1
Chapter 51
Insurance
Case 51.1
108 P.3d 288
Supreme Court of Colorado,
En Banc.
Thomas A. CARY and Beth Hanna, individually and on behalf of their minor daughter, Dena Cary,
Petitioners,
v.
UNITED OF OMAHA LIFE INSURANCE COMPANY, Respondent.
No. 04SC13.
Feb. 28, 2005.
2 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
SPD contained markedly different exclusions than the 1994 SPD.
In June 1997, Dena shot herself under the chin in an unsuccessful suicide attempt. At the time, she was suffering from a major
depressive episode associated with diagnosed bipolar disorder, a biologically based mental illness covered by the Plan. Dena’s
gunshot injuries required extensive treatment, hospitalization, and multiple surgeries.
Petitioner and Dena (Insureds) applied for benefits under the Plan, but United denied the claim. After an unsuccessful appeal to
FN1. Arvada and the Trust settled immediately after the trial court decision. Antero settled after we issued our opinion in
Cary v. United of Omaha Life Insurance Co.,
68 P.3d 462 (Colo.2003) (
Cary II
), but before the court of appeals’ decision
in
Cary v. United of Omaha Life Insurance Co.,
91 P.3d 425 (Colo.App.2003) (
Cary III
). Thus, United is the sole party
remaining in this case. The issue of coverage is central to Insureds’ claim of bad faith failure to provide insurance
benefits.
FN2. We granted certiorari on the following issues:
1) Whether the court of appeals correctly interpreted Tom Cary’s health insurance plan as excluding coverage for injuries
sustained by his fourteen year old daughter when she shot herself because she was suffering from a biologically based
2) Whether a brochure or the draft of a new Summary Plan Description which purports to exclude coverage can trump a
previously published and distributed Summary Plan Description which contains no such exclusion even though the draft
Summary Plan Description had not been distributed to insureds.
1061. Any ambiguity in an insurance policy is construed in favor of providing coverage to the insured.
Am. Fam. Mut. Ins. Co. v.
Johnson,
816 P.2d 952, 953 (Colo.1991). A mere disagreement between the parties concerning interpretation of the policy does
not create an ambiguity.
Houtz,
883 P.2d at 1061. To determine whether a policy contains an ambiguity, we must evaluate the
policy as a whole.
Id.; Stein,
940 P.2d at 387
.
In this case, the Plan provides that it pays a specified percentage of “covered expenses” per year. To qualify as a “covered
expense,” a medical expense must be “Medically Necessary for the treatment of an Injury or an Illness not specifically excluded or
otherwise limited under [the] Plan.” [FN3]
FN3. Capitalization of words and phrases in quoted Plan material indicates that such words and phrases are expressly
defined in the Definitions section of the Plan. Only Plan definitions that are relevant to the analysis in this case are
FN4. Citing
Bigelow v. Berkshire Life Insurance Co.,
93 U.S. 284, 287, 23 L.Ed. 918 (1876), United argues that the “sane
or insane” language contained in the Plan is meant to exclude benefits for self-destructive behavior regardless of the
degree or nature of the mental disorder from which the individual is suffering. However,
Bigelow
is distinguishable on its
facts because it involved a life insurance policy whose exclusion prohibited coverage where the decedent “shall die by
suicide (sane or insane).” Id. at 285-86. Here, there is no mention of the term “suicide” in the Plan and it is not apparent
FN5. United argues that although the Plan provides coverage for treatment of the mental illness itself, it does not cover all
the consequences that might flow from the mental illness. Thus, United argues that although depression may be a
symptom of Dena’s bipolar disorder, her injuries are not themselves a symptom of bipolar disorder and are not covered in
the treatment of her mental illness. In other words, United argues that the sequela of a symptom can be isolated from the
symptom itself, and that the symptom is covered, but the sequela is not. This argument is without merit.
Bipolar disorder is a biologically based mental illness that is a disease or illness in the same sense as cancer, diabetes, or
heart disease.
See, e.g.
