Duke University v. St. Paul Fire and Marine Ins. Co., 8914SC33

• Decision Date: 04 January 1990
• Docket Number: No. 8914SC33,8914SC33
• Court: North Carolina Court of Appeals
• Parties: DUKE UNIVERSITY v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY.

Page 762

386 S.E.2d 762

96 N.C.App. 635

DUKE UNIVERSITY v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY.

No. 8914SC33.

Court of Appeals of North Carolina.

Jan. 4, 1990.

Maxwell, Martin, Freeman & Beason, P.A. by John C. Martin, Durham, for plaintiff-appellee.

Patterson, Dilthey, Clay, Cranfill, Sumner & Hartzog by Theodore B. Smyth and Kari Russwurm, Raleigh, for defendant-appellant.

SARAH ELIZABETH PARKER, Judge.

The question presented by this appeal is whether the trial court erred in entering summary judgment for plaintiff because plaintiff's insurance policy excluded coverage for liability resulting from the wrongful death action. Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 690, 340 S.E.2d 374, 377 (1986). It is undisputed in this case that plaintiff's policy required defendant to provide a defense in lawsuits based upon covered claims. By refusing to defend the wrongful death action, defendant obligated itself to pay the amount and costs of a reasonable settlement if its refusal was unjustified. Nixon v. Insurance Co., 255 N.C. 106, 112-13, 120 S.E.2d 430, 434 (1961); Ames v. Continental Casualty Co., 79 N.C.App. 530, 538, 340 S.E.2d 479, 485, disc. rev. denied, 316 N.C. 730, 345 S.E.2d 385 (1986). In the proceedings below, defendant admitted that plaintiff settled the action for $75,000.00 and paid $3,521.12 for legal fees and expenses in defending the action. Defendant has not challenged the reasonableness of the settlement in this action; therefore, we need not consider the issue. See Wilson v. State Farm Mut. Auto. Ins. Co., 92 N.C.App. 320, 326, 374 S.E.2d 446, 450 (1988).

The sole remaining issue is whether the policy required defendant to defend the wrongful death action. Since this issue is determined by interpreting the language of the policy, it is a question of law which may be resolved by summary judgment. Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. at 691, 340 S.E.2d at 377. The insurer's duty to defend is determined by the pleadings in the underlying lawsuit. Id. The duty to defend exists if the events alleged in the pleadings are covered under the terms of the policy, and any doubt as to coverage must be resolved in favor of the insured. Id. at 693, 340 S.E.2d at 378. If the claim is within the coverage of the policy, the insurer's refusal to defend is unjustified even if it is based upon an honest but mistaken belief that the claim is not covered. Indiana Lumbermen's Mutual Ins. Co. v. Champion, 80 N.C.App. 370, 376, 343 S.E.2d 15, 19 (1986).

Plaintiff's basic policy excludes coverage for liability resulting from performing or failing to perform professional services. The general exclusion is modified by the following endorsement:

Under this section, you're protected against claims for injuries that result from the providing or withholding of professional services by any of your non-hospital operations. The company shall in no way be liable for any claims arising out of the providing or failure to provide professional services by your hospital operations.

The parties do not dispute that the dialysis center is a "hospital operation" for purposes of the policy. The issue in this case is whether the wrongful death action is a claim "arising out of the providing or failure to provide professional services."

The complaint in the wrongful death action alleged that the decedent was injured when two attendants who were lifting her from a dialysis table to a wheelchair dropped her to the floor. Affidavits filed by plaintiff in the present case establish that decedent did not undergo dialysis on a table but received the treatment in a specially designed dialysis chair. The affidavits further establish that decedent fell when she attempted to get out of the chair and the fall occurred because the chair was equipped with casters which caused the chair to slide out from under her as she rose. The affidavits tend to show that the negligence of plaintiff's employees, if any, consisted of their failure to lock the casters or take other steps to stabilize the chair while they were assisting the decedent.

Although the insurer's duty to defend an action is generally determined by the pleadings, facts learned from the insured and facts discoverable by reasonable investigation may also be considered. Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. at 692, 340 S.E.2d at 377-78. Therefore, the affidavits filed by plaintiff in this case are relevant to the determination of defendant's duty to defend. Plaintiff was not required to establish ultimate liability, however, but only to show that the facts of the claim were within the coverage of the policy. Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. at 691, 340 S.E.2d at 377; W & J Rives, Inc. v. Kemper Insurance Group, 92 N.C.App. 313, 317-18, 374 S.E.2d 430, 433 (1988), disc. rev. denied, 324 N.C. 342, 378 S.E.2d 809 (1989).

Our courts have not previously construed a professional services exclusion in an insurance policy. Provisions which exclude liability coverage are not favored, however, and any ambiguities must be construed against the insurer and in favor of the insured. State Capital Ins. Co. v. Nationwide Mutual Ins. Co., 318 N.C. 534, 547, 350 S.E.2d 66, 73 (1986). The policy in this case excludes liability "arising out of" the providing or failure to provide professional services. Dialysis treatment is clearly a professional service. In State Capital, however, our Supreme Court held that "arising out of" language in an insurance policy exclusion must be strictly construed to require that the excluded cause be the sole proximate cause of the injury. State Capital Ins. Co. v. Nationwide Mutual Ins. Co., 318 N.C. at 547, 350 S.E.2d at 74. In this case, the decedent's injury did not result from the dialysis treatment itself but from her attempt to get out of the dialysis chair. Therefore, coverage is excluded only if any negligence with respect to assisting decedent out of the chair was a providing or failure to provide professional services. In order to resolve this issue, we must construe the term "professional services."

Those jurisdictions that have considered whether a particular act falls within a professional services exclusion have relied on the particular facts of each case and no uniform rules of interpretation have emerged. See generally 12 R. Anderson Couch on Insurance 2d § 44A:123 (rev. ed. 1981 & Supp.1988). Nevertheless, two general principles guide our determination in this case. First, a "professional service" is generally defined as one arising out of a vocation or occupation involving specialized knowledge or skills, and the skills are mental as opposed to manual. See Smith v. Keator, 21 N.C.App. 102, 105-06, 203 S.E.2d 411, 415, aff'd, 285 N.C. 530, 206 S.E.2d 203, appeal dismissed, 419 U.S. 1043, 95 S.Ct. 613, 42 L.Ed.2d 636 (1974) (quoting Marx v. Hartford Accident & Indem. Co., 183 Neb. 12, 14, 157 N.W.2d 870, 872 (1968)); Black's Law Dictionary 1089 (5th ed. 1979). Second, the determination of whether a particular act or omission falls within the scope of a professional services exclusion depends upon the nature of the activity rather than the position of the person responsible for the act or omission. See Gulf Ins. Co. v. Gold Cross Ambulance Serv. Co., 327 F.Supp. 149, 152 (W.D.Okla.1971).

Cases from other jurisdictions reveal that the courts have reached conflicting results under facts somewhat similar to the facts in this case. Several courts have held that the claims were excluded from coverage. See Antles v. Aetna Casualty and Surety Co., 221 Cal.App.2d 438, 34 Cal.Rptr. 508 (1963) (injury resulted when heat lamp being used in chiropractor's treatment fell on the patient); Brockbank v. Travelers Ins. Co., 12 A.D.2d 691, 207 N.Y.S.2d 723 (1960) (injury which resulted when the patient fell from her bed was allegedly caused by negligence in adjusting sideboards); Harris v. Fireman's Fund Indem. Co., 42 Wash.2d 655, 257 P.2d 221 (1953) (injury caused by collapse of defective treatment table). Other courts have held that the claims were...