The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
WALTER HAMILTON AND DIANNA )
HAMILTON, Individually and as Legal )
Guardians of the Person and Estate of )
KAITLIN HAMILTON, an Incapacitated )
Person, )
)
Plaintiffs, )
)
vs. ) No. CIV-18-1240-C
)
BAYER HEALTHCARE )
PHARMACEUTICALS INC., BAYER )
PHARMA AG, BAYER )
CORPORATION, BAYER )
HEALTHCARE LLC, BAYER )
HEALTHCARE AG AND BAYER AG )
)
Defendants, )
)
MUTUAL OF OMAHA INSURANCE )
COMPANY, )
)
Intervenor )
)
vs. )
)
WALTER HAMILTON AND DIANNA )
HAMILTON, Individually and as Legal )
Guardians of the Person and Estate of )
KAITLIN HAMILTON, an Incapacitated )
Person, )
MEMORANDUM OPINION AND ORDER
The present action is a dispute over insurance coverage. Plaintiffs are the parents
and legal guardians of Kaitlin Hamilton. Kaitlin Hamilton was covered under a group
catastrophic injury insurance coverage pursuant to her status as a student athlete at
Oklahoma State University. Kaitlin suffered a left calf strain in December of 2009 while
at an athletic meet in Kansas City. She received treatment for that injury off and on until
January of 2010. In January she went to see an orthopedic surgeon who was concerned
that she had developed a deep vein thrombosis (“DVT”). The orthopedic surgeon
scheduled Kaitlin for an ultrasound and on the morning of her scheduled ultrasound Kaitlin
was found unresponsive on her dorm room floor, having suffered a pulmonary embolism
and subsequent brain injury.
A claim was made on the insurance policy issued by Mutual and in July of 2010,
Mutual determined that Kaitlin’s claim was covered and began providing benefits. Prior
to paying benefits, Mutual submitted medical records to an independent physician for
review. That review noted that while Kaitlin’s taking YAZ1 birth control was the most
likely genesis of the DVT, it was impossible to eliminate the calf injury as a possible cause.
Indeed, notes from Mutual’s claims file, authored by the decisionmaker on the claim,
outlined the inability to distinguish causation from birth control versus the injury, and on
that basis accepted the claim as a covered injury.
In October of 2014, attorneys representing Plaintiffs in an action against the
manufacturer of the birth control pill contacted Mutual to obtain copies of the claims file.
1 The term YAZ or birth control when used herein refers to the oral contraceptive
Yasmin and/or YAZ, also known generically as drospirenone and ethinyl estradiol
designed, researched, manufactured, tested, advertised, promoted, marketed, sold, and
distributed by Defendants Bayer Healthcare Pharmaceuticals, Inc., Bayer Pharma AG,
Bayer Corporation, Bayer Healthcare LLC, Bayer Healthcare AG, and Bayer AG.
2
In July of 2016, a medical record management company obtained copies of records from
Mutual related to an ongoing lawsuit. In August of 2017, Mutual sent a letter to Plaintiffs
indicating that it had terminated benefit payments under the policy based on new evidence
that clarified Kaitlin’s injuries did not directly result from an accident at a covered event.
In this action Mutual argues that certain parts of this evidence were new information.
However, documents from the claims file as well as deposition testimony in this case
demonstrate that Mutual was aware that Plaintiffs were pursing an action against Bayer
several years prior to the 2017 termination letter. After approximately 45 days, and
following protest from lawyers representing the Hamiltons as well as other community
leaders, Mutual reinstated benefits to Kaitlin. However, the parties are in dispute as to
whether or not all outstanding claims under the policy have been paid.
Mutual sought leave to intervene in the action between the Hamiltons and Bayer
and once Mutual had done so, the Hamiltons filed a counterclaim against Mutual, asserting
claims for breach of contract and bad faith. Mutual has filed a Motion for Summary
Judgment seeking judgment on Plaintiffs’ claim for breach of contract and subrogation, as
well as the claim for bad faith.
