Interstate Fire & Cas. Co. v. Pacific Indem. Co.

• Citation: 568 F. Supp. 633
• Decision Date: 03 August 1983
• Docket Number: Civ. No. H-81-2895.
• Court: U.S. District Court — District of Maryland
• Parties: INTERSTATE FIRE & CASUALTY COMPANY, Plaintiff, v. The PACIFIC INDEMNITY COMPANY and Chubb & Son, Incorporated, Defendants.

568 F. Supp. 633

INTERSTATE FIRE & CASUALTY COMPANY, Plaintiff, v. The PACIFIC INDEMNITY COMPANY and Chubb & Son, Incorporated, Defendants.

Civ. No. H-81-2895.

United States District Court, D. Maryland.

August 3, 1983.

E. Dale Adkins, III, Baltimore, Md., for plaintiff.

Kieron F. Quinn, Patrick K. Cameron and Ober, Grimes & Shriver, Baltimore, Md., for defendants.

ALEXANDER HARVEY, II, District Judge.

The dispute in this case is similar to the one presented to this Court in Chicago Insurance Company v. Pacific Indemnity Company, 502 F.Supp. 725 (D.Md.1980). As in that case, a primary insurer under a professional liability insurance policy and an excess insurer dispute the meaning of a coverage provision in the former's policy. Interstate Fire & Casualty Company (hereinafter "Interstate"), the excess insurer, is here seeking to recover $200,000 from The Pacific Indemnity Company (hereinafter "Pacific"),¹ the primary carrier. Plaintiff asserts that defendant Pacific was under its policy required to pay that sum as a part of the settlement of a malpractice suit brought against the parties' insured, a physician.

Presently pending in the case are cross-motions for summary judgment. Extensive memoranda and exhibits have been filed in support of and in opposition to these motions. Oral argument by counsel has been heard in open Court. As the facts here are not in dispute, the case is appropriately one for disposition under Rule 56, F.R.Civ.P.

On September 14, 1979, a Statement of Claim, HCA No. 79-171, was filed in the Health Claims Arbitration Office of Maryland against Dr. Vibhakar J. Mody and others. The claimants were George M. Cross, Jr. (an infant), Barbara Ann Cross (his mother) and George M. Cross, Sr. (his father). Essentially, the claimants alleged that the negligence of Dr. Mody in delivering the Cross infant during his birth caused (1) the infant to suffer permanent brain damage, (2) his mother to suffer physical injuries as well as emotional shock and pain, and (3) his father to incur various medical and educational expenses.

At the time of the Cross infant's birth, Dr. Mody was insured by defendant Pacific under an obstetricians' and gynecologists' policy providing primary medical malpractice liability coverage. Dr. Mody was further covered by an excess medical malpractice liability policy issued by plaintiff Interstate. The primary policy had $200,000/$600,000 policy limits while the excess policy had a $1,000,000 limit.

Shortly before the scheduled arbitration hearing, the parties entered into settlement negotiations, which culminated in a settlement of all claims against Dr. Mody for $560,500. In a letter dated March 25, 1981 and sent to the attorney for Interstate, claimants' attorney stated that the settlement sum would be divided as follows: George M. Cross, Jr. — $350,000, George M. Cross, Sr. — $200,000, and Barbara Ann Cross — $10,500. These were also the amounts set forth in the releases, which were executed on April 6, 1981.

At the time of the settlement, Interstate and Pacific disputed the amounts that each was required to pay under each respective policy. Pacific agreed that the claim of Barbara Ann Cross, the mother, was a separate claim under its policy and paid the sum of $10,500 to satisfy that claim. However, Pacific took the position that it was required to pay no more than $200,000 additionally because the claims of the Cross infant and his father were not separate claims and because the policy limit for any one claim was $200,000. Interstate, the excess carrier, accordingly contributed $350,000 to the settlement and thereupon sued Pacific in this Court to recover the additional amount which plaintiff claims that defendant Pacific was legally required to pay under applicable provisions of Pacific's primary policy.

In this action, Interstate concedes that under its excess policy it was required to contribute $150,000 to the settlement. However, it contends that the claim of the infant and the claim of the father are not a single claim under Pacific's primary policy and that defendant was therefore obligated to contribute $200,000 for the settlement of each of those claims, or a total of $400,000. Plaintiff is here seeking to recover $200,000 from defendant Pacific plus interest and costs. The issue presented is whether under the terms of the primary policy defendant was obligated to contribute to the settlement of the claim of George M. Cross, Sr. as well as to that of his infant son.

