Concord Hosp. v. New Hampshire Medical Malpractice Joint Underwriting Ass'n

• Decision Date: 10 November 1993
• Docket Number: No. 92-693,92-693
• Citation: 633 A.2d 1384,137 N.H. 680
• Parties: CONCORD HOSPITAL v. NEW HAMPSHIRE MEDICAL MALPRACTICE JOINT UNDERWRITING ASSOCIATION.
• Court: New Hampshire Supreme Court

Page 1384

633 A.2d 1384

137 N.H. 680

CONCORD HOSPITAL v. NEW HAMPSHIRE MEDICAL MALPRACTICE JOINT UNDERWRITING ASSOCIATION.

No. 92-693.

Supreme Court of New Hampshire.

Nov. 10, 1993.

As Amended on Denial of Reconsideration

Dec. 23, 1993.

Upton, Sanders & Smith, Concord (Russell F. Hilliard on the brief and orally and David P. Slawsky, on the brief), for plaintiff.

Morrison, Mahoney & Miller, of Boston, MA (Michael F. Aylward, on the brief and orally), for defendant.

JOHNSON, Justice.

The plaintiff, Concord Hospital (hospital), appeals the Superior Court's (McHugh, J.) ruling that three professional liability insurance policies issued by the defendant, New Hampshire Medical Malpractice Joint Underwriting Association (JUA), do not cover the expense of defending certain lawsuits filed against the hospital after the policies expired. The issue before us is whether these policies afford such coverage, where the hospital reported the incidents giving rise to the lawsuits to the JUA during the policy periods. We hold that the policies do provide such coverage and, therefore, reverse.

The relevant facts are as follows. The hospital purchased three substantially identical one-year professional liability insurance policies from the JUA for the period of July 29, 1986, through July 29, 1989, and thereafter purchased its insurance from Conn Med. Each JUA policy is labelled, "HOSPITAL PROFESSIONAL LIABILITY COVERAGE FORM--CLAIMS MADE," and at the top of the first page of the policies is a box entitled, "TO OUR POLICYHOLDER," which reads as follows: "This is a claims made policy. It covers claims arising from the performance of professional services subsequent to the retroactive date indicated and first brought against you while the policy is in force. Please review the policy carefully and discuss the coverage with your insurance agent." (Emphasis added.) Under the box is the caption, "INSURING AGREEMENTS," the first of which, "COVERAGE," states in part:

"To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of any claim or claims made against the insured during the policy period arising out of the performance of professional services rendered or which should have been rendered, subsequent to the retroactive date, by the insured or by any person for whose acts or omissions the insured is legally responsible...."

(Emphasis added and omitted.) Several words and phrases, such as "insured" and "policy period," are defined in the policy, but the word "claim" is not. Section II of the policies is entitled "COVERAGE PERIOD" and states:

"This insurance applies only to professional services rendered or which should have been rendered after the retroactive date stated in the declarations and then only if claim is first made during the policy period.

If any claim is first made during the policy period alleging injury to an individual that would be covered by this policy, any additional claims made subsequent to the policy period for damages resulting from the same injury to the same individual shall be considered a claim hereunder. A claim shall be considered to be first made when the company first receives written notice of the claim or occurrence. (See Condition 3 for insured's rights to have extended reporting endorsements issued.)"

(Emphasis added and omitted.) On July 27, 1989, two days before the last JUA policy expired, the hospital notified the JUA in writing of thirty-six "patient events." On August 1, 1989, the hospital declined the JUA's offer to purchase an "extended reporting period endorsement," explaining that "our new policy with Conn Med will pick up prior acts."