Plaintiffs seek partial summary judgment, arguing they are entitled to the value of
the insurance policy, as the August 2017 termination by Mutual constituted a repudiation
of the contract. Plaintiffs also request judgment on Mutual’s request for subrogation,
arguing that there is no right of subrogation or alternatively that the subrogation clause in
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the insurance policy does not cover any recovery that Kaitlin obtained from the litigation
related to Bayer.2
STANDARD OF REVIEW
Summary judgment is appropriate if the pleadings and affidavits show there is no
genuine issue as to any material fact and that the moving party is entitled to judgment as a
matter of law. Fed. R. Civ. P. 56(c). [A] motion for summary judgment should be
granted only when the moving party has established the absence of any genuine issue as to
a material fact. Mustang Fuel Corp. v. Youngstown Sheet & Tube Co., 561 F.2d 202,
204 (10th Cir. 1977). The movant bears the initial burden of demonstrating the absence
of material fact requiring judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986). A fact is material if it is essential to the proper disposition of the
claim. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). If the movant carries
this initial burden, the nonmovant must then set forth specific facts outside the pleadings
and admissible into evidence which would convince a rational trier of fact to find for the
nonmovant. Fed. R. Civ. P. 56(e). These specific facts may be shown by any of the
kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves.
Celotex, 477 U.S. at 324. Such evidentiary materials include affidavits, deposition
transcripts, or specific exhibits. Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d
1022, 1024 (10th Cir. 1992). The burden is not an onerous one for the nonmoving party
2 Plaintiffs settled their claims against the Bayer Defendants in August of 2019.
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in each case, but does not at any point shift from the nonmovant to the district court. Adler
v. Wal-Mart Stores, Inc., 144 F.3d 664, 672 (10th Cir. 1998). All facts and reasonable
inferences therefrom are construed in the light most favorable to the nonmoving party.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
ANALYSIS
Beginning with Mutual’s Motion, the Court will address each party’s Motion for
Summary Judgment in this Order.
A. Breach of Contract
Mutual argues that Plaintiffs cannot demonstrate a breach of contract claim because
they cannot show that Kaitlin was entitled to benefits under the policy. In support of its
first argument, Mutual directs the Court to the opinions of the medical providers in this
action. According to Mutual, the medical experts for both parties indicate that YAZ was
the most likely cause of the DVT and subsequent injury. Mutual directs the Court to the
language of the insurance policy defining what is a covered accident. The policy states
Covered Accident “means an accident that occurs while this Policy is in effect, between
August 1, 2009, and August 1, 2013, which directly results in bodily injury or death (not
excluded from coverage by the Policy Exclusions and Limitations) of an Insured
Person . . . .” (Dkt. No. 254-2, p. 14.) As noted above, Mutual argues that Kaitlin’s
injury does not fall under the definition of a covered accident because it was not directly
caused by the left calf strain. On this point Mutual’s argument must fail. Even Mutual’s
medical experts state unequivocally that it is possible that the left calf strain was a cause of
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the DVT. Indeed, the medical reports are clear that it is impossible to distinguish whether
the strain alone, YAZ alone, or a combination of YAZ and the muscle strain led to the
DVT.
Indiana recognizes that where a pre-existing medical condition sets in motion a
chain of events which results in the ultimate injury, the original event is the direct cause of
the ultimate injury. Am. States Ins. Co. v. Morrow, 409 N.E.2d 1140, 1141-42 (Ind. Ct.
App. 1980). 3 Indeed, to the extent Mutual argues that other jurisdictions have a more
restrictive definition of direct cause, the Indiana courts have expressly rejected that
position. See Nationwide Mut. Ins. Co. v. Neville, 434 N.E.2d 585, 590 (Ind. Ct. App.
1982). Under Indiana law, “[i]t is the duty of courts to interpret a contract so as to
ascertain the intent of the parties.” First Fed. Sav. Bank of Ind. v. Key Mkts., Inc., 559
N.E.2d 600, 603 (Ind. 1990). Consistent with that instruction, the Court has evaluated the
language of the contract and applied the appropriate Indiana law to determine that the left
calf strain falls within the scope of a direct cause, rendering it a Covered Accident under
the terms of the policy. Thus, Kaitlin is entitled to benefits.
