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State v. Prison Health Services, Inc.

Supreme Court of Vermont

December 20, 2013

State of Vermont
v.
Prison Health Services, Inc.

On Appeal from Superior Court, Chittenden Unit, Civil Division Mary Miles Teachout, J.

William H. Sorrell, Attorney General, and Mark J. Patane, Assistant Attorney General, Montpelier, for Plaintiff-Appellant.

Samuel Hoar and Sophie E. Zdatny of Dinse, Knapp & McAndrew, P.C., Burlington, for Defendant-Appellee.

Shannon A. Bertrand of Kenlan, Schwiebert, Facey & Goss, P.C., Rutland, for Intervenor-Appellee James Gipe, Administrator of the Estate of Ashley Ellis.

PRESENT: Dooley, Skoglund, Burgess and Robinson, JJ., and Devine, Supr. J., Specially Assigned

SKOGLUND, J.

¶ 1. The case before us involves a contract dispute between the State of Vermont and Corizon Health, Inc., formerly known as Prison Health Services, Inc. (PHS). The State appeals a declaratory judgment ruling that PHS is not contractually obligated to defend the State and its employees against certain claims brought by the estate of decedent, who died while in the custody of the Department of Corrections. We reverse, and conclude that PHS has a duty to defend.

¶ 2. In January 2007, PHS entered into a twenty-four million dollar contract with the State to provide all medical services to inmates in the custody of the Department in compliance with all laws and national health care standards. In addition to outlining the specific terms of the service agreement, the contract contained an indemnification provision requiring PHS to “indemnify, defend and hold harmless the State and its officers and employees from liability and any claims, suits, judgments, and damages which arise as a result of [PHS]’s acts and/or omissions in the performance of services under this contract.” The question presented is whether, under this contractual language, PHS is obligated to defend the State and its employees for certain claims in a lawsuit brought by decedent’s estate.

¶ 3. In contractual duty-to-defend cases, “an indemnitor’s obligation to defend should be determined at the beginning of the case based on the pleadings.” Tateosian v. State, 2007 VT 136, ¶ 15, 183 Vt. 57, 945 A.2d 833. For a judgment on the pleadings, we assume all factual allegations in the nonmoving party’s pleadings are true. Knight v. Rower, 170 Vt. 96, 98, 742 A.2d 1237, 1239 (1999).

¶ 4. The events on which the pleadings are based are as follows. On August 14, 2009, decedent began serving a thirty-day sentence at the Northwest State Correctional Facility in Swanton, Vermont. At the time of her incarceration, decedent suffered from an eating disorder and weighed only ninety pounds. As a result of her eating disorder, decedent also suffered from hypokalemia, a life-threatening condition linked to dangerously low potassium levels. When she entered the prison, decedent was taking a potassium supplement called K-Clor to treat the hypokalemia. The facility was given notice of decedent’s medication needs prior to her admission.

¶ 5. On the day decedent entered the facility, PHS was short-staffed. The facility had no potassium supplement in stock, and none was obtained during decedent’s incarceration. On the morning of August 16, 2009, two days after entering the correctional facility, decedent was found nonresponsive in her cell by correctional officers. Neither PHS nor the correctional officers were able to locate a cardiopulmonary-resuscitation (CPR) mouth guard, delaying resuscitation attempts. Decedent was taken to Northwestern Medical Center, where she was pronounced dead. The medical examiner found that she died from a hypokalemic-induced cardiac arrhythmia resulting from a lack of potassium.

¶ 6. Decedent’s estate, through its administrator James Gipe, made claims against both PHS and the State. PHS privately settled with the administrator before any lawsuit was filed. Part of the terms of the settlement included a Covenant Not to Sue, in which the administrator agreed not to bring any claims against PHS, including any claims against the State for which PHS could owe a duty of defense or indemnification.

¶ 7. In July 2011, the administrator filed a lawsuit against the State and several state employees in Rutland Superior Court. See Gipe v. State, Docket No. 515-7-11 Rdcv. In an amended complaint, the Administrator strategically tailored the estate’s claims to remove PHS actors from the suit, at least nominally, alleging five different causes of action: (1) cruel and unusual punishment; (2) intentional infliction of emotional distress; (3) negligence; (4) punitive damages; and (5) wrongful death. Only four of these claims are at issue here; the State concedes that PHS is not obligated to defend it against allegations of taunting by corrections officers that make up the estate’s claim for intentional infliction of emotional distress and part of the cruel and unusual punishment claim.

¶ 8. The State filed a declaratory judgment action, seeking a declaration that PHS has a duty to defend the State against the claims asserted in Gipe v. State. It attached a copy of the contract between the State and PHS, a copy of the original complaint in Gipe v. State, and a copy of the subsequently amended complaint. After hearing arguments, the trial court granted PHS judgment on the pleadings sua sponte, finding that “[t]here are no allegations of wrongdoing by PHS personnel that form the basis for a claim, and thus the duty to defend is not triggered.” On that basis, the court held that the State failed to meet its burden of showing that PHS had an obligation to defend based on the terms of the contract. On appeal, the ...


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