Quest Diagnostics, LLC v. Pinnacle Consortium of Higher Educ.

Citation93 A.3d 949
Decision Date27 June 2014
Docket NumberNo. 2013–108–Appeal.,2013–108–Appeal.
PartiesQUEST DIAGNOSTICS, LLC v. PINNACLE CONSORTIUM OF HIGHER EDUCATION, a Vermont Reciprocal Risk Retention Group et al.
CourtUnited States State Supreme Court of Rhode Island

OPINION TEXT STARTS HERE

Mark P. Dolan, Esq., Providence, for Plaintiff.

Todd D. White, Esq., Providence, Lewiss K. Loss, Pro Hac Vice, for Defendants.

Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.

OPINION

Chief Justice SUTTELL, for the Court.

The plaintiff, Quest Diagnostics, LLC (Quest), appeals from the Superior Court's grant of summary judgment in favor of the defendants, Pinnacle Consortium of Higher Education, a Vermont Reciprocal Risk Retention Group (Pinnacle), and Genesis Insurance Company (Genesis) in this insurance coverage dispute.

The plaintiff asserts that the hearing justice erred in denying its motion for summary judgment and in granting defendants' motions for summary judgment. Specifically, plaintiff argues that: (1) it is covered as an insured under the Pinnacle general liability policy; (2) it is covered under the professional liability coverage section of the Pinnacle policy; (3) it is covered under the pertinent Genesis excess coverage policy; and (4) both Pinnacle and Genesis breached their duties to defend and waived their rights to deny coverage because they did not respond to plaintiff's demand for defense in a reasonably timely manner. For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.

IFacts and Procedural History

Brown University and Quest entered into a Professional Services Agreement (PSA), in which Brown retained Quest as an independent contractor, responsible for performing “certain clinical laboratory testing for students and employees” at the Brown University health center. The PSA set forth policies for the performance of certain tests, and required both parties to procure four types of insurance coverage: workers' compensation insurance, general liability insurance, “All Risk” property insurance, and professional liability insurance. Notably, the agreement obligated both to name the other party as an additional insured under their general liability policies; there was no requirement that they do so for any of the other types of insurance. Brown secured insurance through Pinnacle and excess insurance through Genesis.

On May 10, 2006, Pauline Hall, a graduate student at Brown University, sought treatment at the university's health services clinic. At the time, Ms. Hall was experiencing a sore throat, nausea, and ear pain. She was seen by Rita Shiff, a physician's assistant who was employed by Brown. Ms. Shiff ordered a rapid strep test, to be performed by Quest. The test was not performed promptly, and results were not returned to the health center.1When Ms. Hall returned to the health center on May 12, 2006, she was diagnosed with toxic shock syndrome—an illness that resulted in a prolonged hospital stay and permanent injuries.

On June 26, 2006, Brown notified Pinnacle and Quest of the incident and the potential claim arising from it.2 On March 24, 2008, Ms. Hall filed suit in Superior Court against Ms. Shift, Brown, and Quest, alleging, inter alia, that Quest failed to exercise the “degree and skill expected of [a] reasonably competent provider of laboratory services” in failing to process the test and in failing to provide the results of the testing in a timely manner. On December 10, 2010, Brown and Ms. Shift filed a cross-claim against Quest, alleging that Quest negligently failed to “properly process the Rapid Strep test, * * * and to communicate the results” of the test to the health center. In addition to the negligence claim, Brown asserted claims for breach of contract, indemnification, and contribution.

On May 4, 2011, Ms. Hall settled her claims with Brown and its insurers, Pinnacle and Genesis. Quest did not participate in the settlement, and the Brown cross-claim was not resolved. On July 15, 2011, Quest sent a letter to Brown's counsel, demanding, for the first time, “a complete defense and indemnification from Pinnacle,” and requesting that Brown's counsel forward the letter to Pinnacle and provide the relevant contact information to Quest. When Quest did not receive a reply, it sent a follow-up letter on July 27, 2011. Genesis, the excess insurer, never received a copy of these letters.

On November 7, 2011, Quest filed the instant action, seeking a declaratory judgment that it was entitled to a defense from Pinnacle and indemnification under the Pinnacle and Genesis policies. On May 11, 2012, Quest filed a motion for summary judgment; Pinnacle and Genesis each opposed the motion and filed their own motions for summary judgment.