Alternatively, Mutual argues that Kaitlin suffered no damage as a result of the
termination of claim payments between August 17 and October 2, 2017. Mutual argues
that because it subsequently paid any claims that were denied following the termination of
benefits, Plaintiffs cannot demonstrate that Kaitlin has suffered any damage and, as a result,
3 The parties are in agreement that Indiana law controls interpretation of the
insurance policy, while Oklahoma law will govern the bad faith claims.
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the breach of contract claim must fail. Mutual argues that because Plaintiffs are not
parties to the contract, any damage or loss they suffered is not compensable damage for
any alleged breach of the policy.
Certainly, at the time Mutual suspended payments under the policy, Kaitlin suffered
a loss; that is, there were medical providers that were not paid. Kaitlin would not have
received some of the care that was necessary absent payments by third parties. Thus, she
clearly suffered a loss due to Mutual’s termination of benefits. Orto v. Jackson, 413
N.E.2d 273, 278 (Ind. Ct. App. 1980) (“A party injured by a breach of contract is entitled
to receive damages that may reasonably be considered to have arisen naturally from the
breach or as may reasonably have been in contemplation of the parties at the time they
entered the contract as a probable result of its breach.”) That Mutual ultimately mitigated
its damages by paying the claims does not absolve it of the breach. Rather, Mutual’s
actions only impact the amount of damages that may be recovered for the breach. “A
fundamental rule of damages applicable to breach of contract cases is that the party injured
by the breach is limited in recovery to the loss actually suffered; he is not entitled to be
placed in a better position than he would have been if the contract had not been broken.”
Jay Clutter Custom Digging v. English, 393 N.E.2d 230, 234-35 (Ind. Ct. App. 1979).
The amount of damages, if any, that Plaintiffs are entitled to recover for breach of contract
is a matter for determination by the jury.
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B. Bad Faith
Mutual argues it is entitled to judgment on Plaintiffs’ bad faith claim. According
to Mutual, the undisputed facts demonstrate it acted reasonably and in good faith in
handling Kaitlin’s claim. Mutual states that at a minimum there was a legitimate dispute
as to coverage and therefore there can be no bad faith. See Bailey v. Farmers Ins. Co.,
2006 OK CIV APP 85, ¶ 16, 137 P.3d 1260, 1264. In response, Plaintiffs offer sufficient
evidence to demonstrate a question of fact exists on this issue. The facts presented by
Plaintiffs, if accepted by the jury, would establish that Mutual acted in bad faith in
terminating the policy. In its Reply, Mutual argues that many of the acts now relied on
by Plaintiffs as bad faith were not set forth in their counterclaim. However, the
Counterclaim provided adequate notice to Mutual that Plaintiffs were pursuing claims for
bad faith. That discovery has now allowed Plaintiffs to more explicitly detail that claim
does not prejudice Mutual.
C. Punitive Damages
Finally, Mutual argues that Plaintiffs’ claims for punitive damages must fail because
their claim for bad faith fails. Alternatively, Mutual argues that the evidence does not
demonstrate the level of conduct necessary to support an award of punitive damages.
The Court has previously determined that the issue of bad faith will be submitted to
the jury. Thus, Mutual’s first argument fails. Whether or not the evidence demonstrates
conduct by Mutual that warrants submission of the issue to the jury cannot be determined
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until the evidence is presented at trial. Certainly, at this stage, Plaintiffs have offered
enough evidence to deny Mutual’s request for summary judgment on the issue.
D. Repudiation
Before turning to Plaintiffs’ arguments related to repudiation, the Court must first
address whether or not the issue is before it. First, Mutual argues that the counterclaim is
not even properly before the Court, as Plaintiffs filed an answer to an amended intervenor
complaint that did not include a counterclaim. As Plaintiffs note, the counterclaim and
answer were separate documents pursuant to Court Order. Thus, when the second
amended complaint was filed, only an answer was required to be filed in response. The
counterclaim remained pending as no amendment or other challenge had been brought
which required it to be refiled.
