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Evanston Insurance Co. v. Aminokit Laboratories, Inc.

United States District Court, D. Colorado

February 7, 2019

EVANSTON INSURANCE COMPANY, Plaintiff,
v.
AMINOKIT LABORATORIES, INC., and JONATHAN LEE, M.D., Defendants.

          FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

          RAYMOND P. MOORE UNITED STATES DISTRICT JUDGE

         A bench trial on this matter was held before the Court on January 8, 2019. Plaintiff Evanston Insurance Company tried its unjust enrichment claim against Defendant Jonathan Lee, M.D. After the trial, the Court took the matter under advisement and ordered the parties to submit proposed findings of fact and conclusions of law. The parties filed their proposals on January 18, 2019. (ECF Nos. 297, 298.) Having reviewed the evidence presented, the post-trial submissions, applicable law, and arguments of counsel, the Court now enters its Findings of Fact, Conclusions of Law, and Order.

         I. BACKGROUND

         This litigation involves a coverage dispute between an insurance carrier and those claiming benefits under an insurance policy it had issued. Plaintiff Evanston Insurance Company (“Plaintiff” or “Evanston”) filed the operative amended complaint against defendants Aminokit Laboratories, Inc. (“Aminokit”), Tamea Rae Sisco (“Sisco”), and Jonathan Lee, M.D (“Lee”) (collectively referred to as “the Defendants”).[1] (ECF No. 46.) This coverage action stems from an earlier civil lawsuit in which the Defendants were sued by a former patient. In the underlying lawsuit, Lee sought benefits (defense and indemnity) under the policy.

         In this case, Evanston alleges two claims for relief against Lee: (1) declaratory judgment; and (2) unjust enrichment for $26, 407.36 paid in defense costs and $260, 000.00 paid for settlement of the underlying lawsuit. Before trial, the Court granted Evanston summary judgment against Lee on the declaratory judgment claim, declaring that Evanston owed no duty to defend or indemnify Lee in the underlying lawsuit. (ECF No. 267.) The Court also granted Evanston summary judgment as to the claim that Lee was unjustly enriched by its payment of defense costs in the amount of $26, 407.36. (Id. at 19.) Thus, only two issues remained for trial to the Court: (1) whether Evanston could recover the $260, 000 settlement payment from Lee under its unjust enrichment claim; and (2) if so, whether Lee is jointly and severally liable for the entire $260, 000. The Court now turns to the resolution of these two remaining issues.

         II. FINDINGS OF FACT

         To the extent that any conclusions of law are deemed to be findings of fact, they are incorporated herein by reference as findings of fact.

         1. Evanston issued policy no. SM903576 (the “Policy”) to Aminokit for policy period October 19, 2014 to December 19, 2015. The Policy contained two Coverage Parts: Specified Medical Professions Professional Liability Insurance - Claims Made Coverage affording limits of $1, 000, 000 Each Claim and $3, 000, 000 Aggregate; and Specified Medical Professions General Liability (Including Products and Completed Operations Liability) Insurance - Claims Made Coverage affording limits of $1, 000, 000 Each Claim, $3, 000, 000 Aggregate.

         2. On July 20, 2015, Brandon Lassley, and his mother, Julia Walker, filed a lawsuit in the United States District Court for the District of Colorado, Case No. 15-cv-1531 (“Lassley”). The Lassley lawsuit named the following four defendants: Aminokit Laboratories, Inc.; Tamea Rae Sisco, individually and as beneficial owner of Aminokit; Jonathan Lee, MD; and White Lodging Services Corporation.

         3. The Lassley complaint identified Lee as a medical doctor, the medical director of Aminokit, and the only employee who was medically trained. Defendant Lee is alleged to have had knowledge of and participated in the fraudulent scheme that was being perpetrated against Aminokit's unsuspecting patients. Lassley and his mother alleged that Aminokit was little more than an amalgamation of misrepresentations, fraud, and unlicensed medical care in an unsafe environment (treating patients at a Fairfield Inn) and that its employees held themselves out as having medical training and expertise when, in actuality, they did not.

         4. The initial Lassley complaint advanced three claims for relief against Lee:

a. The first claim against Defendant Lee asserted violations of the Racketeer Influenced Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq. The conduct that undergirds the RICO claim pertaining to Defendant Lee was his participation in the submission of fraudulent insurance claims via wire and mail;
b. The second claim against Lee accused him of being part of a civil conspiracy with respect to his participation in the fraudulent enterprise; and
c. The third claim alleged that Defendant Lee breached a fiduciary duty he owed to the patients of Aminokit by failing to provide adequate treatment by licensed professionals.

         5. The Lassley plaintiffs sought to hold the four named defendants jointly and severally liable.

         6. After being served with the Lassley complaint, Lee requested defense coverage and indemnification from Evanston under the Policy.

         7. By letter dated August 28, 2015, Evanston denied Lee coverage for all claims advanced against him in the initial Lassley complaint.

         8. On October 15, 2015, the plaintiffs in the Lassley lawsuit amended the complaint to add a fourth claim against Lee (and other defendants) for negligence.

         9. The amended complaint in the Lassley case alleged that Lee was negligent because, as a treating physician to the patients at Aminokit, he owed his patients a duty to ensure that they received adequate and appropriate medical care, but breached this duty.

         10. Lee again requested coverage for the claims asserted against him in the amended Lassley complaint.

         11. In response to the amended Lassley complaint, Evanston supplemented its coverage position with a letter dated December 8, 2015. In the supplemental coverage letter, Evanston reiterated its position that no coverage existed, but stated that it would provide a defense to Lee, subject to a full reservation of its rights, specifically including the right to withdraw the defense and the right to pursue reimbursement. Lee requested that attorney Dick Waltz represent and defend him in the Lassley case; Evanston agreed to (and paid for) Mr. Waltz's representation of Lee.

         12. On December 9, 2015, Evanston filed this declaratory judgment action against Aminokit, Sisco, and Lee seeking a determination ...


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