§ 10–16-104(5.5), C.R.S. (2004) (“Every group policy, plan certificate, and contract of a carrier
subject to the provisions of … this article ... shall provide coverage for the treatment of biologically based mental illness
that is no less extensive than the coverage provided for any other physical illness.”). It is well established that physically
self-destructive behavior, including attempted suicide, is a symptom of bipolar disorder. American Psychiatric
FN6. In a related argument, Insureds argue that the Plan is also ambiguous because it does not state whether the self–
inflicted injury exclusions require the injury to have been intentionally self-inflicted. If the self-inflicted injury exclusions
require the injury to have been intentional, Insureds argue that this only aggravates the ambiguity in the Plan because the
word “intentionally” has more than one meaning. Insureds further argue that the phrase “whether sane or insane” fails to
clarify this ambiguity. Because we conclude that the ambiguity in the Plan arises solely as a result of the effect of the first
two sentences in the definition of “injury,” and because an analysis of the intentional/accidental and sane/insane dualities
has no effect upon our finding of ambiguity, we do not address either of these arguments.
CHAPTER 51: INSURANCE 5
Based on our conclusion that the Plan is ambiguous, we need not address whether or not the 1994 SPD created an ambiguity that
the 1996 Flier and 1997 SPD later cured. [FN7]
FN7. Each of these documents ultimately defers to the Plan if there is a conflict. The 1994 SPD provides that “[i]n any
cases of conflict, the official Plan document will determine your eligibility or benefit.” Similarly, the 1997 SPD expressly
Case 51.2
164 P.3d 454
Wash.,2007.
Supreme Court of Washington,En Banc.
Robert C. WOO, D.D.S., and Anne M. Woo, husband and wife; and the marital
community composed thereof, Petitioners,
v.
FIREMAN’S FUND INSURANCE COMPANY, a California corporation; and National
Surety Corporation, an Illinois corporation, Respondents,
Depositors Insurance Company, an Iowa corporation; and the Pacific Underwriters
Corporation, a Washington corporation, Defendants.
No. 77684-9.
Argued Sept. 12, 2006.
Decided July 26, 2007.
FAIRHURST, J.
*48 1 This case arises from a practical joke that an oral surgeon, Dr. Robert C. Woo, played on an employee, Tina
Alberts, while **457 he was performing a dental procedure on her. Alberts brought suit against Woo as a result of the
practical joke, and Woo asked his insurer, Fireman’s Fund Insurance Company FN1 (Fireman’s), to defend him,
claiming coverage under the professional liability, employment practices liability, and general liability provisions of his
insurance policy. Fireman’s refused Woo’s request to defend.
FN1. Woo originally sued Fireman’s, National Surety Corporation (a corporate affiliate of Fireman’s and
provider of Woo’s professional, employment practices, and general liability coverage), Depositors Insurance
Company (Woo’s homeowner’s and personal excess liability insurer), and the Pacific Underwriters
Corporation (Woo’s insurance broker). Fireman’s stipulated that it would take responsibility for the acts and
omissions of its corporate affiliate, National Surety. Depositors defended Woo on a reservation of rights,
6 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
Underwriters from the suit.
2 Woo brought suit against Fireman’s, claiming breach of duty to defend, bad faith, and violation of the Consumer
Protection Act (CPA), chapter 19.86 RCW. The trial court granted Woo’s motion for partial summary judgment,
holding that Fireman’s had a duty to defend under all three provisions. After trial on the bad faith and CPA claims, a
*49 jury found by special verdict that Fireman’s failed to act in good faith and violated the CPA. Division One of the
Court of Appeals reversed, holding that Fireman’s had no duty to defend. Woo seeks review of the Court of Appeals
ruling and attorney fees and costs on appeal.
FN2. Woo claims he was originally planning to show the boar tusk flippers to Alberts at the time of the
procedure while she was under local anesthetic. He claims, however, that because Alberts asked for a
general anesthetic the morning of the procedure, he decided instead to put them in her mouth while she was
under general anesthesia, take photographs, and show the photographs to her afterward.