Turning to whether or not the repudiation claim was ever raised, Plaintiffs argue
that their counterclaim asserts breach of contract and that under Indiana law, which the
parties agree govern the interpretation of the insurance policy at issue here, repudiation is
merely a type of breach of contract. Additionally, in the joint status report filed before
this Court, Plaintiffs specifically claim the full amount of the contract in damages. Thus,
while it perhaps would have been more prudent for Plaintiffs to have raised or at least made
clear that their claim was based on repudiation of the contract, it does appear that Mutual
was fairly on notice that the claim for the full amount of the insurance contract would be
made by Plaintiffs. Indeed, nowhere in their response to the motion for summary
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judgment does Mutual argue any prejudice from Plaintiffs’ failure to use the word
“repudiate” until filing the present motion for summary judgment.
The Indiana Court of Appeals stated, “where liability has attached under a contract
of insurance, but where liability has been denied by the insurer, the insured may treat the
contract as repudiated and may pursue his remedy to recover all that is due him in a single
suit on a lump-sum basis.” Colonial Life & Accident Ins. Co. v. Newman, 284 N.E.2d
137, 139 (Ind. Ct. App. 1972).
In order to establish repudiation, Plaintiffs must show the existence of a contract
and a positive, absolute, and unconditional repudiation of that contract. See Eden United,
Inc. v. Short, 573 N.E.2d 920, 929 (Ind. Ct. App. 1991). Plaintiffs argue that there is no
question that liability attached or that the existence of a contract existed when Mutual made
its 2010 determination that Kaitlin’s injury was covered under the policy. Mutual argues
that Plaintiffs cannot demonstrate an entitlement to coverage because the evidence supports
its position that the DVT was caused by the birth control that Kaitlin was taking.
However, as the Court made clear elsewhere in this Order, because it cannot be clearly
established whether the DVT was caused by birth control pills, the athletic injury, or some
combination, Kaitlin’s current injuries are a covered event under the policy and therefore
she is entitled to continue to receive benefits under that policy.
Mutual’s primary defense to Plaintiffs’ claim of repudiation is Plaintiffs’ continued
request for payment under the policy even following the termination. Mutual points to
letters from Plaintiffs’ counsel demanding that the benefits be reinstated after termination.
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Relying on Ind. Life Endowment Co. v. Carnithan, 109 N.E. 851 (Ind. App. 1915), Mutual
argues that where the insured treats the policy as in force and continues to recover benefits
he cannot claim repudiation by the insurance company. In response, Plaintiffs direct the
Court to Fischer v. Heymann, 12 N.E.3d 867 (Ind. 2014), for legal support that their right
to continue to make claims under the contract amounts to mitigation and since they were
required to mitigate their damages it does not trump any claim for repudiation.
The Court finds the fatal flaw in Plaintiffs’ request for repudiation is their action of
continued receipt of policy benefits once Mutual began repaying. The Carnithan case
cited by Mutual is instructive on this point:
appellee was trying to hold on to two inconsistent remedies, vis., he was
trying to keep the contract alive in order that he might enforce one of its
provisions and at the same time treat it as canceled for all purposes except
for the purpose of predicating damages for a repudiation thereof. Appellee
by thus electing to keep such contract alive for his own benefit kept it alive
for all purposes both for himself and for appellant, and estopped himself from
afterwards predicating a suit thereon for the alleged repudiation.
Carnithan, 109 N.E. 851, 856. Plaintiffs’ action in demanding reinstatement of benefits
and/or seeking other means of financing Kaitlin’s medical needs could be seen as
mitigation. However, once Mutual reversed its position on termination and Plaintiffs
accepted that change by continuing to submit claims for payment, any argument of
repudiation was lost, and the contract was once again accepted by each party. Thus,
Plaintiffs’ request for judgment on the claim of repudiation will be denied.
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E. Estoppel
Plaintiffs seek a determination that Mutual is estopped from denying continued
liability under the policy because it failed to make a reservation of rights when it first began
paying claims on Kaitlin’s behalf. In light of the Court’s ruling that coverage exists under
the policy, this issue is moot.
F. Subrogation
Plaintiffs argue that Mutual has no subrogation rights under the policy. According
to Plaintiffs, the policy provisions which govern any subrogation claim establish that any
funds recovered from Bayer are not subject to subrogation. Unsurprisingly, Mutual
disagrees, arguing it is entitled both to recover all monies paid on Kaitlin’s behalf from any
proceeds of the settlement with Bayer, and also treat any future claims under the policy as
“Other Insurance.”
