Guaranty Nat. Ins. Co. v. North River Ins. Co.

• Decision Date: 17 August 1990
• Docket Number: No. 89-1890,89-1890
• Citation: 909 F.2d 133
• Parties: GUARANTY NATIONAL INSURANCE CO., and Ranger Insurance Co., Plaintiffs-Appellees-Appellants, v. The NORTH RIVER INSURANCE COMPANY, Defendant-Appellant, United States Fire Insurance Co., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 133

909 F.2d 133

GUARANTY NATIONAL INSURANCE CO., and Ranger Insurance Co. Plaintiffs-Appellees-Appellants, v. The NORTH RIVER INSURANCE COMPANY, Defendant-Appellant United States Fire Insurance Co., Defendant-Appellee.

No. 89-1890.

United States Court of Appeals Fifth Circuit.

Aug. 17, 1990.

Rehearing Denied Sept. 17, 1990.

Herbert Boyland, Harbour, Kenley, Boyland Smith & Harris, Longview, Tex., for defendant-appellant.

Sidney H. Davis, Jr., Touchstone, Bernays, Johnston, Beall & Smith, Dallas, Tex., for plaintiffs-appellees-appellants.

Appeals from the United States District Court for the Northern District of Texas.

Before GOLDBERG, GEE and WILLIAMS, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

This case arises out of a psychiatric patient's suicide at Texarkana, Texas, Memorial Hospital. The hospital's liability is established. The district court resolved a dispute between the hospital's primary insurers and the hospital's excess liability insurers by holding that an exclusion in the hospital's primary comprehensive general liability policy did not apply to preclude coverage under that policy and that the single claim limit of liability in the hospital's primary professional malpractice policy applied. We affirm.

I.

On September 13, 1983, Margaret Wagner was admitted to Texarkana Memorial Hospital for psychiatric care with directions that she be placed in the hospital's "closed" unit. ¹ The closed unit, however, was full. Hospital staff decided, therefore, to place Wagner in the less secure, "open" unit. On September 14, 1983, Wagner jumped to her death from the window of her fourth floor hospital room.

The administrator of Wagner's estate sued the hospital on behalf of Wagner's survivors. A jury found the hospital negligent in three respects:

(1) failure to monitor and to observe Wagner properly;

(2) failure to maintain the windows in Wagner's room in a proper manner to prevent escape or suicide; and

(3) failure to maintain an adequate staff of properly trained personnel in the psychiatric unit. ²

Each of these negligent acts was found to be a proximate cause of Wagner's death. The jury awarded Wagner's survivors $968,985.82 in damages. This judgment is final.

When Wagner died, the hospital was insured under four policies. First, a primary comprehensive general liability insurance policy issued by North River Insurance Company provided up to $500,000 coverage for each occurrence resulting in bodily injury liability. The North River policy contained an exclusion for liability arising from medical malpractice and professional services. The second policy, issued by United States Fire Insurance Company, provided primary hospital professional liability coverage. Coverage under this policy was limited to $200,000 for "each claim" and $600,000 "aggregate." The third policy, issued by Guaranty National Insurance Company, provided the first layer of excess liability coverage. This policy provided up to $500,000 of coverage per occurrence above the general liability coverage. It also provided coverage of $500,000 for "each claim" or $1,000,000 "aggregate" above the hospital's professional liability insurance. Finally, Ranger Insurance Company issued a policy that established a second layer of excess liability insurance. This second layer provided coverage of up to $25,000,000 in excess of all underlying insurance.

In partial satisfaction of the judgment, U.S. Fire paid $200,000 plus interest. U.S. Fire claimed $200,000 was the limit of its liability under the primary professional liability policy. North River paid nothing, claiming that the professional services exclusion in the comprehensive general liability policy excluded any coverage for Wagner's death. Guaranty and Ranger paid the remainder of the judgment.

Guaranty and Ranger filed the present lawsuit against North River. Guaranty and Ranger claimed that under the terms of the North River policy, North River was liable for a portion of the original judgment. Guaranty and Ranger also named U.S. Fire as a defendant, claiming that U.S. Fire's liability under the professional liability policy was $600,000 under the "aggregate" provision and not $200,000 under the "each claim" provision. Each party filed a motion for summary judgment. The district court granted Guaranty's and Ranger's motions for summary judgment against North River, holding that under the comprehensive general liability policy North River was liable under the original judgment. The district court also granted U.S. Fire's motion for summary judgment, holding that U.S. Fire was liable for only the $200,000 "each claim" limit. The district court denied the other motions. North River appeals. Guaranty and Ranger also appeal, challenging the district court's conclusion on the limit of U.S. Fire's liability.