Since the JUA policies expired, some of the "patient events" reported to the JUA have resulted in malpractice suits filed against the hospital. Although Conn Med undertook the hospital's defense of these suits, a deductible in the Conn Med policies has left the hospital with $50,000 in out-of-pocket losses. The hospital asked the JUA for coverage, citing the third sentence of section II, but the JUA refused. The hospital then sued the JUA in a declaratory judgment action, and both parties filed motions for summary judgment. The JUA's motion included a plea to dismiss the hospital's action as untimely filed. The superior court ruled the action timely, but agreed with the JUA that its policies were "claims made" and thus did not cover claims filed against the hospital after the policies expired. As the court found no evidence of such a claim made during the policy period, it granted the JUA's motion for summary judgment. The hospital appeals, arguing that the trial court misinterpreted the language of the JUA policies.

It is ultimately for this court to interpret the language of insurance policies. See Gagnon v. N.H. Ins. Co., 133 N.H. 70, 73, 573 A.2d 137, 139 (1990). Where disputed terms are not defined in the policy or by State judicial precedent, we construe them in context, see Amica Mut. Ins. Co. v. Morrison, 130 N.H. 250, 252, 255, 536 A.2d 199, 200, 202 (1987), and "in the light of what a more than casual reading of the policy would reveal to an ordinarily intelligent insured," Aetna Insurance Co. v. State Motors, 109 N.H. 120, 125, 244 A.2d 64, 67 (1968); see also Coakley v. Maine Bonding & Cas. Co., 136 N.H. 402, 409-10, 618 A.2d 777, 781 (1992). This is an objective standard. Karol v. N.H. Ins. Co., 120 N.H. 287, 290, 414 A.2d 939, 941 (1980). Where the terms of a policy are clear and unambiguous, we accord the language its natural and ordinary meaning. Trombly v. Blue Cross/Blue Shield, 120 N.H. 764, 771, 423 A.2d 980, 984 (1980). Ambiguities, however, are construed against the insurer, see Gagnon, 133 N.H. at 74-75, 573 A.2d at 140; Trombly, 120 N.H. at 770-72, 423 A.2d at 984-85, and the burden is on the insurance carrier to prove a lack of coverage, RSA 491:22-a (1983).

Turning to the words of the JUA policies at issue here, we first note that the title and the first sentence of the policies declare the contracts to be of the "claims made" variety. As the JUA points out, the term "claims made" in insurance law refers to liability policies that afford coverage for tort claims that are both made against the insured and reported to the insurance company during the policy period. See Chas. T. Main, Inc. v. Fireman's Fund Ins. Co., 406 Mass. 862, 863-64, 551 N.E.2d 28, 29 (1990). Assuming--as the JUA does--that the tort claims at issue here were not made against the hospital until after the JUA policies expired, we agree that the hospital would not be entitled to coverage under a standard "claims made" policy. The JUA policies, however, are not "claims made" simply because they say they are. "Claims made" is a category of policies that contain certain provisions; without those provisions, no amount of labelling can make these policies "claims made" or induce us to treat them as such. The layperson of average intelligence does not know what "claims made" refers to and cannot be expected to read crucial provisions into the term. Cf. Coakley, 136 N.H. at 414-15, 618 A.2d at 784-85 (discussing plain and ordinary meaning of "damages"). The insurance company must spell out the provisions of a "claims made" policy.

Accordingly, we disregard the labels attached to the JUA policies and examine the various provisions themselves. We agree with the JUA that the first three relevant policy provisions support its contention that the policies are indeed "claims made." The first provision states that the policy "covers claims ... first brought against you while the policy is in force." The second promises to pay all sums the hospital becomes obligated to pay as damages "because of any claim or claims made against the [hospital] during the policy period." (Emphasis omitted.) The third states, "This insurance applies only ... if claim is first made during the policy period." (Emphasis omitted.) Again, on the assumption that no "claims" were made against the hospital before the JUA policies expired, these provisions--when read in isolation--would preclude coverage for the defense and indemnification of the lawsuits at issue here.

A fourth provision of the JUA policies, however, explains and modifies the third provision's requirement that claims be "first made" during the policy period. This fourth provision, found in section II of the policies, reads, "A...