D'Auria v. Zurich Ins. Co.

• Decision Date: 07 April 1986
• Citation: 352 Pa.Super. 231,507 A.2d 857
• Parties: Thomas M. D'AURIA, Appellant, v. ZURICH INSURANCE COMPANY, Hartford Insurance Company, Argonaut Insurance Company, Pennsylvania Medical Society Insurance Company, Appellees.
• Court: Pennsylvania Superior Court

Page 857

507 A.2d 857

352 Pa.Super. 231

Thomas M. D'AURIA, Appellant, v. ZURICH INSURANCE COMPANY, Hartford Insurance Company Argonaut Insurance Company, Pennsylvania Medical Society Insurance Company, Appellees.

Superior Court of Pennsylvania.

Argued Sept. 12, 1985.

Filed April 7, 1986.

Wendelynne J. Newton, Pittsburgh, for appellant.

James A. Beinkemper, Sr., Pittsburgh, for Hartford, appellee.

Kenneth J. Nolan, Pittsburgh, for Argonaut, appellee.

Mark Neff, Washington, for Pa. Med., appellee.

Before CAVANAUGH, JOHNSON and WATKINS, JJ.

CAVANAUGH, Judge:

Dr. Thomas M. D'Auria appeals from the order of August 30, 1984 entered in the Court of Common Pleas of Fayette County denying his motion for summary judgment and entering judgment in favor of appellees. ¹ The sole question in this appeal is whether three insurance companies had a duty to defend the appellant in a malpractice suit filed against him. We hold they did not.

In 1981, Dr. D'Auria, who practiced pediatric medicine in Uniontown, Pennsylvania, was sued for malpractice by a former patient, Mr. Gregory Egnot. Egnot was a patient of Dr. D'Auria's from the time of his birth in 1957 until 1963. In Egnot's complaint against Dr. D'Auria, he alleged that D'Auria was negligent and careless both during and after the time he was D'Auria's patient and avers that this negligence was a cause of the renal failure he suffered in 1979.

Each of the three insurance companies involved in this dispute did not insure appellant until long after he treated Egnot. Hartford insured him from 7/22/73 to 7/22/76. Argonaut insured him from 7/22/76 to 1/1/78. PMSLIC insured him from 1/1/78 to 6/30/82. All three provided "occurrence" type policies. "An 'occurrence' policy protects the policyholder from liability for any act done while the policy is in effect, whereas a 'claims made' policy protects the holder only against claims made during the life of the policy." St. Paul Fire & Marine Insurance Co. v. Barry, 438 U.S. 531 n. 3, 98 S.Ct. 2923 n. 3, 57 L.Ed.2d 932 (1978). According to appellant, all three policies stated:

"[T]he company shall have the right and duty to defend any suit against the insured seeking such damages, even if any of the allegations of the suit are groundless, false or fraudulent...."

The duty to defend is separate from and greater than the duty to indemnify. Pacific Indem. Co. v. Linn, 590 F.Supp. 643 (E.D.Pa.1984) aff'd. 766 F.2d 754 (3d Cir.1985). In purchasing insurance, the appellant here purchased not only the insurer's duty to indemnify when claims which fall within the policy's coverage are successful, but also protection against those groundless, false or fraudulent claims regardless of the insurer's ultimate liability to pay. Zeitz v. Zurich General Accident & Liability Ins. Co., 165 Pa.Super. 295, 67 A.2d 742 (1949). Not all claims asserted against an insured, however, activate the insurer's duty to defend. In analyzing whether the insurer has a duty to defend, we must first look to the complaint filed against the insured. St. Paul Surplus Lines Ins. Co. v. 1401 Dixon's, 582 F.Supp. 865 (E.D.Pa.1984). "It is not the actual details of the injury, but the nature of the claim which determines whether the insurer is required to defend." Springfield Tp. et al. v. Indemnity Ins. Co. of North America, 361 Pa. 461, 64 A.2d 761 (1949). See also Vale Chemical Company v. Hartford Acc. & Indem., 340 Pa.Super. 510, 490 A.2d 896 (1985). Eastcoast Equipment Co. v. Maryland Casualty Co., 207 Pa.Super. 383, 218 A.2d 91 (1966). After discerning the facts alleged in the complaint, we then must decide whether, if those facts were found to be true, the policy would provide coverage. If it would, then there is a duty to defend. The much quoted language of Judge Learned Hand clearly delineates the well-settled principle.

"[I]f the plaintiff's complaint against the insured alleged facts which would have supported a recovery covered by the policy, it was the duty of the defendant to undertake the defence, until it could confine the claim to a recovery that the policy did not cover."

