Rapid City Regional Hosp., Inc. v. South Dakota Ins. Guar. Ass'n

Decision Date01 March 1989
Docket Number16242,Nos. 16215,s. 16215
Citation436 N.W.2d 565
PartiesRAPID CITY REGIONAL HOSPITAL, INC., Plaintiff and Appellant, v. SOUTH DAKOTA INSURANCE GUARANTY ASSOCIATION, Defendant and Appellee, and North Star Hospital Mutual Assurance, Ltd., Defendant.
CourtSouth Dakota Supreme Court

Thomas E. Simmons of Bangs, McCullen, Butler, Foye & Simmons, Rapid City, for plaintiff and appellant.

Timothy M. Gebhart of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for defendant and appellee; Lawrence L. Piersol of Davenport, Evans, Hurwitz & Smith, Sioux Falls, on the brief.

HENDERSON, Justice.

PROCEDURAL HISTORY/ISSUES

Plaintiff, the Rapid City Regional Hospital, Inc. (Hospital), sought a declaratory judgment in the circuit court for Pennington County to determine whether defendants South Dakota Insurance Guaranty Association (Guaranty) and North Star Hospital Mutual Assurance Company, Ltd., * were obligated to reimburse Hospital for $150,000 paid in settlement of a medical malpractice claim against Hospital after Hospital's two insurers became insolvent. The circuit court granted summary judgment to Guaranty. Hospital appeals, alleging that Guaranty is obligated to pay the $150,000 in question under the terms of an umbrella liability policy issued by the insolvent Transit Casualty Company (Transit).

Guaranty, by notice of review, contests the circuit court's holding that Guaranty can be liable for claims against two insolvent insurers arising from a single injury.

We affirm the circuit court's award of summary judgment to Guaranty on the basis that the policy issued by Transit does not cover the $150,000 at issue, and Guaranty, under SDCL ch. 58-29A, is not obligated to Hospital for that amount. We do not reach the issue raised by Guaranty's notice of review, as consideration of that issue would not affect the outcome of this case.

FACTS

In May 1986, Hospital participated in a $900,000 settlement of a medical malpractice claim, which stemmed from hospitalization, in February 1980, of Jason Enos, a minor. Hospital contributed $450,000 of the agreed amount. The Ideal Mutual Insurance Company of New York (Ideal) provided primary coverage of medical malpractice claims against Hospital, up to a $1,000,000 limit on individual claims. An "umbrella liability" policy, issued by the Transit Casualty Company (Transit), provided coverage for amounts in excess of coverage under the Ideal policy, to a maximum of $10,000,000 for an individual occurrence. Both Ideal and Transit became insolvent prior to settlement of Enos' claim, and Guaranty acknowledged liability, under Ideal's policy, for $300,000 of the settlement amount. Guaranty refused to pay the remaining $150,000 on the grounds that its liability was limited to $300,000 for a single injury, under SDCL ch. 58-29A, and Transit's excess liability policy did not provide for coverage of amounts under $1,000,000 when the underlying insurer, Ideal, became insolvent.

The circuit court decided that Guaranty could be liable for two claims against insolvent insurers under SDCL ch. 58-29A, but awarded summary judgment to Guaranty because the coverage of the Transit policy did not encompass the $150,000 claimed by Hospital.

DECISION

Guaranty, under SDCL ch. 58-29A, becomes the insurer of entities to whom insurance policies are issued by insurers which become insolvent. SDCL 58-29A-17 provides:

The association shall be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent.

The extent of Guaranty's obligation is limited to a maximum of $300,000 for each "covered claim." SDCL 58-29A-16. "Covered claim" is defined as "an unpaid claim ... which arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy ..." issued by an insolvent insurer. SDCL 58-29A-3(4). There is no question that Guaranty is responsible for $300,000 coverage under the Ideal policy. However, the crux of this appeal immediately follows.

Hospital argues that Guaranty is also obligated for the additional $150,000 under the Transit excess policy, as the Declarations page of the policy states that coverage extends to liability in excess of "[t]he amount recoverable under the underlying insurance" to a limit of $10,000,000 per occurrence. We disagree.

The Transit policy's Declarations page provides that the limit of Transit's liability is "subject to all the terms of this policy having reference thereto." Item 3, Section IA, of the Declarations, upon which Hospital relies heavily, authorizes coverage up to $10,000,000 for amounts in excess of the "amount recoverable under the underlying insurance as set out in Schedule A attached [.]" (Emphasis added.) Schedule A, as attached, specifies that Ideal's coverage limit is "$1,000,000 each occurrence." Endorsement No. 8, a supplement to Transit's policy, provides that Transit's "Company limit" is $10,000,000 for each claim, and the "underlying limit" of the Ideal policy is $1,000,000 for each claim. Endorsement No. 8 further states that coverage is "[t]o indemnify the Insured, in accordance with the applicable provisions of the 'underlying insurance' for the amount of 'loss' which is [in] excess of the applicable limits of the 'underlying insurance'...

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