CMS Insurer Must Pay Wyoming Suicide Settlement

The Tenth Circuit Court of Appeals has held that an insurer is required to indemnify Correctional Medical Services (CMS) for an incident that occurred prior to CMS obtaining the insurance policy. The Court’s ruling came in a legal battle over the meaning of “other notice” under the policy.

The dispute between CMS and North American Specialty Insurance Company (NAS) centered around who was responsible for payment of a settlement involving a prisoner’s medical treatment. CMS had a contract to provide health care to prisoners at the Wyoming State Penitentiary. On July 3, 2000, when CMS was insured by PHICO Insurance Company, prisoner Orlando Patrick Roan Eagle committed suicide while under the care of a CMS doctor.

On July 20, 2000, Lawyers and Advocates for Wyoming (LAW), a not-for-profit public interest law firm, sent a letter to the Wyoming Department of Corrections requesting all medical and investigative records pertaining to Roan Eagle’s death. A copy of that letter was sent to CMS attorneys, who advised CMS Medical Claims Management Group of a possible future claim.

CMS obtained an insurance policy from NAS on October 31, 2000. That policy barred coverage for any claim against an insured “arising from a demand, summons, or other notice received by the insured prior to the effective date of the policy.” On July 27, 2001, LAW sent CMS a notice of claim. NAS negotiated and mediated a settlement for Roan Eagle’s death, which it paid.

NAS then advised CMS that it was denying policy coverage in the Roan Eagle case, and filed a declaratory judgment complaint seeking a court ruling that it was not liable for covering the claim. CMS counter-sued for breach of contract. The Wyoming federal district court held that NAS was liable for the claim, and awarded CMS $118,219.92 in attorney’s fees and defense costs. NAS appealed.

The Tenth Circuit found the plain meaning of “other notice” was ambiguous. The appellate court held “The language, properly construed, merely requires that the ‘other notice’ must emanate from a claimant and must have sufficient formality and particularity as to signal the sender’s intent to make a claim.”

The July 2001 LAW request, the Court found, only sought medical records, not a right to relief. Thus, it only “implied that there could be a claim in the future.” As a result, the policy language did “not exclude the Roan Eagle claim from coverage.” The district court’s order was affirmed. See: North American Specialty Insurance Company v. Correctional Medical Services, 527 F.3d 1033 (10th Cir. 2008).