Employers Reinsurance Corp. v. Newcap Ins. Co.

• Decision Date: 11 July 2002
• Docket Number: No. 01-2276-JWL.,01-2276-JWL.
• Citation: 209 F.Supp.2d 1184
• Parties: EMPLOYERS REINSURANCE CORPORATION, Plaintiff, v. NEWCAP INSURANCE COMPANY, LTD., Defendant.
• Court: U.S. District Court — District of Kansas

209 F.Supp.2d 1184

EMPLOYERS REINSURANCE CORPORATION, Plaintiff, v. NEWCAP INSURANCE COMPANY, LTD., Defendant.

No. 01-2276-JWL.

United States District Court, D. Kansas.

July 11, 2002.

Robert T. Adams, L. Benjamin Mook, Steven D. Soden, Shiik, Hardy & Bacon L.L.P., Kansas City, MO, Brenda G. Hamilton, Shank & Hamilton, Kansas City, MO, David Lee Heinemann, Sharon A. Stallbaumer, Shank & Hamilton, P.C., Kansas City, MO, for Plaintiff.

James S. Kreamer, John P. Patterson, Baker, Sterchi, Cowden & Rice, L.L.C., Kansas City, MO, John S. Worden, Shawn D. Parrish, Jason R. Houghton, Tracy C. Lemmon, Morgenstein & Jubelirer, L.L.P., San Francisco, CA, for Defendant.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

This declaratory judgment action arises out of an insurance coverage dispute between a reinsurer and a reinsured. Specifically, the dispute is over whether an incident at Providence Hospital ("Providence"), which gave rise to a settlement payment of $7,600,000 by Providence to a third party, is covered by the hospital's commercial general liability ("CGL") coverage provision or its hospital professional liability ("HPL") coverage provision. Plaintiff Employers Reinsurance Corporation ("ERC"), the reinsurer, contends that the settlement falls under the HPL provision while defendant Newcap Insurance Company, Ltd. ("NewCap"), the reinsured, argues that it falls under the CGL provision.¹

The matter comes before the court on plaintiff ERC's motion for summary judgment. The motion is denied.² In short, as a matter of law, the court concludes that the incident at Providence Hospital, which led to a $7,600,000 settlement, is not covered by the HPL provision of the Trust Plan.

I. STATEMENT OF FACTS

The following facts are uncontroverted unless otherwise noted, or, if controverted, are viewed in a light most favorable to the defendant, the nonmoving party.

The Underlying Action

Providence Hospital, located in Mobile, Alabama, was named as a defendant in a lawsuit filed by Steven R. Florence and Vicki W. Florence, his wife, in the Circuit Court of Mobile County, Alabama. The following are the undisputed facts that gave rise to the lawsuit. Mr. Florence went to Providence's emergency room at approximately 9:47 p.m. on Friday, May 2, 1997. He had been experiencing severe chest pain, shortness of breath and a rapid heartbeat prior to going to the emergency room. His symptoms, however, had abated by the time he was admitted to the emergency room and at 12:30 a.m. on May 3, 1997, he was discharged from the emergency room. After being discharged, he and his wife began walking to their car located in a lower-level emergency room parking lot. While walking in the lower parking lot, Mr. Florence began to experience chest pains again and collapsed a few steps later. After Mr. Florence collapsed, his wife shouted for help. When it appeared no one was coming to help, she ran to the stairs to scream for help several times, while periodically running back to her husband's side.

At 12:34 a.m. security officer Nelson Gene Keller, an employee of Vinson Security working at the hospital, heard someone in the lower parking lot "hollering" for help. Officer Keller testified he first saw Mrs. Florence after she came halfway up the hill, and she told him then that she needed assistance. Mr. Keller radioed his supervisor, Sergeant Maher, and advised him that a person was down in the parking lot. Dwight Grigsby, a Security Supervisor employed by Providence Hospital, first learned of the problem in the lower emergency room parking lot around 12:34 a.m. when he overheard Officer Keller's radio call to the dispatcher reporting a visitor "down" in the parking lot. While heading toward Mr. Florence's location, Security Supervisor Grigsby called Sgt. Maher and told him that if the visitor was "down," 911 needed to be called for an ambulance. Officer Keller offered to get a wheelchair for Mr. Florence, but Mrs. Florence informed him they needed a stretcher. After speaking with Mrs. Florence, Officer Keller returned to the emergency room to get a stretcher. On his way to the parking lot where Mr. Florence was down, Sgt. Maher saw Officer Keller about halfway to the parking lot with a stretcher and told him to "hold up" because of the hospital policy of calling 911 for persons down in the parking lot. Mr. Keller complied with Sgt. Maher's order and did not take the stretcher to Mr. Florence's location.

