St. Paul Fire & Marine Ins. Co. v. Edge Memorial Hosp.

• Citation: 584 So.2d 1316
• Court: Supreme Court of Alabama
• Decision Date: 14 June 1991
• Parties: ST. PAUL FIRE & MARINE INSURANCE COMPANY v. EDGE MEMORIAL HOSPITAL, et al. 1900059.

Page 1316

584 So.2d 1316

ST. PAUL FIRE & MARINE INSURANCE COMPANY v. EDGE MEMORIAL HOSPITAL, et al.

1900059.

Supreme Court of Alabama.

June 14, 1991.

Rehearing Denied Aug. 9, 1991.

R. Stan Morris of Harris, Evans, Berg & Morris, Birmingham, for appellant.

W. Stancil Starnes and Laura Howard Peck of Starnes & Atchison, Birmingham, for appellees.

SHORES, Justice.

This case involves the question of whether St. Paul Fire & Marine Insurance Company must defend and pay certain malpractice claims against Edge Memorial Hospital and Holy Name of Jesus Medical Center under the terms and conditions of an expired malpractice policy issued by St. Paul. A second issue concerns whether St. Paul is entitled to collect a deductible amount from Holy Name.

On September 4, 1987, Edge Memorial and Jackson Hospital filed a complaint in the Circuit Court of Jefferson County, Alabama, for a declaratory judgment against St. Paul, seeking a determination that St. Paul must defend and pay certain claims. St. Paul filed a motion to dismiss and a counterclaim for declaratory judgment. The plaintiffs amended their complaint to add as parties plaintiff, Mutual Assurance Company of Alabama, Inc., and Holy Name of Jesus Medical Center. Subsequently, Jackson Hospital dismissed its claims against St. Paul because its claims had been compromised and settled.

Plaintiffs, Edge Memorial and Holy Name, and the defendant, St. Paul, then filed cross motions for summary judgment, alleging that there was no genuine issue as to any material fact and that the issues could be resolved as a matter of law. A The facts are undisputed and are set forth by the trial judge in his order, which the appellant and the appellees have adopted by reference in their briefs to this Court.

hearing was held and briefs were submitted to the trial judge, the Honorable Marvin Cherner. On August 23, 1990, the trial judge entered a summary judgment for the hospitals on the issue of malpractice insurance coverage. The trial judge also entered a summary judgment for Holy Name in respect to St. Paul's counterclaim to collect a deductible amount from the hospital. St. Paul appeals. We affirm.

"Edge Memorial and Holy Name are hospitals which were insured under a professional liability insurance policy issued to each of them by St. Paul. The insurance policies which St. Paul issued to the two hospitals are identical.

"Both hospitals decided to allow their insurance policies with St. Paul to expire without renewal and to obtain insurance coverage instead from MASA.

"MASA advised both hospitals, as a part of MASA's 'pre-effective date loss identification procedure,' to search their records for potential claims and to report those claims to St. Paul prior to the end of the insurance term of the St. Paul policies.

"Approximately one week before Edge Memorial's policy with St. Paul expired (Edge Memorial's policy expired January 16, 1987), W.D. Walley, an Edge Memorial administrator, sent nine letters by express mail and also by hand delivery to St. Paul referring to 9 potential claims against Edge Memorial. Among those letters was one letter regarding a potential claim by Polly King. That letter reads as follows:

" 'January 9, 1987:

" 'I am writing to you regarding the above referenced patient. It should be emphasized that this letter is not a patient incident report rather, we are reporting this situation to you because we believe it will most likely finalize in litigation.

" 'This 27 year old white female delivered an apparently premature baby by repeat C-Section on 1-1-85. The Dubowitz score was 27 weeks. The baby had to be transferred to Baptist Medical Center Neonatal ICU in Montgomery, and we're sure the family incurred additional medical expenses.

" 'Our concern is that the patient could allege our hospital failed to provide appropriate professional services.

" 'A copy of the patient's chart is available upon your request should you decide to investigate this claim.'

"A malpractice lawsuit was subsequently filed against Edge Memorial based on the occurrence referred to in Edge Memorial's January 9, 1987, letter, styled as follows:

" 'Charles Alva King, a minor, by and through his father and next friend, Charles R. King, Polly M. King, and James R. King v. Edge Memorial Hospital, et al., civil action number CV 87-553-PH.'

"Holy Name also followed MASA's advice, and on the last day of its St. Paul policy coverage period, hand delivered 15 letters to St. Paul outlining 15 potential claims against it.

