in the underlying lawsuit.   Under Connecticut law, waiver requires that a party has “both knowledge of the existence of the right and intention to relinquish it.”  Breen v. Aetna Casualty & Surety Co., 153 Conn. 633, 645, 220 A.2d 254 (1966).   Estoppel has two elements:  “the party must do or say something which is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief;  and the other party, influenced thereby, must actually change his position or do something to his injury which he otherwise would not have done.   Estoppel rests on the misleading conduct of one party to the prejudice of the other.   In the absence of prejudice, estoppel does not exist.”  Id. at 642.

The law of this state prevents the extensions of coverage by waiver or estoppel.  Heyman Assoc.   No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 777, 653 A.2d 122 (1995).   Generally, waiver and estoppel cannot be used to extend the coverage of an insurance policy or create a primary liability but may only affect rights reserved therein;  for example, an insurer may be estopped by its conduct or its knowledge or by statute from insisting on a forfeiture, but under no conditions can the coverage or restrictions on coverage be extended by waiver and estoppel.   16 B Appleman, Insurance Law & Practice, § 9090, pp.579-82.

While a waiver cannot create coverage where none exists, as in this case, it may prevent the plaintiff from asserting that it has no duty to defend.   Dr. Fica argues that the conduct of the counsel retained by ProSelect to represent Dr. Fica served to estop the plaintiff from asserting its lack of duty to defend Dr. Fica.

On July 30, 2007, this court, Shortall, J., dismissed the underlying action because Petruzzi did not file a Complex Litigation scheduling order.   At that time Dr. Fica was and still is, represented by counsel retained by ProSelect.   Petruzzi did not appeal from the July 30, 2007 dismissal.   Instead, on October 12, 2007, Petruzzi filed a motion to open judgment, which Judge Shortall denied on November 30, 2007.   On December 12, 2007, Petruzzi filed a Motion to Reargue.   Judge Shortall granted the Motion to Reargue and stated in his order the following:

The moving party's failure to comply with the court's order was due to negligence, which is not grounds for opening a judgment.  Segretario v. Stewart-Warner Group, 9 Conn.App. 255, 359 (1986).   Because defendants' counsel have no objection, however, the court will exercise its discretion to reconsider its decision to deny the motion to open the non-suit, and, upon reconsideration, grant that motion.

Dr. Fica has submitted his affidavit in which he avers that he was unaware of the dismissal of the underlying action, the motion to reopen and the motion to reargue.   He further avers that had he been aware of the foregoing, he would have instructed his attorney to object to the motion to reopen and the motion to reargue.

Equitable estoppel operates to bar a party from asserting rights it would otherwise have but for its own conduct.  Glazer v. Dress Barn, Inc., 274 Conn. 33, 60, 873 A.2d 929 (2005).   There is clearly an issue of fact as to whether the attorneys retained by ProSelect to represent Dr. Fica did fail to object to the Motion to Reargue and also as to whether the underlying case would have been reopened even if such objection had been made.   However, if the attorneys acted (or rather failed to act) in the manner alleged by Dr. Fica, that is, they failed to object to the Motion to Reargue, then the attorneys' conduct could have prejudiced Dr. Fica's defense in the underlying suit.   The attorneys were retained by ProSelect.   Arguably, Dr. Fica believed that the attorneys so retained were adequately representing his interests and therefore, refrained from retaining his own counsel.   There is an issue of fact as to whether the plaintiff is estopped from asserting that it has no duty to defend Dr. Fica and, therefore, summary judgment is denied in part.

In conclusion, summary judgment is granted insofar as the plaintiff seeks a 1) declaration that it has no duty to indemnify either Dr. Fica or Mr. Nakouzi and 2) has no duty to defend Mr. Nakouzi and summary judgment is denied insofar as the plaintiff seeks a declaration that it has no duty to defend Dr. Fica.

By the court,

Aurigemma, J.

Aurigemma, Julia L., J.