                                                                                      FILED
                               NOT FOR PUBLICATION                                     MAY 21 2010

                                                                                  MOLLY C. DWYER, CLERK
                       UNITED STATES COURT OF APPEALS                               U .S. C O U R T OF APPE ALS




                                FOR THE NINTH CIRCUIT



 TEXAS FARMERS INSURANCE                                No. 08-55835
 COMPANY,
                                                        D.C. No. 06-cv-8220-DDP-AJW
               Plaintiff - Counter-Defendant-
 Appellant,
                                                        MEMORANDUM *
   v.

 LEXINGTON INSURANCE COMPANY,

            Defendant - Counter-
 Claimant-Appellee.



                      Appeal from the United States District Court
                         for the Central District of California
                      Dean D. Pregerson, District Judge, Presiding

                          Argued and Submitted October 8, 2009
                                  Pasadena, California

Before: KLEINFELD and TALLMAN, Circuit Judges, and LAWSON,** District
Judge.




         *
              This disposition is not appropriate for publication and is not precedent except as
provided by Ninth Circuit Rule 36-3.
        **
               The Honorable David M. Lawson, United States District Judge for the Eastern
District of Michigan, sitting by designation.
      Texas Farmers Insurance Company appeals from a summary judgment

granted by the district court declaring that Texas Farmers is responsible for the full

amount of a settlement of a medical malpractice claim. We have jurisdiction

pursuant to 28 U.S.C. § 1291, and affirm.

      Like the district court, we view this case as a dispute between a primary

insurer (Texas Farmers) and an excess insurer (defendant Lexington Insurance

Company), even though Lexington did not have a direct relationship with the

insured, Kaiser Permanente. The actual excess carrier, Ordway Indemnity Ltd.,

which provided a $10 million excess policy to Kaiser, ceded the risks involved in

this case to Lexington by means of a “following-form” facultative reinsurance

policy that Lexington issued to Ordway. Lexington, therefore, stood in Ordway’s

place with respect to the claims made by the underlying plaintiff. The central issue

in the case focuses on the event(s) that triggered coverage under the respective

policies and the claims that were included in the settlement.

      It is undisputed that the malpractice plaintiff, Janice Kupukaa, who suffered

from diabetic retinopathy, underwent two eye surgeries at Kaiser Permanente of

Hawaii on July 9, 2001 and November 6, 2001, and those surgeries left her blind.

It also is undisputed that Ms. Kupukaa had been treating with Kaiser Permanente

for diabetes beginning in the late 1990s. On April 9, 1999, Texas Farmers issued


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to Kaiser Permanente a claims-made policy – transformed into an occurrence

policy by endorsement – covering a one-year period with a liability limit of $5

million per claim, and renewed the policy for another year. It reduced its coverage

to $1 million per claim on April 9, 2001, effective through April 9, 2002.

Lexington (through Ordway) did not come on the risk until the 2001-2002 policy

period. The district court properly characterized the legal issue as whether Texas

Farmers’s coverage was triggered prior to April 9, 2001, when the $5 million

liability limit was in effect, and before Lexington came on the risk.

      When Janice Kupukaa and her husband, Joseph, filed their lawsuit against

Kaiser Permanente and Dr. Steven Miller, their complaint was based entirely on

Dr. Miller’s negligence in performing the 2001 eye surgeries. But when the case

moved to arbitration, the record is clear that the parties stipulated to add the claim

that Kaiser Permanente’s negligent treatment of Ms. Kupukaa’s diabetes before

2001 caused kidney damage requiring her to undergo dialysis. There is no dispute

that during her treatment at Kaiser Permanente, Ms. Kupukaa developed diabetic

nephropathy that required dialysis and proliferative diabetic retinopathy that

required eye surgery. So at the time of the settlement on February 28, 2007, both

claims were on the table and both were resolved by the settlement agreement, in




                                           3
which the Kupukaas agreed to release “all claims which are, or might have been,

the subject matter of the Arbitration.” ER 435-36.

      Texas Farmers argues that its retained defense counsel in the underlying tort

case did not think much of the kidney damage claim, and the main purpose of the

settlement was to discharge the eye surgery claim. It insists therefore that there is a

factual dispute over which claims were settled. It also contends that even if the

kidney damage claim were included in the settlement, there is no evidence that the

claim arose before the 2001-2002 policy period because the occurrence language in

its policy requires that the injury manifest itself during the coverage period. Texas

Farmers contends further that a claim for interrelated wrongful acts will be

considered to have been made “on the earliest date written notice of such Claim is

received by any Insured,” Appellant’s Br. at 31 (quoting ER 340), which was after

April 9, 2001. Neither the relevant policy language, the record, nor the law favors

these arguments.

