Atlantic Health Care Center, LLC v. Argonaut Insurance Company

• Court: Court of Appeals for the Eleventh Circuit
• Decided: August 24, 2021
• Docket: 21-10675
• Status: Unpublished

Opinion

USCA11 Case: 21-10675 Date Filed: 08/24/2021 Page: 1 of 9

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 21-10675 Non-Argument Calendar ________________________

D.C. Docket No. 2:19-cv-14420-RLR

THE ESTATE OF LILY COOMBS, by and through Susan E. Corrigan, Personal Representative,

Plaintiff,

versus

ATLANTIC HEALTHCARE CENTER, LLC, LYRIC HEALTH CARE FACILITIES, LLC, GRANTHAM HEALTH CARE, LLC, TIMOTHY F. NICHOLSON,

Defendants-ThirdParty Plaintiffs-Appellees,

ADD IT, LLC, MILESTONE RETIREMENT COMMUNITIES, LLC, SLC PROFESSIONALS CHAI, LLC, SLC PROFESSIONALS MONARCH, LLC, SLC PROFESSIONALS HOLDINGS, LLC, et al.,

Defendants,

versus USCA11 Case: 21-10675 Date Filed: 08/24/2021 Page: 2 of 9

ARGONAUT INSURANCE COMPANY,

ThirdParty Defendant-Appellant.

________________________

Appeal from the United States District Court for the Southern District of Florida ________________________

(August 24, 2021)

Before WILLIAM PRYOR, Chief Judge, WILSON and BRASHER, Circuit Judges.

PER CURIAM:

Argonaut Insurance Company appeals the summary judgment in favor of its

insureds, Atlantic Healthcare Center, LLC, its parent companies, and their owner,

Timothy Nicholson. Nicholson and his companies obtained a declaratory judgment

that they were owed a defense under a directors and officers liability insurance

policy in an action filed by the estate of a former resident of an Atlantic Healthcare

nursing home. Argonaut challenges the ruling that a policy exclusion for prior

wrongful acts did not apply to a complaint that Nicholson and his companies

exploited a vulnerable adult. We affirm.

The Estate of Lily Coombs filed in a Florida court a complaint against

Nicholson, his three partners, six entities that Nicholson and his partners jointly

owned, Atlantic Healthcare, and its parent companies, Lyric Health Care Facilities,

LLC, and Grantham Health Care, LLC. The complaint alleged that Coombs, a

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“vulnerable adult with a long-term disability” who was unable to perform daily

self-care activities, resided at the Atlantic Healthcare nursing home from January

9, 2012, until her death on December 5, 2016. The complaint described a scheme

in which Nicholson used Atlantic Healthcare and its parent companies (“the

Nicholson companies”) as his alter egos to contract with his nursing home and to

enrich the entities that he and his partners jointly owned.

The complaint alleged that Nicholson and his partners agreed “[a]t some

time in 2012 . . . to operate a group of management and consulting companies[,

which they jointly owned,] together as a partnership and/or joint venture

partnership (the Venture).” “In or around 2012,” the defendants agreed “to utilize

the Venture to operate, manage, consult with, and control the day-to-day

operations of” Coombs’s nursing home “to generate as much profits as possible”

and to avoid detection of their self-serving contracts. “To prevent scrutiny” by a

regulatory agency, on May 25, 2012, Nicholson filed an application for license

renewal that concealed his ownership of the nursing home.

The complaint alleged four counts. In counts one and two, the Estate

complained that all the defendants assisted and conspired with the nursing home to

breach duties it owed Coombs of loyalty, good faith, and fair dealing. Count one

incorporated all the factual allegations in the preceding paragraphs of the

complaint, and count two incorporated all the allegations in count one. In count

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three, the Estate complained that all the defendants, except the Venture, exploited

Coombs by depriving her “of the use, benefit or possession of [her] funds, assets or

property” by failing to use those resources for her care. See Fla. Stat. § 415.1111.

Count three incorporated select factual allegations in preceding paragraphs of the

complaint regarding venue, jurisdiction, and prerequisites for suit. Count three also

contained factual allegations concerning Coombs’s exploitation, including “it is

not alleged that the Defendants are an entity that established, controlled,

conducted, managed or operated the Facility.” In count four, the Estate complained

that all the defendants conspired to exploit Coombs. See id. Count four

incorporated all the allegations in count three.

Nicholson and his companies submitted a claim to Argonaut for coverage

and a defense under the insurance policy it had issued to Lyric Health Care in

Maryland. The policy covered losses of the “Company,” which consisted of “the

Policyholder . . . and any Subsidiary of the Policyholder,” and of “Insured

Person(s),” including the “director, trustee, governor, management committee

member, Manager, [or] officer[s] . . . of the Company.” Argonaut denied the claim

in part based on an endorsement to its policy that excluded coverage for losses for

conduct occurring “in whole or in part” before December 1, 2012.

[T]he insurer shall not be liable to make payment for Loss . . . based upon, arising out of, directly or indirectly resulting from, in consequence of, attributable to or in any way involving:

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1. any act, omission, fact, circumstance, situation, transaction, or event which occurred, or is alleged to have occurred, in whole or in part, prior to December 1, 2012, including any act, omission, fact, circumstance, situation, transaction, and/or event which constitutes a Wrongful Act; or

2. any other act, omission, fact, circumstance, situation, transaction, or event, whenever occurring or allegedly occurring, which together with an act, omission, fact, circumstance, situation, transaction, and/or event described in paragraph 1. above constitute Interrelated Wrongful Acts.

