American Cas. Co. of Reading, Pa. v. PHICO Ins. Co.

• Decision Date: 05 August 1994
• Citation: 537 Pa. 295,643 A.2d 91
• Parties: AMERICAN CASUALTY COMPANY OF READING, PA, Appellant, v. PHICO INSURANCE COMPANY and Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund, Joseph Pulcini, Jr., Director and Sharon Dirienzo and David Richard and Suzanne Richard, h/w as Parents and Natural Guardians of Christopher Richard and David Richard and Suzanne Richard, in their own right, Appellees.
• Court: Pennsylvania Supreme Court

Page 91

643 A.2d 91

537 Pa. 295

AMERICAN CASUALTY COMPANY OF READING, PA, Appellant, v. PHICO INSURANCE COMPANY and Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund, Joseph Pulcini, Jr., Director and Sharon Dirienzo and David Richard and Suzanne Richard, h/w as Parents and Natural Guardians of Christopher Richard and David Richard and Suzanne Richard in their own right, Appellees.

Supreme Court of Pennsylvania.

Argued April 6, 1993.

Decided June 16, 1994.

Rearguments and Clarification Denied Aug. 5, 1994.

On Concurring Opinion

James M. Marsh, Phillip J. Meyer, K. Charles Gudenas, Philadelphia, for American Cas. Co. of Reading, PA.

David E. Sandel, Jr., Philadelphia, for Phico Ins. Co. and S. Dirienzo.

Peter J. Hoffman, Philadelphia, for Medical Professional Liability Catastrophe Loss Fund.

Mark Kardos, Philadelphia, for David and Suzanne Richard.

Before NIX, C.J., and LARSEN, FLAHERTY, ZAPPALA, PAPADAKOS, CAPPY and MONTEMURO, JJ.

OPINION OF THE COURT

PAPADAKOS, Justice.

This appeal as of right arises from a declaratory judgment action filed by Appellant, American Casualty Company of Reading, PA (American Casualty) against PHICO Insurance Company (PHICO) and the Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund (the CAT Fund); Sharon DiRienzo, and David and Suzanne Richard, as parents and natural guardians of Christopher Richard, and in their own right, were joined as potentially interested parties. The action was filed initially in the Commonwealth Court of Pennsylvania, invoking that court's original jurisdiction. It was decided by the court on four motions PHICO's motion for summary judgment, American Casualty's cross-motion for summary judgment, the CAT Fund's application for summary relief, and American Casualty's cross-application for summary relief.

The Commonwealth Court on January 24, 1992, entered a summary judgment in favor of PHICO and denied American Casualty's motion for summary judgment. They also granted the CAT Fund's application for summary relief, in part, and denied American Casualty's cross-application for summary relief.

The facts of this case are not in dispute. David and Suzanne Richard filed a suit for damages against Sharon DiRienzo and several other defendants in the Montgomery County Court of Common Pleas (the Richard action). That suit has been settled for an amount in excess of two million dollars. The Richards, in their own right and acting as parents and natural guardians of Christopher Richard, alleged that DiRienzo was negligent in providing nursing care and treatment at the time Suzanne Richard was about to give birth to Christopher on January 29 and 30, 1988. At that time, DiRienzo was acting in the course and scope of her employment by Bryn Mawr Hospital as a delivery room nurse. The Richards claimed that, as a result of DiRienzo's conduct, severe and permanent brain damage was sustained by Christopher, and that pain and suffering and expenses were inflicted upon David and Suzanne Richard. The complaint further alleged that Bryn Mawr Hospital was liable to the Richards as the employer of DiRienzo and also because of its own negligence.

At the time of the alleged negligence, DiRienzo was covered by three policies of insurance which were applicable to the claims set forth in the Richard action. American Casualty had issued to DiRienzo a Professional Nurse's Liability Policy, No. NS03807436 (American Casualty policy). That policy was subject to a limit of $1,000,000.00. The policy covered both DiRienzo's professional and non-business activities. American Casualty contends that its policy specifically stated in its "other insurance" clause that, in effect, it provided excess insurance only. DiRienzo paid an annual premium of $58.00 for the policy.

PHICO issued two policies of insurance to Bryn Mawr Hospital which afforded coverage to DiRienzo by virtue of her status as an employee there. A Health Care Provider's Comprehensive Liability Policy (No. HP2001), provided Institutional Professional Liability Coverage (Coverage C) for the hospital's professional employees, other than physicians, for liability arising out of rendering or failure to render professional services (the PHICO Primary Policy). The "other insurance" clause in the PHICO Primary Policy stated that its coverage was primary. The limit of that policy was $200,000.00, which covered DiRienzo as a professional employee of the hospital.

