Moscarillo v. Professional Risk

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Frank M . Mosca rillo v. Professio nal Risk M anagem ent Service s, Inc., et al. No. 61, September Term, 2006 HEADNOTE: PROFESSIONAL LIABILITY INSURA NCE DUT Y TO DEFE ND To establish a potentiality of coverage, an insure d can refe r to extrinsic ev idence, ho wever, the extrinsic evidence must relate to a cause of action actually alleged in the comp laint and can not create a new, unasserted claim. An insurer s du ty to defend is not triggered when the professional liability insurance policy at issue does not provide coverage for fraud and the gravamen of the com plaint in the und erlying ac tion alleg es only fra ud. In the Circu it Court for M ontgom ery County Civil No. 249217 IN THE COURT OF A PPEALS OF MARYLAND No. 61 September Term, 2006 __________________________________ FRANK M. MOSCARILLO v. PROFESSIONAL RISK MANAGEMENT SERV ICES, IN C., et al. __________________________________ Bell, C.J. Raker *Wilner Cathell Harrell Battaglia Greene, JJ. __________________________________ Opinion by Green e, J. __________________________________ Filed: April 16, 2007 *Wilner, J., now retired, participated in the hearing and conference of this case while an active member of this Court; after being recalled pursuant to the Constitution , Article IV, Section 3A, he also participated in the decision and adoption of this opinion. This appeal arise s out of an action filed in the Circuit C ourt for M ontgom ery County by Petitioner, Dr. Frank M oscarillo ( Dr. Moscarillo ), against Respondents, Professional Risk Man agem ent Ser vices, In c. ( PRM S ), Prope rty and Casu alty Insurance G uaranty Corporation ( PCIGC ), and Leg ion Insu rance C ompa ny ( Leg ion. ) D r. Mosca rillo brought a declaratory judgement action that included allegations o f breach o f contract. Add ition ally, Dr. Moscarillo sought damages as a result of Legion s refusal to pay or reimburse the losses that he incurred in defending a law suit which had bee n filed against him. The C ircuit Court denied Dr. Mo scarillo s mo tion for partia l summar y judgment a nd grante d Respondents cross-motions for summary judgment, finding no duty to defen d existed under Le gion s policy (the Policy ) b ecause the allegations ag ainst Dr. M oscarillo w ere related to intentional misconduct and no t neglige nt cond uct. On app eal, the Cou rt of Specia l Appeals held that the Policy did not provide coverage for fraud. Additionally, that court held that the comp laint and extrinsic eviden ce only su pporte d a cau se of ac tion for fraud. The issue we must decide in this case is whether Legion had a duty to defend Dr. Mosca rillo in a la wsu it bro ught aga inst h im by William M. Mercer, Inc. and Marsh & McLennan Co., Inc. (collectively, Mercer ). We h old that there was no d uty to defend Dr. Mosca rillo because there was no potentiality of coverage under the Policy. Accordingly, we shall af firm the judgm ent of th e Cou rt of Sp ecial A ppeals . I. We adopt the facts as stated by Judge Peter B. Krauser, writing for the Court of Special A ppeals in this c ase: On Novemb er 4, 1998, [Dr. M oscarillo] purchased a claims-made professional liability insurance policy from L egion, wh ich was re troactive to May 1, 1996. It provided that Legion would pay on behalf of an Insured all sums which the Insured shall become legally obligated to pay as Damages arising out of a Medical Incident, to which this policy applies. It further provided that Legion had a duty to defend an y Claim or Suit against an Insured for Damag es which are payable und er the terms o f this policy, even if any of the allegations of such actions or proceedings are groundless, false, or fraudu lent. In the Legio n policy, a Claim meant a written demand received by an Insured for money including the service of Suit, demand for arbitration or the institution of any other similar legal proceeding to which this policy applies ; Dama ges includ ed any com pensatory am ount wh ich an Insured is legally obligated to pay for any Claim to which this insurance applies ; and a Medical Incident encompassed any negligent act or omission in the furnishing of Psychiatric Services by a Named Insured or any person for whose acts or o mission s the N amed Insured is legally re sponsi ble. The Legion policy contained several exclusions, but only one is at issue here. That exclusion provided: This policy does not apply to: . . . [a]ny Claim arising out of or in connection with any dishonest, f raudulent, c riminal, maliciously or deliberately wrongful acts or omissions, or violations of law comm itted by an Insured . The Mercer Litigation On February 24, 1999, Mercer and M arsh & M cLennan, M ercer s parent company, filed suit in federal district court against [Dr. Moscarillo] and his patient, Evelyn