II.

Summary judgment is proper when the pleadings and evidence on file show that no genuine issue exists as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The parties stipulated to all the facts necessary to rendering a summary judgment. The stipulation included copies of the insurance policies, the transcript from the trial of the suit against the hospital, and the jury verdict against the hospital. No genuine issues of material fact were raised. Instead, only two issues were before the district court. They were whether the North River exclusion precluded coverage and whether the U.S. Fire policy's single claim limit or aggregate limit applied. Interpretation of an insurance policy is a question of law. Gladney v. Paul Revere Life Ins. Co., 895 F.2d 238, 241 (5th Cir.1990). Because there were no genuine issues of material fact and because the only disputed issues called for determination of questions of law, the district court properly decided this case on the summary judgment motions.

III.

The North River policy provides, in pertinent part, that North River will "pay on behalf of [the hospital] all sums which [the hospital] shall become legally obligated to pay as damages because of ... bodily injury ... to which this insurance applies...." The policy also contains a malpractice and professional services exclusion that excludes coverage for bodily injury that occurs "due to ... the rendering of or failure to render ... any service or treatment conducive to health or of a professional nature...." North River claims this exclusion exempts North River from any responsibility for the judgment against the hospital. Guaranty and Ranger, however, assert that North River cannot avoid liability under this exclusion, because the hospital's liability was founded, in part, on the hospital's failure to safeguard Wagner's window and the hospital's failure adequately to staff the psychiatric ward. Guaranty and Ranger claim that these errors did not involve professional services excluded under the professional services provision. ³

We interpret the North River exclusion to avoid coverage only for actions taken on behalf of a patient that are based on professional, medical judgment. The hospital's liability in this case, however, was founded, in part, on its negligent failure to maintain Wagner's window in such a manner as to prevent her from committing suicide through the window. The hospital's error was not that it decided as a matter of professional judgment not to protect the open unit patients from the perils posed by the windows. Instead, the error was that once the hospital decided to provide such protection, it did not do so adequately. Testimony at the original trial revealed that a psychiatric patient previously had escaped from the open unit through an opened window. The hospital then placed screws in the window sashes to prevent the windows from being opened more than a few inches. This protection, however, proved to be inadequate to prevent Wagner's death. ⁴ The decision to protect the open unit patients through screws in the window sashes rather than through fixed, protective screens over the windows was an administrative, business decision and was not a professional, medical decision. We conclude, therefore, that the professional services exclusion in the North River policy does not reach the error for which the hospital was found to be liable.

The cases that come closest to the facts of this case support our interpretation of the North River exclusion. At least two cases specifically address hospitals' failures to safeguard their patients' safety. For example, in Duke University v. St. Paul Fire & Marine Ins. Co., 96 N.C.App. 635, 386 S.E.2d 762 (1990), review denied, 326 N.C. 595, 393 S.E.2d 876 (1990), a hospital patient was injured when she attempted to get out of a specially designed dialysis chair that was equipped with casters. The accident occurred because the hospital's employees negligently failed to lock the casters so that the chair would not move. The hospital was insured under a general liability policy that excluded coverage for liability "arising out of the providing or failure to provide professional services...." The court held that the exclusion precluded coverage only for "those services for which professional training is a prerequisite to performance." Since no professional training was required as a prerequisite properly to operate the dialysis chair, the exclusion did not prevent coverage for the patient's injuries.

Our conclusion also is supported by D'Antoni v. Sara Mayo Hospital, 144 So.2d 643 (La.Ct.App.1962). In D'Antoni, an elderly patient fell out of her bed because of the hospital's employees' negligent failure to raise the side rail on her bed. The hospital's comprehensive general liability insurer claimed this failure was an act of malpractice that was excluded under the policy's professional services exclusion. The court, however, held that the failure to raise the protective side rail was not a professional service because:

[t]he raising of the side rail was...