"Of those 15, two have since resulted in lawsuits against Holy Name. These actions are styled as follows:

" 'William Michael Morrison v. Holy Name of Jesus Hospital, et al., civil action number CV 87-825-WWC;

" 'Sharlisia Suttle Williams, as Administratrix of the Estate of Lillie Mae Sumpter v. Holy Name of Jesus Medical Center, et al., Circuit Court of Etowah County, Alabama, CV 89-124.'

"The letter concerning William Morrison is set out below:

" 'July 31, 1987

" 'Dear Mr. Harris:

" 'I am writing to you regarding this patient and of the potential litigation that may arise due to this claim. This patient was admitted to Holy Name of Jesus Hospital on 5/20/87 with a diagnosis of gastro intestinal bleeding. While undergoing treatment for erosive " 'Shortly after leaving the hospital we received a request for medical records from attorney Ralph Coleman of Birmingham.

gastroduodenitis, he apparently became dissatisfied with the treatment and left the hospital without notice on 5/23/87 without signing an "against medical advise" [sic] form.

" 'Due to this patient's apparent dissatisfaction, and attorney Coleman's past track record of filing medical malpractice suits, we are concerned that this matter may become embroiled in litigation and are reporting this to you for any investigation that you deem necessary. Our staff and personnel stand ready to assist you in any way possible.'

"The letter concerning Lillie Mae Sumpter reads as follows:

" 'July 31, 1987

" 'Dear Mr. Harris:

" 'I am writing to you about the above referenced claim regarding this patient who was admitted to Holy Name of Jesus Hospital on 3/9/87 and expired in our hospital on 4/15/87.

" 'This 38 year old black female was burned while at work, and was treated for these second and third degree burns to her face while in admission at our hospital. During the hospitalization and immediately following her demise, the family expressed hostility toward the hospital and threatened suit.

" 'Due to the high likelihood of a suit being filed in regard to this claim, we are alerting you to this situation. Our employees and the medical records are available to you for any investigation you deem necessary.' "

The first question presented is whether the trial court erred in declaring that Edge Memorial and Holy Name properly submitted claims to St. Paul during their respective policy periods so as to be entitled to coverage under their claims-made policies.

We affirm the judgment of the trial judge and adopt his order as the opinion of this Court:

"St. Paul says that these letters are nothing more than 'patient incident reports' which cannot serve as the hospital's report of a claim or potential claim under the terms of the insurance policy.

"However, it is this Court's opinion that each of the letters contains sufficient information to place St. Paul on notice of the relevant facts concerning why each particular incident could result in a liability claim. The letters are not merely 'patient incident reports,' but are notices of potential claims made to comply with St. Paul's insurance policy requirements for making a claim for insurance.

"St. Paul also says that the provision of its policy requiring notice of a 'claim' refers to a 'claim' for damages made by the injured person to the insured (hereinafter 'legal claim'), by making demand for damages by letter or in a complaint filed in a lawsuit; that claim does not refer to the notice of a potential claim made by the insured to the insurer, (hereinafter 'insurance claim').

"St. Paul says that this is a 'claims-made' policy, and the ordinary meaning of 'claims-made' is that a legal claim must be made by the injured against the insured during the effective dates of the insurance policy.

"However, the meaning of the terms 'claims' and 'claims-made' as those terms appear in St. Paul's insurance policy are in dispute.

"The word 'claim' appears a number of times in St. Paul's policy. Sometimes the word 'claim' appears to mean insurance claim; at other times it is used to mean 'legal claim'.

"For example, under the 'General Rules' section of the policy the following sentences contain the word 'claim':

" 'If we submit to an appraisal, we'll still retain our right to deny the claim (insurance claim?' (p. 2.)

" 'No one can sue us on a liability claim (legal claim?) until the amount of the protected person's liability has been finally " 'Once liability has been determined by judgment or by written agreement, the party making the claim (legal claim or insurance claim) may be able to recover under this policy, up to the limits of coverage that apply.' (p. 3.)

decided either by a trial or by a written agreement signed by the protected person, by us and by the party making this claim (insurance claim?).' (p. 3.)

"Other sentences in the insurance policy which include the word 'claim' read as follows:

" 'If we settle with the owner, the owner's release will satisfy any claim (insurance claim?) you make for the same loss.' (Valuable Papers Section, p. 4.)

" 'Claims (legal claims or insurance claims?) for bodily injury or property damage are only covered if the injury or damage results from an accidental event.' (p. 1, Health Care portion of policy.)

" 'We won't cover claims (insurance claims?) for any of the following liabilities even if they're assumed under a contract or agreement.' (p. 4, Health care portion.)

" 'If you agree, we can settle any claim (legal claim?) for...