The relevant policy provisions are as follows:
If the Insured Person has rights to recover from a third party all or part of any
payment made under the terms of this Policy, those rights, are transferred to
the Company, regardless of whether the Insured Person has been made whole
or has received full compensation from or has been paid by the third party all
losses sustained or alleged. The Insured Person must do nothing after the
Covered Accident to impair such rights. At the Company’s request, and at
the Company’s expense, the Insured Person will bring legal action or transfer
those rights to the Company and help the Company enforce them.
In addition, the Company shall be entitled to recover any benefits paid up to
the amount of the “Net Recovery” by the Insured Person against any such
third party. “Net Recovery” shall mean the gross recovery against the third
party wrongdoer, less attorneys' fees and expenses and court costs.
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Should any money be recovered by the Insured Person from an alleged third
party wrongdoer for the same Covered Accident for which benefits were paid
under this Policy, the “Net Recovery” shall be considered Other Insurance
for all purposes of this Policy.
Dkt. No. 188, Exh. 9, KHvMOO 015302. The interpretation of this language is a question
of law for the Court. Am. Family Life Assurance Co. v. Russell, 700 N.E. 2d 1174, 1177
(Ind. Ct. App. 1998). The language is given its plain and ordinary meaning. Liberty
Mut. Ins. Co. v. Mich. Mut. Ins. Co., 891 N.E.2d 99, 101 (Ind. Ct. App. 2008). If there
are ambiguities in the language, those ambiguities are construed against the insurer and
resolved in favor of the insured. Tate v. Secura Ins., 587 N.E. 2d 665, 668 (Ind. 1992).
“The construction of the contract of insurance cannot be limited to a strict construction of
the eleventh section or any other one section, but must be construed as a whole.” Bowen
v. Farmers Mut. Ins. Co. of Mulberry, 199 N.E. 426, 428 (Ind. App. 1936).
Plaintiffs argue the three paragraphs of the subrogation clause should be read as two
independent clauses with the first two paragraphs as one and the final paragraph the other.
The Court is not persuaded that is a proper construction of the policy language. Rather,
applying the rule requiring construction as a whole, the Court finds all three paragraphs
must be considered together. Nonetheless, the Court agrees with Plaintiffs that Mutual is
not entitled to subrogation for payments made on behalf of Kaitlin.
First, the Court notes that language in the first paragraph required certain action by
Mutual. Mutual was required to either bring an action against Bayer on Kaitlin’s behalf,
or pay the expenses of any action brought on her behalf. Mutual did neither. Mutual
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may argue that it could not have done so as it was unaware of a potential claim against
Bayer until after Plaintiffs had filed their action. First, this argument is contrary to the
evidence in the claims file. As noted above, Mutual was aware that Kaitlin’s birth control
pills were a potential factor in her injury from the initial medical review conducted at
Mutual’s request. As early as 2010, Mutual’s doctor opined that the use of oral
contraceptives played a role in the DVT. Even if Mutual was not aware until litigation
was filed against Bayer, there is no evidence Mutual ever offered to assist Plaintiffs with
litigation expenses. Thus, Mutual failed to perform its part under the first paragraph. To
allow Mutual to have sat on the sidelines until a favorable recovery was made and only
then seek subrogation would not give effect to all the contract language. It may be said
that the language is unclear whether Mutual had a duty to act. Even if that is the case,
when that ambiguity is construed against Mutual, a requirement of action must be imposed.
The second paragraph begins with the phrase “in addition.” That phrase clearly
links it to the first paragraph and therefore it is subject to the same requirement that Mutual
have taken some action to pursue the claim or pay the expenses. Plaintiffs argue the third
paragraph stands alone. However, whether treated as an independent option or an
addition to the first two paragraphs, the third does not change the outcome for two reasons.
The first is apparent – as explained above, Mutual did not take the required steps to preserve
its interests. The second is that advocated by Plaintiffs. The third paragraph provides
for subrogation when recovery from the third party is for the same “Covered Accident.”