Toni Mulder, alleging fraud and conspiracy to defraud in connection with Mulder s application for and receipt of disability benefits. The complaint stated that Mercer hired Mulder as an actuary in 1992. On February 27, 1997, the head of Mulder s practice group, Henry Essert, met with Mulde r to advise her that, as part of Mercer s restructuring plan, her office was to be closed. Two months later, he sent Mulder a letter offering her a severance package and notifying her that her employment would end on May 31, 1997. Two weeks after that letter was sent, on May 22, 1997, Mulder sought treatment from [D r. Mosca rillo,] a psychiatrist. Sh e continued to see [Dr. Moscarillo] during the spring and summer of that year. During that time, [Dr. Moscarillo] prescribed Prozac and other antidepressants for her. By June, [Dr. Moscarillo] had concluded that Mulder was suffering from major depression. -2- That diagnosis enabled Mulder to apply for and receive disability ben efits under the Marsh & McLennan benefit plan. According to the M ercer co mplain t, three w eeks late r, on Jun e 23, 1997, Mulder told [Dr. Moscarillo] about the employment dispute she was having with Merc er. At that time, [Dr. Mosca rillo] and Mulder co mpleted M ulder s application for s hort-term disability benefits. The application stated that Mulder had major depression and had been unable to work since May 14, 1997. In July and A ugust of 1 997, [D r. Mosca rillo] purportedly told a disability coordinator and a health care consultant for Marsh & McLennan that Mulder had not yet recovered from that depression. The Mercer c omplaint f urther alleged that on October 23, 1997, a senior Mercer human resourc es representative told M ulder that, con sistent with Mercer s original decision, there was no longer any position for her at Me rcer; her disability benefits were terminated effective November 1, 1997. On October 31 st, the day befor e her bene fits were to en d, Mulde r sent a letter to Mercer appealing the termination of her benefits. In reply, Mercer suggested that Mulder submit to an independent medical examination. That suggestion, according to the complaint, prompted [D r. Mosca rillo] to write a n ote to Mercer s medical consultant stating that Mulder would be able to return to work on December 1, 1997.[1] When the Merc er litigation commenced, [Dr. Moscarillo] invoked Legion s duty to defend him under the terms of his insurance policy. That request was denied. On April 26, 1999, [Dr. Moscarillo] filed an answer, and discovery commenced. Nine months later, on January 29, 2001, Mercer and Marsh &McLennan filed a stipulation under seal stating that, following extensive discovery and intense discussions between counsel . . . plaintiffs counsel has advised his clients of h is opinion that the allegations th at Dr. M oscarillo himself engaged in fraud or co nspiracy to def raud with respect to his d iagnosis and treatment of defen dant M ulder or w ith respect to Mulder s application for disability benefits w ould likely be re jected b y a finder of fac t. On January 30, 2001, Mercer and Marsh & McLennan agreed to d ismiss with p rejudice their claims against [Dr. M oscarillo]. Thereafter, [Dr. Moscarillo] demanded payment from [Legion] of the costs he had incurred during the Mercer litigation. On June 29, 2000, and 1 In Decem ber, Mu lder filed suit in the Sup erior Cou rt of the Dis trict of Colu mbia against Mercer and M arsh &M cLennan fo r wrongful termina tion. The record does not disclose the o utcome o f that suit. -3- October 15, 2001, PRMS, PCIGC,[2] and Legion denied coverage of [Dr. Moscarillo s] claim. Two years later, on July 28, 2003, Legion was declared insolvent by the Commonwealth of Pennsylvania. **** On January 28, 2004, [Dr. Moscarillo] filed suit against [Respondents] PRMS, PCIGC, and Legion, seeking a declaratory judgment and damages for breach of contract arising out of Legion s refusal to reimburse him for the costs of the M ercer litig ation. E ight mo nths late r, [Dr. M oscarillo] filed a motion for partial sum mary judgm ent seekin g a judicial declaration that [Respondents] had a duty to defend him and that Legion, by failing to pay or reimburse [Dr. M oscarillo] for h is defense costs, had an unpaid ob ligation to him at the time it was declared insolvent. In response, [Respondents] moved for summary judgment on the grounds tha t they had no duty to defend [D r. Moscarillo] in the Mercer litigation. Following a hearing on the crossmotions, the circuit court granted [Respondents ] motion for summ ary judgem ent . . . . Moscarillo v. Prof l Risk Mgmt. Services, Inc., 169 Md. App. 137, 141-44, 899 A.2d 956, 959-6 0 (200 6). Dr. Moscarillo app ealed the judgmen t of the Circuit Court to the C ourt of Special Appeals. On June 2, 2006, the Court of Special Appeals filed its reported opinion, Mosca rillo, 169 Md. App. 137, 899 A.2d 956 (200 6), holding th at Legion did not hav e a duty to defend Dr. Moscarillo in the Mercer litigation. Dr. Moscarillo filed a petition for writ of certiorari3 in this Court, w hich w e grante d. Moscarillo v. Prof l Risk Mgmt. Services, Inc., 2 Subject to certain statutory limitations, PCIGC stands in the shoes of Legio n and is liable for claims that [Dr. Moscarillo] could have brought against Legion. 