FN3. A complete copy of the insurance policy is included in the record.
See
Def. Ex. 40. Pages of defendant
exhibit 40 are designated as “NSW” and are numbered from 000001 to 000112. All references to the
insurance policy in this opinion will use that designation. In addition, all boldface emphasis contained in the
CHAPTER 51: INSURANCE 7
FN4. Woo moved for partial summary judgment arguing that Fireman’s breached its duty to defend him in the
tort action against Alberts. Fireman’s sought summary dismissal of Woo’s claims.
¶ 11 Following trial on the bad faith and CPA issues, a jury found that Fireman’s failed to act in good faith, violated the
CPA, and awarded Woo damages in the amount of $750,000. The trial court entered judgment against Fireman’s and
awarded damages under the jury verdict, attorney fees and costs pursuant to
Olympic Steamship Co. v. Centennial
Insurance Co.,
117 Wash.2d 37, 811 P.2d 673 (1991), and recovery of the $250,000 settlement Woo negotiated with
Alberts.
12 Fireman’s appealed to the Court of Appeals, Division One.
Woo v. Fireman’s Fund Ins. Co.,
128 Wash.App. 95,
114 P.3d 681 (2005). The Court of Appeals reversed the trial court’s summary judgment order regarding duty to
defend and instructed the trial court to vacate the jury’s verdict and dismiss the case. The Court of Appeals did not
reach Fireman’s remaining issues on appeal.
Id.
at 118, 114 P.3d 681. Woo petitioned this court for review, which we
accepted. *52
Woo v. Fireman’s Fund Ins. Co.,
156 Wash.2d 1035, 134 P.3d 1171 (2006). Woo also requests attorney
fees and costs on appeal.
II. ISSUES
A. Did Fireman‘s have a duty to defend Woo under the professional liability, employment practices liability, and
general liability provisions of his insurance policy?
B. Do other issues raised by Fireman’s at the Court of Appeals have merit?
C. Is Woo entitled to attorney fees and costs on appeal?
FN5. Fireman’s argues that we should adopt a “reasonable expectations” standard in determining whether an
insurer has a duty to defend an insured. Suppl. Br. of Resp’ts at 3 (citing
E-Z Loader Boat Trailers, Inc. v.
Travelers Indem. Co.,
106 Wash.2d 901, 907, 726 P.2d 439 (1986)). It argues “an insurer has no duty to
defend when the insured can have no reasonable expectation of coverage.”
Id.
It also suggests the Court of
Appeals adopted such a test when it concluded, “[n]o reasonable person could believe that a dentist would
diagnose or treat a dental problem by placing boar tusks in the mouth while the patient was under anesthesia
in order to take pictures with which to ridicule the patient.”
Id.;Woo,
128 Wash.App. at 103, 114 P.3d 681.
Fireman’s misreads the Court of Appeals’ statement. The court was referring to whether a reasonable
patient
would believe that the dentist would put boar tusks in her mouth whereas Fireman’s refers to whether
a
reasonable insured
would expect his policy to provide coverage. In any case, neither comports with our
established rule regarding the duty to defend, and we decline to adopt Fireman’s reasoning.
1. Professional liability provision
17 Woo makes three basic arguments with regard to Fireman’s duty to defend under the professional liability
provision. First, he argues that the insertion of boar tusk flippers in Alberts’ mouth constituted the practice of dentistry
as defined in his policy and RCW 18.32.020. Second, he argues that the Court of Appeals improperly extended *55
the “sexual misconduct” rule from
Standard Fire Insurance Co. v. Blakeslee,
54 Wash.App. 1, 771 P.2d 1172 (1989)
in concluding that Woo’s actions did not constitute the practice of dentistry. Lastly, he argues that application of
Blakeslee
to the facts of this case was uncertain and Fireman’s had a duty to defend until the rule was clarified by the
court.