The pertinent section of Pacific's policy is "Coverage A — Individual Professional Liability." Under Coverage A, Pacific agreed to

pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of: ... injury arising out of the rendering of or failure to render during the period, professional services by the individual insured, or by any person for whose acts or omissions such insured is legally responsible, except as the individual insured's profession described in the declarations ...

The policy's limits, as stated in Part I of the Declaration Sheet, are $200,000 for "each claim" and $600,000 in the "aggregate." These limits are incorporated into the policy by the following provision:

... the liability of the company for damages because of injury to which this insurance applies, sustained by any one person, shall not exceed the limit of liability stated in Part I of the declarations as applicable to each claim. In addition, the limit of the company's liability under Part I for all damages shall not exceed the limit of liability stated in Part I of the declarations as `aggregate.'

Another significant provision of the Pacific policy is the following definition: "each claim means all claims or suits brought on account of injury sustained by any one person."

Plaintiff argues that this Court's decision in Chicago Insurance Company v. Pacific Indemnity Company, supra (hereinafter Chicago I) is controlling. Defendants, on the other hand, rely on a later decision of the Eastern District of Pennsylvania rendered in a suit between the same parties, namely Chicago Insurance Company v. Pacific Indemnity Company, 566 F.Supp. 954 (E.D.Pa.1982) (hereinafter Chicago II), aff'd per curiam, (3d Cir. July 5, 1983). But neither of those two cases is controlling in this particular action. Precisely the same insurance policy of Pacific was construed in both Chicago I and Chicago II. However, the professional liability insurance policy of Pacific in this case contains additional provisions which pose quite a different issue to the Court from the one presented in both Chicago I and Chicago II. One of the issues presented in both of those cases was whether separate claims had been settled so that the primary insurer was responsible for payment of the separate claims before the excess carrier became obligated to make payments. The policy limit in this case is $200,000 for "each claim." Unlike the policies in the other two cases, in the one involved here the word "claim" has been specifically defined as follows: "each claim means all claims or suits brought on account of injury sustained by any one person." Thus, the narrow issue in this case involves interpretation of the word "injury." If, as defendant argues, that word means "personal injury," then defendant is not obligated to contribute $200,000 towards settlement of the claim of George M. Cross, Sr., since his claim as father of the infant was for an economic loss. On the other hand, if, as plaintiff argues, the word "injury" in the policy includes economic or financial injury, then the father's claim would be separately covered and defendant would be required to contribute an additional $200,000 towards the settlement.

The parties' reliance on Chicago I and Chicago II respectively, is misplaced because the results reached in those cases are not inconsistent. In Chicago I, suit had been filed in the Superior Court of Baltimore City against three doctors and the partnership which they had formed. As in this case, the claims asserted were by an infant, his mother and his father. It was alleged that negligence by attending obstetricians in the course of delivering the baby had caused permanent brain damage to the infant, personal injuries to the mother and economic loss to the father for sums required to be spent by him to care for his injured child.

The principal dispute in Chicago I concerned the relationship between the coverage provided the individual doctors for their own negligence ("Coverage A") and that provided to their partnership and to the members of their partnership for vicarious liability ("Coverage B") under Pacific's primary policy. In deciding the primary dispute, this Court ruled that Coverage B was available and that plaintiff was entitled to a recovery from Pacific. That ruling raised a subsidiary question, namely whether Pacific owed plaintiff $50,000 or $100,000. To decide this secondary issue, it was necessary to determine whether there were separate claims. In Chicago I, counsel characterized the issue as whether there were three separate claims (plaintiff's argument) or, because all three claims arose from the same "occurrence," whether there was only one (defendant's argument). This Court ruled that there were three separate claims and that Pacific was therefore responsible for the full $100,000 under its primary policy. This Court did not consider the question raised here, namely whether the word "injury" included economic injury to the father as well as personal injury to the infant.

In Chicago II, Judge Fullam correctly pointed out that this Court's conclusion that there were three separate claims was not essential to the Court's holding in the second part of its opinion. Both the mother and the infant had sustained personal injuries so that there were admittedly at least two separate personal injury claimants without regard to the claim of the husband. The settlement in ...