      First, Texas Farmers’ policy “applies to claims or suits brought as a result of

Wrongful Acts . . . and/or Occurrences which take place during the Coverage

Period.” ER 393. The determination of the occurrence date is subject to the

“Interrelated Wrongful Act” provision; interrelated wrongful acts are wrongful acts

or occurrences “which are logically or causally connected and have as a common


                                           4
nexus any fact, circumstance, situation, event, transaction or series of facts,

circumstances, situations, events or transactions. Any such Interrelated Wrongful

Acts shall be deemed to have happened at the time of the first Wrongful Act within

those Interrelated Wrongful Acts.” Id. at 367. Texas Farmers conceded in the

district court that the kidney damage claims and the eye surgery claims were

interrelated wrongful acts.

      Second, Texas Farmers’s policy defines “occurrence” to mean “an accident.”

ER 370. There is no reference in the policy to a manifestation requirement.

Applying California law (which the parties agree applies here), we have held that

coverage under an occurrence policy is triggered when “the complaining party was

actually damaged,” not when the wrongful act was committed. Smith v. Hughes

Aircraft Co., 22 F.3d 1432, 1440 (9th Cir. 1994), superseding 10 F.3d 1448

(quoting Chu v. Canadian Indem. Co., 224 Cal. App. 3d 86, 274 Cal. Rptr. 20,

25-26 (1990)). The record in this case shows that Ms. Kupukaa’s diabetes had

progressed to the point of causing kidney damage that should have been detected

by her physicians in 1999 and 2000, had they not failed to seek a nephrology

consult. SER 110-13, 115-21. That evidence is not disputed in this record.

      Third, as mentioned, the settlement documents show that the settlement in

this case included all the claims, including the kidney damage claims. Texas


                                           5
Farmers cites Safeco Ins. Co. of Am. v. Sup. Ct., 140 Cal. App. 4th 874, 881

(2006), for the proposition that the scope of an insurer’s duty to indemnify can

remain open when the underlying dispute is resolved by settlement. True enough.

But when a case settles, “the insurer’s obligation to pay and the determination of

coverage must be based upon the facts inherent in the settlement and, because this

is a summary judgment proceeding, the undisputed facts.” In re Feature Realty

Litig., 468 F. Supp. 2d 1287, 1295 (E.D. Wash. 2006). Although Texas Farmers

insists that the eye surgery claim was the motive force behind Kaiser Permanente’s

willingness to settle, it is undisputed that the settlement included the kidney

damage claim as well.

      Fourth, the “Interrelated Wrongful Act” provision establishes the trigger-of-

coverage date “at the time of the first Wrongful Act,” which in this case was prior

to the 2001-2002 policy period. The argument that the effective trigger date is

when the first written notice of a claim was received ignores the fact that Texas

Farmers issued an endorsement that superseded the claims-made language and

converted the contract to an occurrence policy. Therefore, Texas Farmers’s $5-

million-per-claim liability limit was in effect on the imputed loss date. Because the

$3.2 million settlement with the Kupukaas did not exhaust the primary coverage,




                                           6
Ordway’s excess policy – and Lexington’s reinsurance obligation – were not

triggered.

      Texas Farmers argues that as a reinsurer, Lexington was obliged to “follow

the settlement” and pay a share of the obligation. The district court held that the

follow-the-settlement doctrine did not apply in this situation, and we agree. That

doctrine “prevents facultative reinsurers ‘from second guessing good-faith

settlements and obtaining de novo review of judgments of the reinsured’s liability

to its insured.’” Nat’l Am. Ins. Co. v. Certain Underwriters at Lloyd’s London, 93

F.3d 529, 535 (9th Cir. 1996) (quoting North River Ins. Co. v. CIGNA Reins. Co.,

52 F.3d 1194, 1199 (3d Cir. 1995)). Lexington was not Texas Farmers’s reinsurer,

and therefore it could incur no liability to Texas Farmers under the follow-the-

settlement doctrine.

      Finally, Texas Farmers argues for the first time on appeal that Ordway was

not an excess carrier and that its coverage was concurrent, thereby creating a

contribution obligation under the “other insurance” clause for losses exceeding $1

million in primary coverage. We generally do not entertain an appellate argument

that was not “raised sufficiently for the trial court to rule on it.” Arizona v.

Components, Inc., 66 F.3d 213, 217 (9th Cir. 1995) (internal citation and quptation

marks omitted). “[A]rguments not raised by a party in its opening brief are


                                            7
deemed waived.” Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999) (citing

Brookfield Communications, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036, 1046

n.7 (9th Cir. 1999)).

      Lexington has filed a motion to strike Texas Farmers’s reply brief because it

raises new arguments. We do not reach those arguments, having found them to be

waived. The motion to strike the reply brief is denied as moot. The judgment of

the district court is AFFIRMED.




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