Coverages A, B, D and E in Phico's Primary Policy do not apply to DiRienzo in this case and are not at issue. The premium for the PHICO Primary Policy was $121,563.00 for the period of two months and ten days for which PHICO has provided such information (November 20, 1987 through February 1, 1988). During the same period, the portion of the premium attributable to Coverage C, "Institutional Professional Liability," was $63,643.00..

PHICO also issued to Bryn Mawr Hospital a second policy (No. EP2001) (the PHICO Excess Policy) which provided for DiRienzo, as a professional employee of Bryn Mawr Hospital, excess "Professional Liability" coverage with a $10,000,000.00 limit. The PHICO Excess Policy consisted of two parts: Coverage A, titled "Professional Liability," which was the only coverage applicable to DiRienzo in this case, and Coverage B, titled "Umbrella Liability." Umbrella Liability coverage, however, is not at issue in this matter because that coverage expressly excluded insurance for liability arising from professional services. The premium for the Phico excess policy, for the period of two months and ten days (November 20, 1987 through February 1, 1988) was $120,188.00, of which amount $105,119.00 applied to Coverage A, "Professional Liability," while $15,069.00 applied to Coverage B, "Umbrella Liability."

The Health Care Services Malpractice Act, 40 P.S. § 1301.101, et seq. (the Act) covers up to $1,000,000.00 any "health care provider" as defined in the Act with respect to his or her professional liability.

In its petition for this declaratory judgment action, American Casualty asserted, at Count I, that its policy provided only excess insurance for DiRienzo; that PHICO's Primary Policy provided for her primary coverage; and that PHICO's Excess Policy applied concurrently--on a pro rata basis--with coverage of American Casualty and in excess of the amounts collectible by DiRienzo under the PHICO Primary Policy and from the CAT Fund.

At Count II, American Casualty asserted that DiRienzo was a "health care provider"; that therefore the CAT Fund must provide for her coverage as required by the Act up to $1,000,000.00; that the American Casualty Policy was excess insurance within the meaning of Section 705(a) of the Act; and that only in the event the coverage owed DiRienzo by PHICO under its primary policy and by the CAT Fund were inadequate, American Casualty and PHICO, under their excess policies, would be required to indemnify her as excess co-insurers on a pro-rata basis.

On April 19, 1991, PHICO moved for summary judgment contending that American Casualty's policy provided primary coverage for DiRienzo, that PHICO's Primary Policy was excess or co-primary insurance with American Casualty's policy and that PHICO's excess policy was excess over the other two policies.

American Casualty filed a cross-motion for summary judgment asserting that its coverage was in excess of coverage under PHICO's primary policy and that the responsibility for the sums covered under both PHICO's excess policy and the American Casualty policy should be prorated in accordance with the limits of those policies.

The CAT Fund filed an application for summary relief seeking a declaration that DiRienzo was not a "health care provider" and that the American Casualty policy was not excess insurance within the meaning of the Act. American Casualty filed a cross-application for summary relief seeking a declaration that DiRienzo qualified as a "health care provider" and that its policy was excess insurance under the Act and that therefore the CAT Fund's $1,000,000.00 coverage must be exhausted before the American Casualty policy is triggered.

The Commonwealth Court granted PHICO's motion for summary judgment and denied American Casualty's cross-motion, ruling that the policy of American Casualty would be triggered as a residual primary policy upon exhaustion of the $200,000.00 limit of the PHICO primary policy; that the PHICO Excess Policy would apply as excess insurance over that provided by the PHICO Primary Policy and the American Casualty policy, and over coverage provided by the CAT Fund; that DiRienzo was not a "health care provider" within the meaning of the Act; that the American Casualty policy was not excess insurance within the meaning of Section 705(a) of the Act; and that, although not a "health care provider," DiRienzo is entitled to $1,000,000.00 coverage by the CAT Fund because she was an employee of a hospital. This appeal followed.

The Commonwealth Court, in their opinion, first considers American Casualty's "other insurance" clause and compares it to the "pro rata" other insurance clause in PHICO's excess policy. American Casualty's "other insurance" clause provides as follows:

If you have other insurance which applies to the loss, the other insurance must pay first. It is the intent of this policy to apply to the amount of loss which is more than the limit of liability of the other insurance. We will not pay more than our limit of liability.

(See, 145 Pa.Cmwlth. 184, 602 A.2d 904, at 907).

The Commonwealth Court agreed with PHICO's argument that this clause did not convert American Casualty's liability coverage from primary to excess and they relied on a superficial analogy to the case of Aetna Casualty, Ins. Co. v. United Services Automobile Assn., 676 F.Supp. 79 (E.D.Pa.1987), in drawing that conclusion. Next, the Commonwealth Court determined that the American Casualty policy and...