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The Medical Protective Company v. Shervin Erfani

September 8, 2011

THE MEDICAL PROTECTIVE COMPANY,
PLAINTIFF,
v.
SHERVIN ERFANI, DMD, DEFENDANT.



The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge

ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

In this action by an insurance company for rescission of a professional liability policy, Plaintiff The Medical Protective Company ("MPC") filed a motion for summary judgment. The insured, Defendant Shervin Erfani, DMD, proceeding pro se, did not file an opposition. American Insurance Company ("American"), which is seeking equitable contribution from MPC in a related case, filed an amicus curiae brief in opposition to MPC's summary judgment motion, together with a request that the court consider it. MPC filed an objection to the court's consideration of American's amicus brief and has not filed a reply in support of its motion. The motion is currently set for hearing on Friday, September 9, 2011. The matter is suitable for submission without oral argument pursuant to Local Civil Rule 7.1(d)(1).

The court has jurisdiction over this action based on diversity pursuant to 28 U.S.C. Section 1332(a). For the reasons which follow, MPC's motion for summary judgment is DENIED. American's request for consideration of its amicus brief is also DENIED; however, in ruling on MPC's motion, the court considered the briefing on American's summary judgment motion filed in the related case.

MPC issued professional liability policies to Dr. Erfani, a dentist, for policy periods November 15, 2006 to November 15, 2007 and November 15, 2007 to November 15, 2008. Dr. Erfani did not renew the last policy, and it lapsed effective November 15, 2008. The policies covered claims arising and known to the insured during the policy period, provided the claim was reported to MPC during that time or no later than 30 days thereafter. If the policy was cancelled or not renewed, MPC was obligated to offer an extension contract:

In the event of either non-renewal or cancellation of this contract by either party, . . . the Company guarantees to offer, subject to its then current rules, rates, forms and procedures, and through its normal billing and premium collection procedures, an "extension contract." This contract shall extend the time that claims, which would otherwise be covered, may be filed and reported to the Company. . . . The Insured may accept the Company's offer of this "extension contract" by payment of the proper premium within 30 days of such billing. Lack of payment within the specified 30 day period will be deemed a rejection of such offer.

(Rev. Decl. of Marc Fireoved ("Fireoved Decl."), Exh. A.) On December 15, 2008, MPC sent the offer to Dr. Erfani by certified mail, but the letter was returned as unclaimed. (Further Decl. of Andrew P. Rush, filed in related case, Am. Ins. Co. v. The Med. Protective Co., U.S. Dist. Ct., S. Dist. of Cal. case no. 11cv105-DMS(CAB) ("Rush Decl.") Exh. 8 & 9.)

On January 6, 2009, Dr. Erfani's insurance broker submitted a Confirmation Request for Coverage Reinstatement to MPC, requesting to reinstate the lapsed policy. The document was a form, requiring Dr. Erfani to answer a number of questions, including, whether he had any medical condition that "impairs or could impair" his ability to practice. (Fireoved Decl. Exh. D.) In response, Dr. Erfani disclosed that he was having health problems which did not allow him to practice much, that he was doing some work for his existing patients and was not taking any new ones. (Id.) Another question was, "Since the expiration [d]ate of your Policy with Medical Protective: [¶] Are you now or have you been involved, directly or indirectly in a claim, potential claim, or suit arising out of the rendering or failing to render professional services?" Dr. Erfani answered this question in the negative. (Id.)

On February 12, 2009, Dr. Erfani's broker informed MPC he was unable to obtain a letter from Dr. Erfani's treating physician to satisfy MPC's underwriting requirements. He stated that if MPC declined to reinstate the policy, Dr. Erfani would purchase the extension contract instead. (Fireoved Decl. at 5.) On February 14, 2009, MPC's underwriter declined Dr. Erfani's request for reinstatement. According to MPC, in reliance on Dr. Erfani's representation in the reinstatement request that he was unaware of any potential professional liability claims against him, the time to purchase an extension contract was extended to allow him to purchase it more than 30 days after MPC's December 15, 2008 offer. (See id.) Dr. Erfani then timely paid the premium for the extension contract. (Id.)

Subsequently MPC became aware that on January 2, 2009 Dr. Erfani had been served with a lawsuit filed by one of his patients alleging fraudulent billing practices and negligent performance of professional services. (First Am. Compl. Exh. F (Gleason v. Erfani, San Diego County Super. Ct. case no. 37-2008-99317-CU-BT-CTL, filed Dec. 31, 2008).) The complaint also referenced an accusation against Dr. Erfani filed by the Dental Board of California for negligent treatment and fraudulent billing.

On December 17, 2009, MPC filed this action to rescind Dr. Erfani's extension contract. On January 19, 2011, American filed a complaint against MPC for equitable contribution and indemnification. American had issued a professional liability policy to Dr. Erfani for the period January 16, 2006 to January 16, 2007. In addition to Gleason v. Erfani, several other lawsuits had been filed against Dr. Erfani. He allegedly demanded American and MPC to defend him. Although MPC initially participated in Dr. Erfani's defense, it stopped participating in May 2011. American claims MPC has a duty to contribute to Dr. Erfani's defense and the settlement or judgment of the lawsuits, and should reimburse American for taking on more than its share of these expenses.

MPC filed a motion for summary judgment on its rescission claim against Dr. Erfani, arguing that it is entitled to rescission based on Dr. Erfani's misrepresentation regarding claims or lawsuits. Rule 56 of Federal Rules of Civil Procedure empowers the Court to enter summary judgment on factually unsupported claims or defenses, and thereby "secure the just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 327 (1986). Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c).

The moving party's burden on summary judgment depends on whether it bears the burden of proof at trial with respect to the claim or defense at issue. When, as here, "the party moving for summary judgment would bear the burden of proof at trial, it must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial. In such a case, the moving party has the initial burden of establishing the absence of a genuine issue of fact on each issue material to its case." See C.A.R. Transp. Brokerage Co., Inc. v. Darden Restaurants, Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations omitted).

Only if the movant meets its burden on summary judgment, the burden shifts to the non-movant to show summary adjudication is not appropriate. Nissan Fire & Marine Ins. Co. , Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102-03 (9th Cir. 2000); see also Adickes v. S.H. Kress & Co., 398 U.S. 144, 159-60 (1970); Celotex, 477 U.S. at 317, 324. In this regard, the non-movant must "go beyond the pleadings" and rely on "evidentiary materials" such as his "own affidavits, or . . . the depositions, answers to interrogatories, and admissions on file" to designate specific facts in opposition to the summary judgment motion. Celotex, 477 U.S. at 324 (internal quotation marks omitted). These evidentiary materials must show that genuine factual issues remain which "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The non-movant does not meet this burden by showing "some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

When ruling on a summary judgment motion, the non-movant's evidence is to be believed, and all justifiable inferences are to be drawn in his or its favor. Anderson, 477 U.S. at 255. Determinations regarding credibility, the weighing of evidence, and the drawing of legitimate inferences are jury functions, and ...


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