3 Dr. Moscarillo presented two questions in his petition for writ of certiorari. We have reph rase d the first question for p urpo ses o f cla rity: 1. Whethe r, in this circum stance, the ex trinsic evidence clearly established a reasonable potential that the issue triggering (contin ued...) -4- 394 Md. 47 9, 906 A .2d 942 (2 006). For th e reasons sta ted in this opin ion, we affirm the judgm ent of th e Cou rt of Sp ecial A ppeals . II. A. We turn first to Dr. M oscarillo s asse rtion that Leg ion had a d uty to defend him in the Mercer litigation, despite the fact that the allegations in that case were for fraud and conspiracy to defraud. D r. Mosca rillo argues tha t the duty to defe nd is not ne cessarily triggered by the mere titling or styling of a cause of action, but instead the duty to defend is measured first by gleaning the substance of the underlying tort action from the complaint and/or extrinsic evidence, and then evaluating whether there might be any potential for coverage under the terms of the insurance policy. Dr. Moscarillo further contends that the Policy s coverage grant . . . extends to n egligent co nduct an d that M ercer aggre ssively 3 (...continued) coverage under a professional liability insurance policy (here, negligent conduct) wou ld be raised at trial. If so, did the Court of Special Appea ls imprope rly hold that the d uty to defend can be triggered only w here the tort plaintiffs can also assert negligence as a cause of action, thus elevating form over substance and misapplying this Court s oft-cited test for the du ty to defend? 2. Whether the fraud exclusion in a professional liability insurance policy can apply to unproven allegations of fraud, when by its express terms the exclusion applies to fraudulent acts committed by an [i]nsure d, and the policy imposes a duty to defend even as to allegations that are groundless, false, or fraudu lent. -5- sought to develop a record of neglige nt conduc t against Dr . Mosca rillo [and thu s] the duty to defend w as triggered. Legion a rgues, to the c ontrary, that the term s of the policy establish that Legion had no duty to defend Dr. Moscarillo in the Mercer litigation and that similarly, Dr. Mo scarillo has failed to demons trate that an issue trig gering cov erage wo uld be genera ted at trial. This Court has, on numerous occasions, discussed the duty of an insurer to provide a defense for an insured. The principles for determining whether an insurer h as a duty to defend an insured were first set out in Brohawn v. Transamerica Ins. Co., 276 Md. 396, 347 A.2d 842 (1975). In Brohawn the issue before the Court was whether an insurer had a duty to defend an insured in a tort suit, brought by injured third parties, that alleged negligence and assault, when the policy excluded from coverage acts that we re comm itted with the intent to injure. Brohawn, 276 Md. at 398, 347 A.2d at 844. In that case, the insured, Mary Brohawn, her son, and her sister, were involved in a physical altercation outside of a nursing home that resulted in Mrs. Brohawn and her sister pleading guilty to criminal assault charges. Later, the injured parties each filed a civil suit against Mrs. Brohawn and her sister alleging that they were assaulted and, in an amended declaration, alleged negligence. Mrs. Brohawn requested that her insurer, Transamerica, defen d her in the civil s uits. Brohawn, 276 Md. at 401, 347 A .2d at 84 6. The insurer, in response, filed a declaratory judgment action seeking a declaration that, because Mrs. Brohawn pled guilty in a criminal action, the acts she allegedly committed we re intentional and therefore were excluded from coverage and, -6- further, that Transa merica did not have a n obligation to defend Mrs . Brohaw n in the civil suits. We explained that, [t]he obligation of an insurer to defend its insured under a contract provision . . . is determined by the allegation s in the tort actions. If the plaintiffs in the tort suits allege a claim covered by the policy, the insure r has a duty to defend. Brohawn, 276 Md. at 407-408, 347 A.2d at 850 (citing Journal Pub. Co. v. General Cas. Co., 210 F.2d 202, 207 (9 th Cir. 1954) ; Boyle v. Nat l. Cas. Co., 84 A.2d 614, 61 5-616 (D.C. M un. App. 1951 ); Travelers Ins. Co. v. Newsom, 352 S.W.2d 888, 892 (Tex. Civ. App. 1961); 7A Appleman Insurance Law and Practice § 4682; Anno t., 50 A.L.R.2d 