Argonaut stated that all allegations in the complaint related to the formation of the

Venture, which occurred before December 1, 2012.

Nicholson and his companies filed a third-party complaint seeking a

declaration that Argonaut owed them a duty to defend. The Florida court severed

the third-party action from the Coombs action. Later, Argonaut removed the

severed action to the district court. See 28 U.S.C. § 1332.

Both Argonaut and its insureds moved for summary judgment. Argonaut

argued that its policy excluded from coverage all counts of the complaint because

they were based on allegations of wrongful acts that occurred before the cut-off

date. Nicholson and his companies argued that Argonaut had a duty to defend

because the complaint alleged conduct that occurred or possibly occurred after the

cut-off date.

The district court granted summary judgment in favor of Nicholson and his

companies. The district court ruled that Argonaut had a duty to defend because the

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allegations in the complaint left “open the potential—however slight” that

Nicholson “could have joined the Venture after [the cut-off date of] December 1,

2012, and still have done so ‘in or around 2012’ or ‘at some time in 2012.’” The

district court determined that “a claim based on” or interrelated with Nicholson’s

wrongful act on May 25, 2012, was a prior act excluded from coverage and that

incident was “incorporated in Counts 1 and II alleging claims for breach of

fiduciary duties.” But the district court ruled that Argonaut had a duty to defend

because the incident was “specifically not incorporated in Counts III and IV

alleging exploitation of a vulnerable adult” and the “claim . . . that [Nicholson and

his companies] exploited Ms. Coombs by using her property for their benefit

instead of for her support . . . ha[d] naught to do with the false statement

[Nicholson filed] on May 25, 2012.”

We review de novo a summary judgment. Amerisure Mut. Ins. Co. v.

Auchter Co., 673 F.3d 1294, 1295 n.2 (11th Cir. 2012). Summary judgment is

appropriate when “there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

Under Maryland law, which the parties agree applies, “insurance contracts

are construed as ordinary contracts.” Nat’l Union Fire Ins. Co. of Pittsburgh v.

David A. Bramble, Inc., 879 A.2d 101, 109 (Md. 2005). Their interpretation

“begins with the language employed by the parties.” MAMSI Life & Health Ins.

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Co. v. Callaway, 825 A.2d 995, 1005 (Md. 2003). And all “terms of the contract

are accorded their customary, ordinary, and accepted meanings.” Walk v. Hartford

Cas. Ins. Co., 852 A.2d 98, 106 (Md. 2004).

In Maryland, “[a]n insurance company has a duty to defend its insured for

all claims that are potentially covered under the policy.” Id. That duty “is

determined by the allegations in the tort action[].” Id. (quoting Brohawn v.

Transamerica Ins. Co., 347 A.2d 842, 850 (Md. 1975)). When “a tort plaintiff does

not allege facts which clearly bring the claim within or without the policy

coverage, the insurer still must defend if there is a potentiality that the claim could

be covered by the policy.” Id. (quoting Brohawn). “If there is any doubt as to

whether there is a duty to defend, it is resolved in favor of the insured.” Id. at 106–

07. And so long as “any claims potentially come within the policy coverage, the

insurer is obligated to defend all claims.” Utica Mut. Ins. Co. v. Miller, 746 A.2d

935, 940 (Md. 2000).

Argonaut had a duty to defend the suit against Nicholson and his companies

because the complaint alleges a wrongful act potentially covered by their insurance

policy. By its plain terms, the endorsement to the policy excluded from coverage

wrongful acts and acts interrelated with a wrongful act that occurred before

December 1, 2012. That exclusion did not apply to the Estate’s complaint in count

three that Nicholson, his companies, his partners, and their jointly-owned entities

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exploited Coombs. Count three alleges no date when any defendant misused

Coombs’s property. And count three did not incorporate the earlier allegation

about Nicholson’s wrongful act of filing a false application on May 25, 2012, or

share a common nexus with that distinct activity. So the defendants could have

exploited Coombs in the years after the cut-off date while she continued to live at

the nursing home. Because Nicholson and his companies could have exploited

Coombs after December 1, 2012, their claim possibly is covered by the policy they

bought from Argonaut, and it has a duty to defend them.

Argonaut argues that it owes no duty to defend because “all of the acts

undertaken by Defendants were part and parcel of the Venture’s conspiracy” and

involved interrelated wrongful acts that preceded the cut-off date. But the Venture

was not named in count three as a perpetrator who exploited Coombs. See Fla. Stat.

§ 415.1111 (“A vulnerable adult who has been . . . exploited . . . has a cause of

action against any perpetrator . . . .”). And the specific allegations unique to the

count for exploitation eliminated the Venture as a perpetrator by stating that the

defendants were not “an entity that established, controlled, conducted, managed or

operated the Facility.”

Argonaut also argues, for the first time, that it owes no defense because

Nicholson and his companies filed a single claim for coverage and some counts of

the complaints against them involve wrongful acts that preceded the cut-off date

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and are excluded from coverage. In the district court, Argonaut argued that the

wrongdoing that formed the basis for each count of the complaint was interrelated.

We decline to address the merits of a theory Argonaut raises for the first time on

appeal. See Access Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1331 (11th Cir.

2004).

We AFFIRM the summary judgment in favor of Atlantic Healthcare, its

parent companies, and Nicholson.