A person practices dentistry, within the meaning of this chapter, who (1) represents himself as being able to diagnose,
treat, remove stains and concretions from teeth, operate or prescribe for any disease, pain, injury, deficiency,
deformity, or physical condition of the human teeth, alveolar process, gums, or jaw, or (2) offers or undertakes by any
means or methods to diagnose, treat, remove stains or concretions from teeth, operate or prescribe for any disease,
pain, injury, deficiency, deformity, or physical condition of the same, or take impressions of the teeth or jaw, or (3)
owns, maintains or operates an office for the practice of dentistry, or (4) engages in any of the practices included in
services.” Resp’ts’ Answer to Br. of Amicus Curiae Washington State Trial Lawyers Association Foundation (WSTLA
Foundation) at 5.
[16] 20 The Court of Appeals based its conclusion that Fireman’s had no duty to **461 defend Woo under the
professional liability provision on two flawed premises. First, it concluded, “[n]o reasonable person could believe that a
dentist would diagnose or treat a dental problem by placing boar tusks in the mouth while the patient was under
what Woo’s policy conceivably covers was overly constrained. In addition to covering the rendering of dental services,
the professional liability provision covers ownership, maintenance, or operation*57 of an office for the practice of
dentistry and Alberts’ complaint alleged Woo’s practical joke took place while Woo was conducting his dental practice.
The insertion of the boar tusk flippers was also intertwined with Woo’s dental practice because it involved an
interaction with an employee. In fact, that employee interaction was as much a part of his dental practice as the
liability provision of his insurance policy.
24 We conclude that Fireman’s had a duty to defend under Woo’s professional liability provision because the
insertion of boar tusk flippers in Alberts’ mouth conceivably fell within the policy’s broad definition of the practice of
dentistry.
b.
Extension of
Blakeslee
3.
26
Blakeslee
involved a dentist accused of sexually assaulting a patient during a dental procedure while the patient
1172.
27 The Court of Appeals analogized the facts of this case to
Blakeslee
by noting that, like Blakeslee, Woo took
CHAPTER 51: INSURANCE 11
FN6.
Blakeslee
expressly recognized a distinction between factual situations in which sexual contact is
necessitated by the treatment being provided and those in which it is not, citing a case involving improper
sexual contact by a gynecologist.
Blakeslee,
54 Wash.App. at 9, 771 P.2d 1172 (citing
St. Paul Fire & Marine
1172.
Blakeslee’s
analysis, therefore, focused on whether the insurance policy actually provided coverage. In contrast,
our focus in this case is whether the facts alleged in the complaint conceivably triggered a duty on the part of
Fireman’s to defend. Thus,
Blakeslee
does not even provide the proper framework for our analysis.
¶ 30 We conclude that the Court of Appeals improperly extended
Blakeslee
to a nonsexual assault context.
c.
Refusal to defend when there was an undetermined rule of law
opinion acknowledged, however, that neither
Blakeslee
nor
Hicks
were entirely on point and that a court reviewing
them might conclude they relate only to cases involving sexual assault.
[18] ¶ 33 Fireman’s reliance on Skinner’s equivocal advice regarding the application of **463
Blakeslee
or
Hicks
to this
case flatly contradicts one of the most basic tenets of the duty to defend. The duty to defend arises based on the
insured’s
potential
for liability and whether allegations in the complaint
could conceivably
impose liability on the
*61 2. Employment practices liability provision
[20] 36 The employment practices liability provision states that Fireman’s will defend any claim brought against the
insured “even if the allegations of the claim are groundless, false or fraudulent.” NSW at 000094. It further states, in
pertinent part, that Fireman’s will “pay all sums which you … are legally required to pay as damages as a result of
sexual harassment, discrimination, or wrongful discharge that arise out of a wrongful employment practice.”
Id.
Woo
FN7. Woo also takes issue with the Court of Appeals’ statement that Fireman’s had no duty to defend him
under the employment practices liability provision if it determined the complaint alleged no “cognizable cause
of action.” Pet. for Review at 15-17 (citing
Woo,
128 Wash.App. at 105, 114 P.3d 681). He notes that the duty
to defend focuses on “the allegations of the complaint and the policy, not on whether a claim happens to be