458). We noted that [e]ven if a tort plaintiff doe s not allege f acts which clearly bring the claim within or without the policy coverage, the insurer still must defend if there is a potentiality that the claim could be covered by the policy. Brohawn, 276 Md. at 408, 347 A.2d at 850 (citing U. S. Fid. &Guar. v. Nat l. Paving Co., 228 M d. 40, 54 , 178 A.2d 872 (1962)). The Court held that Mrs. Brohawn was entitled to a defense, noting that the allegations of negligence clearly stated a claim that was within the coverage of the polic y and that the ev idence of a guilty plea did not relieve Transamerica of its duty to defend its insured in suits which allege an unintentional tort c overed b y the p olicy. Id. In St. Paul Fire & Marine Ins. Co. v. Pryseski, 292 Md. 187, 438 A.2d 2 82 (1981), this Court further explained the rule for dete rmining w hether an in surer has a d uty to defend its insured, estab lishing a two -part inquiry. Th e Court sa id that [i]n determinin g wheth er a liability insurer ha s a duty to prov ide its insured with a defense in a tort suit, two types of questions ordinarily must be -7- answered: (1) what is the coverage and what are the defenses under the terms and requirements of the insurance policy? (2) do the allegations in the tort action potentially bring th e tort claim within the policy s coverage? The first question focuses upon the language and requirements of the policy, and the second questio n focu ses upo n the alle gations of the to rt suit. Pryseski, 292 Md. at 193, 438 A.2d at 285 (holding that, as the policy was presented in the record, there existed an ambig uity, and that am biguity should be resolved against the insurer, St. Paul, because it is the party that prepared the co ntract.) To determine if Legion h ad a duty to de fend D r. Mosca rillo in the Mercer litigation, we turn to the first question of the Pryseski inquiry. Accordingly, we look to the terms of the professional liability insurance policy issued to Dr. Moscarillo to determine the scope o f its coverage and any def enses. Dr. M oscarillo contends that the Policy creates a duty to defend when there is a potential for a payment arising out o f negligen t profession al conduct, but that duty is not dependent on the plaintiff labe ling the cau se of action as negligen ce. Legion , in turn, consistent with the reasonin g of the C ourt of Sp ecial App eals, argues th at the only ordinary or reasona ble interpretation o f the cove rage clause [is] that Leg ion is obligate d to provide coverage for damages arising out of a negligent act or omission and that because the gravam en of the M ercer com plaint is fraud, Legion did not have a duty to defend Dr. Mosc arillo. The Policy we must interpret provides that Legion had the duty to defend any Claim or suit against an Insured for Damages which ar e paya ble u nder the term s of th[e] Policy, even if any of the allegations of such actions or proceedings are groundless, false or -8- fraudu lent. Additionally, it provided that Legion shall pay on behalf of an Insured all sums which the Insured shall become legally obligated to pay as Damages arising out of a Medical Incident to which th[e] policy applies . . . . The definitions section of the Policy defines a Medical Incident a s meaning any negligen t act or omission in the furnishing of Psychiatric Services by a Named Insured or any person for whose acts or omissions the Named Insured is leg ally responsible. A ny act or omiss ion togethe r with all related acts omissions shall be considered one Medical Incident. The Court of Special Appeals held that it [was] clear that the policy covered negligent acts or omissions and not intentio nal torts. Moscarillo, 169 Md. App. at 146, 899 A.2d at 961. We agree with the intermed iate appellate court s holding. We construe the professional liability insurance policy issued by Legion to Dr. Mosca rillo according to contract prin ciples, becau se a policy of in surance is a contra ct. See Bausch & Lomb v. Utica M ut., 330 M d. 758, 779 , 625 A.2d . 1021, 103 1 (1993); Litz v. State Farm Fire & Cas. Co., 346 Md. 217, 22 4, 695 A .2d 566 , 569 (1 997), Mesmer v. M.A.I.F., 353 M d. 241, 725 A.2d 10 53 (1999 ). We hav e said: Construction of insurance contracts in Maryland is gov erned by a fe w wellestablished principles. An insura nce contra ct, like any other c ontract, is measured by its terms unless a statute, a regu lation, or pub lic policy is violated thereby. To determ ine the intentio n of the pa rties to the insurance con tract, which is the point of the whole analysis, we construe the instrument as a whole. Maryland C ourts should examin e the chara cter of the co ntract, its purpose, and the facts and circumstances of the parties at the time of the execution. Litz, 346 Md. at 224-225, 695 A.2d at 569 (citing Pacific Indem. v. Interstate Fire &Cas., -9- 302 Md. 383, 388, 488 A.2d 486, 488 (1985)). In the case sub judice, we are asked to interpret the contract and decide whether the insurer, Legion, had a duty to defend th e insured, Dr. Moscarillo. As we noted in Litz, [t]he insurer s duty to defend is a contractual duty arising o ut of the te rms o f a lia bility insurance policy. 