A hearing was held on February 5, 2013; on March 14, 2013, the hearing justice issued a written decision denying Quest's motion for summary judgment and granting summary judgment to Pinnacle and Genesis, declaring that Quest was not entitled to defense and indemnification from either insurer. Judgment was entered on March 19, 2013, and Quest timely appealed. Further facts will be provided as necessary to discuss the issues raised on appeal.

IIStandard of Review

“In reviewing the parties' cross-motions for summary judgment, we examine the matter de novo. Peloquin v. Haven Health Center of Greenville, LLC, 61 A.3d 419, 424 (R.I.2013) (quoting Derderian v. Essex Insurance Co., 44 A.3d 122, 126 (R.I.2012)). “In reviewing the Superior Court's judgment on the parties' motions for summary judgment, we * * * apply the same standards as those used by the trial court.” Id. (quoting Delta Airlines, Inc. v. Neary, 785 A.2d 1123, 1126 (R.I.2001)). “Thus, [s]ummary judgment is appropriate when, viewing the facts and all reasonable inferences therefrom in the light most favorable to the nonmoving party, the [C]ourt determines that there are no issues of material fact in dispute, and the moving party is entitled to judgment as a matter of law.’ Id. at 424–25 (quoting Derderian, 44 A.3d at 126–27).

IIIDiscussion

On appeal, Quest argues that it is covered as an insured under the Pinnacle policy, under both its general liability and professional liability sections. Quest also asserts that it is covered under a 2010/2011 excess policy issued by Genesis. Finally, Quest argues that both defendants waived their rights to deny coverage by not responding to its demand for defense in a reasonably timely manner. All parties agree that Quest had contracted with Brown to provide clinical laboratory testing, and that the PSA that memorialized their agreement also required both parties to obtain general liability insurance, upon which each would name the other as an additional insured. Further, both Quest and Brown were required to obtain professional liability coverage, but there was no obligation to name the other party as an additional insured. Brown obtained both general liability and professional liability insurance from Pinnacle.3 At issue is whether Quest is covered by a policy relative to the allegations contained in the underlying action and in Brown's cross-complaint.

Brown University is the named insured on the Pinnacle policy; the policy includes the following language in Endorsement 4:

“It is agreed that the ‘Who is an Insured’ provision of All Coverage Parts are amended to include:

“ * * *

(d) At the option of the Named Insured shown on the declarations page of this policy, any person, corporation, company, organization, estate or other entity but only to the extent the Named Insured has agreed to do so.”

Thus, because the PSA is the basis of the agreement to extend coverage to Quest as an additional insured, we must construe the PSA and the Pinnacle policy together, in order to determine the extent to which Quest may be entitled to coverage. See Rotelli v. Catanzaro, 686 A.2d 91, 94 (R.I.1996) ([I]nstruments referred to in a written contract may be regarded as incorporated by reference and thus may be considered in the construction of the contract.”).

Turning first to the PSA, the relevant portion reads:

“2.6 [Quest] and [Brown] shall purchase and maintain at their sole expense and with an insurance company or through self-insurance the following insurance coverage and limits: (i) Worker's Compensation (covering [Quest's] employees) to statutory limits; (ii) Comprehensive General Liability Insurance for injuries to persons and property occurring at the SITE or as a result of this Agreement in the amount of at leas[t] ONE MILLION DOLLARS ($1,000,000.00) per occurrence and TWO MILLION DOLLARS ($2,000,000.00) aggregate. In addition, the Certificate(s) of Insurance shall name [Brown] or [Quest] as an ‘Additional Insured’; (iii) ‘All Risk’ Property Insurance, insuring against damage to or loss of any property, to its full insurable value, of [Quest] and [Brown], its officers, servants, employees, agents, licensees, or any person or entity claiming by, through or under [Quest] and [Brown] located on the premises, and, if available such insurance shall contain a waiver of any right of subrogation which such insurance carrier might have against [Brown] or [Quest], its servants, or invitees, and (iv) Professional Liability Insurance, insuring against medical malpractice and other liability which may arise as a result of [Quest's] or [Brown health center's] profession and/or business in an amount of not less than ONE MILLION DOLLARS ($1,000,000). Such policies shall contain a provision(s) to the effect that they may not be cancelled or coverage materially altered without at least thirty (30) days' advance written notice to [Brown].”

The PSA is clear and unambiguous in requiring Quest and Brown to name one another as additional insureds only under their respective general liability insurance coverage.

Brown obtained general liability coverage and professional liability coverage from Pinnacle. This coverage was packaged together under one policy number. Pinnacle asserts that Quest is covered only under the...

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