Eighth Circuit Affirms Denial by District Court of Nursing Home Suit Plaintiff's Motion to Intervene in Insurance Declaratory Judgment Action
The United States Court of Appeals for the Eighth Circuit recently affirmed the denial of a motion filed by a plaintiff in a nursing home tort suit to intervene in a collateral declaratory judgment action filed by the insurer of the defendant nursing home to determine its obligations with regard to the underlying suit. In Medical Liability Mutual Ins. Co. v. Alan Curtis LLC, et. al., ___ F.2d ___ (8th Cir. May 17, 2007), the court held that the nursing home suit plaintiff lacked the requisite standing to intervene under Rule 24 of the Federal Rules of Civil Procedure.
The Estate of Annie Redden ("Redden") sued Evergreene Properties of North Carolina ("Evergreene"), Alan Curtis Enterprises, Inc. ("Curtis") and other defendants for various causes of action related to the care and treatment of Redden at a nursing home facility managed and/or operated by defendants. Subsequent to the filing of the nursing home litigation, Medical Liability Mutual Insurance Company ("MLMIC"), successor to a policy of insurance issued to Defendant Evergreene by Fireman's Fund INsurance Company, filed a declaratory judgment action seeking a declaration that it had no duty to indemnify or defend the defendants against the nursing home suit. MLMIC asserted that it had no duty to indemnify or defend because the claims asserted by Redden did not occur during the one-year coverage period of the Fireman's Fund policy, since any such claims would be barred by the applicable statute of limitations under Arkansas law.
After MLMIC filed its declaratory judgment action, Redden filed a motion to intervene in that action, asserting a right to intervene both permissibly and mandatorily under Rule 24. In asserting a right to intervene, Redden argued that (1) she had a "property interest" in the lawsuit because she might need to look to MLMIC to satisfy any judgment obtained in the nursing home suit, and (2) she had an interest in any determination the declaratory judgment court may make about the applicable statute of limitations for her claim in the nursing home suit.
In affirming the district court's denial of Redden's motion, the court first cited its standard for determining whether a party may intervene as of right under Rule 24(a)(2): (1) the movant has a cognizable interest in the subject matter of the litigation, (2) that interest may be impaired as a result of the litigation, and (3) the interest is not adequately protected by the existing parties to the litigation, citing Chiglo v. City of Preston, 104 F.3d 185, 187 (8th Cir. 1997). The court concluded that Redden failed the first prong of the test because she had no cognizable interest in the declaratory judgment action. In reaching this conclusion, the court cited its prior case law holding that an interest is "cognizable" under Rule 24(a)(2) only where it is "direct, substantial, and legally protectable," citing United States v. Union Elec. Co., 64 F.3d 1152 (8th Cir. 1995), and that an economic interest in the outcome of the litigation is not itself sufficient to warrant mandatory intervention, citing Curry v. Regents of the Univ., 167 F.3d 420 (8th Cir. 1999). The court observed that the"interest" Redden had in the declaratory judgment action - to insure that the nursing home suit defendants had sufficient resources to satisfy a judgment - was too remote and indirect to qualify as a cognizable interest under Rule 24(a)(2). The court further noted that (1) Redden was neither a party nor an intended beneficiary to the insurance contract, and (2) her interest in any liability of MLMIC to the nursing home suit defendants was contingent not only upon her obtaining a judgment against those defendants, but also being unable to satisfy the judgment against any of the defendants.
The court also rejected Redden's argument for mandatory intervention on the ground that she had an interest in making sure that the appropriate statute of limitations was applied to her claim in the nursing home suit for violation of the Arkansas Residents' Rights Act. In rejecting this argument, the court noted that issue preclusion as to the applicable statute of limitations could not apply against Redden if she is not a party to the declaratory judgment action.
Finally, the court rejected Redden's alternative argument that the district court abused its discretion in failing to allow permissive intervention under Rule 24(b)(2). The court held the district court did not abuse its discretion in determining that the intervention of Redden would cause prejudice and undue delay to the parties to the declaratory judgment action. In further support of its affirmance of the district court's denial of permissive intervention, the court noted that Redden had waited over a year after the filing of the declaratory judgment action to file its motion to intervene.