At some point, two security guards arrived at Mr. Florence's location. Mrs. Florence asked the security guards for help, but they replied that "it was against [hospital] policy[,] that they had to call 911" and that the ambulance would be there soon.³ When Security Supervisor Grigsby arrived at the scene, he checked Mr. Florence's condition and made the judgment to bring the emergency room staff to Mr. Florence. After about three or four minutes elapsed without the charge nurse arriving, Mr. Grigsby located visiting off-duty nurse Marissa Armentrout, who evaluated Mr. Florence and began administering CPR. Eventually hospital staff arrived at the scene, placed Mr. Florence on a stretcher and took him to the emergency room where he was treated. Mr. Florence arrived in the emergency room at 12:45 a.m. The Florence complaint alleged that as a result of the delay in treatment, Mr. Florence suffered "profound and irreversible brain damage."

The Settlement

On April 27, 1999, Providence settled the underlying lawsuit with the Florences for $7,600,000. On May 4, 1999, Providence's insurance companies entered into an Interim Funding Agreement to fund the settlement. ERC contributed $6,600,000 toward the settlement; the insurance company providing Providence's primary coverage contributed $1,000,000. The Settlement Agreement and Release, dated May 21 1999, documented the terms of the settlement.

Providence's Person Down Policy

Providence's Policy & Procedures Manual contains a "Person Down Policy." The Person Down Policy requires the security guards to have the hospital dispatcher call 911 to have an ambulance attend to an unconscious person on hospital property, rather than have hospital personnel render assistance. The Person Down Policy was formulated and implemented by Robert Green, Providence's Director of Security and Safety.⁴

Providence's Insurance Coverage

Providence has both primary and excess insurance coverage. Its primary coverage is provided by a corporation formerly known as the Daughters of Charity National Health Systems ("DCNHS") through the "Amended and Restated" Self-Insurance Trust Plan Document ("the Trust Plan"). The Trust Plan includes both HPL coverage and CGL coverage. DCNHS is the parent corporation of NewCap. NewCap provides excess liability coverage to DCNHS's member hospitals, including Providence, through Umbrella Liability Policy No. EX001 ("the Umbrella Policy"). The Umbrella Policy provides only excess coverage. Thus, coverage does not apply under the Umbrella Policy until the limits of the Trust Plan are exceeded.

ERC and NewCap entered into a Reinsurance Agreement whereby ERC agreed to reinsure 100 percent of the Umbrella Policy up to a maximum of $35,000,000. The provisions of the Reinsurance Agreement and the Umbrella Policy are such that underlying coverage determinations are governed by the terms of the underlying insurance policy, here, the Trust Plan. The Trust Plan provides $10,000,000 of HPL coverage. Thus, ERC's coverage for HPL claims does not attach until a claim exceeds $10,000,000. By contrast, ERC's coverage for CGL claims attaches when a claim exceeds either $1,000,000 or $5,000,000.⁵

The Language of the Trust Plan

Part I of the Trust Plan is the CGL Coverage Provision which provides:

Coverage A I. Bodily Injury Liability Coverage/Property Damage Liability Coverage

The Trust will pay on behalf of the covered persons all sums which the covered persons shall become legally obligated to pay as damages because of bodily injury or property damage to which this coverage applies, caused by an occurrence....

An "occurrence" is defined by the Trust Plan as:

an accident, including continuous or repeated exposure to substantially ... the same general harmful conditions which results in damages covered hereunder which are neither expected nor intended from the standpoint of the covered persons.

Part II of Trust Plan is the HPL Coverage Provision, entitled Professional Liability Coverage, which provides:

Coverage D

I. Professional Liability

The Trust will pay on behalf of covered persons, all sums which covered persons shall become legally obligated to pay as damages because of injury or damage to any person arising out of the rendering or failure to render or errors and omissions [in providing] the following professional services:

Professional service means any act or omission:

a. In the furnishing of professional health care services, such as: medical, surgical, dental or nursing treatment to such person by the covered person inflicting the injury including the furnishing of food, beverages, medications or applications in connection therewith;

b. Handling of or performing post-mortem examinations on human bodies;

c. Arising out of the service by any persons or members of a formal accreditation, standards review, or similar professional board or committee of the covered persons, or a person charged with the duty of executing directives of any such board or committee;

d. Arising out of teaching or instruction in the field of medicine or healthcare; or

e. Arising out of any act, error or omission by the covered persons in the furnishing of services related to the business operations as a managed care organization....

The HPL Coverage Provision of the Trust Plan contains a Miscellaneous Professional Liability Coverage Endorsement ("MPLC Endorsement") which forms a part of the HPL Coverage Provision:

Miscellaneous Professional Liability

It is agreed that as respects professional...