“Covered Accident” is a term defined in the policy. Any recovery from Bayer did not
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result from “the same Covered Accident for which benefits were paid under this Policy.”
Dkt. No. 188, Exh. 9, KHvMOO 015302. Bayer settled with Plaintiffs because its product
– YAZ – was a cause of Kaitlin’s injuries. Mutual must pay claims because the calf strain
was a “covered accident” as defined by the policy. In its response, Mutual repeatedly
argues it is entitled to subrogation because the recovery from Bayer and the payments it
made are the result of the same “injury.” While that may be correct, it is not what the
policy says. As noted above, the Court’s obligation in this matter is to give effect to the
policy as it is written, not as a party wished it had been written. Because the payments to
Plaintiffs from Bayer and Mutual are not for the “same Covered Accident,” there can be
no right of subrogation under the policy. Plaintiffs’ Motion will be granted on this issue.
Mutual’s Motion will be denied.
G. Reservation of Rights
In light of the Court’s resolution of the subrogation clause, Plaintiffs’ arguments
that certain subrogation claims have been waived due to a failure to reserve rights is moot.
H. Other Insurance
Finally, Plaintiffs argue the Other Insurance clause of the policy does not apply to
any recovery from Bayer. Plaintiffs note that in Jensen v. Board of Regents Univ. of
Nebraska, 684 N.W.2d 537 (Neb. 2004), the Nebraska Supreme Court construed a similar
NCAA policy. In examining the other insurance clause, the Jensen court relied on the
ejusdem generis principle of contract construction. Id. at 543. Under that rule “specific
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words or terms modify and restrict the interpretation of general words or terms where both
are used in sequence.” Id. (citation omitted). The Jensen court then stated:
Applied in this context, our interpretation of the broad, general definition
“any other source whatsoever” is modified by the specific words and terms
surrounding it, notably, the specific term “Other Insurance” and the seven
specific examples of “Other Insurance,” all of which bear the traditional
characteristics of insurance. Thus, NASIC’s general description of “Other
Insurance” as including recovery from any source whatsoever is restricted to
include only recovery from any form of insurance. Jensen’s settlement with
the university bears none of the traditional characteristics of insurance.
Id. Mutual argues this case is inapplicable as the language of the policy is different. In
Reply, Plaintiffs attach a copy of the policy at issue in Jensen. That policy is strikingly
similar to the one at issue here. Regardless of any similarities or differences, Mutual’s
argument directs the Court to the subrogation clause, not the Other Insurance clause. As
the Court has rejected the subrogation claim, this argument is unhelpful to Mutual. The
Jensen court noted that in defining sources of “other insurance” the policy listed seven
specific sources, all of which are traditional forms of insurance. Id. The policy at issue
here provides seven examples of “other insurance” and indeed each are a traditional form
of insurance. Indiana applies the rule of ejusdem generis when appropriate. O’Bryant
v. Adams, 123 N.E.3d 689, 693 (Ind. 2019).
The Court is not persuaded that application of ejusdem generis is necessary. The
language of the “Other Insurance” clause is fairly clear, and it is inapplicable to Plaintiffs’
recovery from Bayer. Were the Court to find the terms ambiguous it would apply the
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doctrine and again find that the “Other Insurance” clause does not apply. Accordingly,
Plaintiffs are entitled to judgment on this issue.
CONCLUSION
For the reasons set forth herein, the Amended Motion for Summary Judgment of
Intervenor Mutual of Omaha Insurance Company (Dkt. No. 254) is DENIED. The
Motion for Partial Summary Judgment of Plaintiffs Walter Hamilton and Dianna Hamilton,
Individually and as Legal Guardians of the Person and Estate of Kaitlin Hamilton, an
Incapacitated Person (Dkt. No. 188) is GRANTED in part and DENIED in part.
Plaintiffs’ request for repudiation is DENIED. Plaintiffs’ arguments on the issues of
estoppel and reservation of rights are MOOT. Plaintiffs’ request for judgment on
subrogation and “Other Insurance” is GRANTED.
IT IS SO ORDERED this 5th day of September 2019.
United States District Judge
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