Lee v. Aetna Casualty & Surety Company, 178 F.2d 750, 752 (2d Cir.1949). See also Cadwallader v. New Amsterdam Casualty Co., 396 Pa. 582, 152 A.2d 484 (1959). If the factual allegations of the complaint on its face states a claim to which the policy potentially applies, the insurer must defend. Pacific Indem. Co. v. Linn, supra; Brugnoli v. United Nat. Ins. Co., 284 Pa.Super. 511, 426 A.2d 164 (1981); Gedeon v. State Farm Mutual Automobile Ins. Co., 410 Pa. 55, 188 A.2d 320 (1963); and Seaboard Industries, Inc. v. Monaco, 258 Pa.Super. 170, 392 A.2d 738 (1978).

Even though the insurance policy states that the insurer must defend against allegations which are groundless, false, or fraudulent, this does not mean that the insurer has a duty to defend any suit filed against the insured. The duty to defend is limited only to those claims covered by the policy. Warner v. Employers' Liability Assurance Corporation, 390 Pa. 62, 133 A.2d 231 (1957); Wilson v. Maryland Casualty Company, 377 Pa. 588, 105 A.2d 304 (1954). Thus, the insurer owes a duty to defend if the complaint against the insured alleges facts which would bring the claim within the policy's coverage if they were true. It does not matter if in reality the facts are completely groundless, false or fraudulent. It is the face of the complaint and not the truth of the facts alleged therein which determines whether there is a duty to defend. See Warner v. Employers' Liability Assurance Corporation, supra; Wilson v. Maryland Casualty Company, supra.

In the instant case, Egnot's complaint against the doctor alleged that when the doctor treated him from 1957 to 1963, he was negligent or careless in failing to diagnose and have treated a medical condition that was a consequence "of a lower urinary tract obstruction secondary to posterior urethral valves." ² This kidney condition was surgically treated in December of 1962 or January of 1963 by another physician. After 1963, Egnot was never again treated by D'Auria. Egnot experienced renal failure in March of 1979. He attributes the cause of his renal failure to 1) D'Auria's failure to diagnose and have treated the aforementioned condition which was eventually treated by surgery in December of 1962 or January of 1963, and 2) appellant's failure to provide appropriate follow-up care and treatment after Egnot's release from the hospital in January, 1963. ³ The complaint states: "As a combination of the foregoing occurrences, Plaintiff suffered loss of renal tissue which results in renal failure, which loss of renal tissue could have been avoided or minimized if Plaintiff had received appropriate diagnosis, care and treatment throughout the course of his renal condition."

We must determine if the facts alleged on the face of the complaint state a claim which is covered by any of the three policies. If so, there is a duty to defend. Because these policies were "occurrence" policies, we must decide whether the facts allege an "occurrence" that falls within any of the policies' coverages.

We will refer to and rely upon occurrence cases which deal with indemnity. We believe that these cases may be appropriately used in a duty to defend context. The major difference between indemnity and duty to defend cases is that in the latter, the complaint is the sole guide to the facts. As such, we shall use the complaint as our sole guide. The "time of the occurrence" has spawned numerous reported decisions and a fair amount of confusion. See Annot., 37 A.L.R. 4th 382 (1985). We find no Pennsylvania state court decision directly on point, but have sought guidance from well-reasoned opinions in other courts.

In determining whether the facts allege an "occurrence" that falls within any of the three policies' coverages, we must ascertain what is the "occurrence" alleged, and when it happened. The three insurance policies at issue insured Dr. D'Auria from 7/22/73 to 6/30/82. If an "occurrence" is alleged to fall anywhere within that time period, one or more of the insurance companies has a duty to defend.

We must first determine how many "occurrences" are present in Egnot's complaint. "The general rule is that an occurrence is determined by the cause or causes of the resulting injury. '[T]he majority of jurisdictions employes [sic] the 'cause theory'. .... Using this analysis, the court asks if '[t]here was but one proximate, uninterrupted, and continuing cause which resulted in all of the injuries and damage.' ' " Appalachian Ins. Co. v. Liberty Mut. Ins. Co., 676 F.2d 56 (3d Cir.1982). In Appalachian, an employer adopted certain employment policies in 1965 which, according to several female employees, discriminated against women over the next several years. The court of appeals affirmed the lower court and held that despite the fact that there were multiple injuries of different magnitudes which extended over a period of time, there was but one occurrence. "The injuries for which [the employer] was liable all resulted from a common source: [the employer's] discriminatory employment policies." We adopt the "cause of the loss" test in the instant case to determine the number of "occurrences" present in Mr. Egnot's complaint.

Even if completely true, we find that Egnot's complaint alleges only one occurrence. The cause of Mr. Egnot's alleged renal failure was the alleged mistreatment of his condition by Dr. D'Auria. We note that the complaint superficially states two causes for the renal failure: 1) Dr. D'Auria's pre-1963 failure to diagnose and have treated the condition that was eventually treated in January 1963, and 2) his post-1963 failure to adequately follow up and care for Egnot. Nevertheless, we believe that the substance of the complaint alleges only one cause. The complaint indicates that the doctor mishandled Egnot's treatment in not diagnosing or acting quickly enough to...