346 Md. at 225, 695 A.2d at 569. The policy at issue also contained several Exclusions, including an exclusion that provided that the Policy does not apply to: . . . [a]ny claim arising out of or in connection with any dishonest, fraudulent, criminal, maliciously or deliberately wrongful acts or omissions, or violation of law committed by an Insured. Our reading of the policy as a whole, in light o f the pri nciples of con struction , supra, according to the ordinary meaning of the word s used, ma kes clear tha t the parties did not intend to cover any claim brought against Dr. Moscarillo that is based on an alleged fraudulent act or omission. The policy cannot be construed, however, to exclude a claim that is based on an alleged negligent a ct. The definition o f Med ical Incident supp orts this conc lusion. The policy clearly contemplates coverage in instances in w hich Dr. Mo scarillo s actions are alleged to be negligent, but not where the condu ct is alleged to b e intentional o r fraudulen t. Thus, in answer to the first part of the Pryseski inquiry, we hold that the Policy before us obligated the insurer to defend th e insured in an action that alleged negligen ce but not as here, wh ere the pleadings in the Mercer litigation alleged only frau dulent c onduc t. Accordingly, [h]aving established th e scope an d limitations o f coverag e available under the [Legion] insuran ce polic [y], as the Court of Special Appeals notes, [t]he second -10- part of the Pryseski inquiry requires us to determine whether any of the claims in the Mercer litigation could potentially fall within the scope of the policy s coverage. Mosca rillo, 169 Md. App. 137, 146, 899 A.2d 956, 961 (2006) (citing Aetna Cas. & Surety Co. v. Cochran, 337 Md. 98, 105, 651 A.2d 859, 863 (1995)). As noted supra, the insurer must defend the insured if there is a potentiality that the claim could be covered by the insu ranc e policy. Brohawn, 276 M d. at 408 , 347 A .2d at 85 0. In Cochran, this Court held that to establish a potentiality of coverage, an insured can also refer to extrinsic eviden ce. In tha t case, w e conc luded th at, [o]nly if an insured demonstrates that there is a reasonable potential that the issue triggering coverage will be generated at trial can evidence to support the insured s assertion be used to establish a potentiality of coverage under an insurance policy. Cochran, 337 Md. at 112, 651 A.2d at 866 (noting that the facts sufficiently established a reasonable potential that a self-defense issue would be generated at trial and therefore the insurer had a duty to defend the insured in the underlying tort action). We w arned, however, that an insured can not assert a frivolous defense m erely to establish a duty to defend on the part of his insurer. Cochran, 337 M d. at 112 , 651 A .2d at 86 6. Later in Walk v. Hartford Cas. Ins. Co., 382 Md. 1, 852 A.2d 98 (2004), we limited the usage of extrinsic evidence to establish the potentiality of coverage. Dr. M oscarillo contends that, in its decision, the Court of Special Appeals misapplied this Court s decision in Walk. We di sagree . In our v iew, Walk is dispositive and was correctly applied by the -11- Court o f Spec ial App eals. Walk arose out of an action filed by Richard Walk against Hartford Casualty Insurance Company alleging breach of contract and seeking damages as a result of Hartford s refusal to defend him in a lawsuit which had been filed aga inst him. Walk s emp loyer, IBSC E ast, purchased a business insurance policy that provided coverage for business personal property, business liability, and employment practices . . . . Walk, 382 Md. at 6, 852 A.2d at 101. The insurer agreed to pay those sums that the insured becomes legally obligated to pay as damages because of . . . [an] advertising injury. Id. An adv ertising injury was defined in the insuran ce policy as including the copying in an advertisement of an advertising idea or style. Id. Prior to his em ployment w ith ISBC , Walk was employed by Schinnerer, a company that, like ISBC, acted as an underwriter for liability insurance policies for professionals. While employed by Schinnerer, Walk focused on marketing to real estate agents errors and omissions insurance. The underlying actions instituted by Schinn erer, aga inst Wa lk, allege d, inter alia, that Walk breached non-solicitation and severance agreements by soliciting Schin nerer s clients and using proprietary and confidential information . . . . Walk, 382 Md. at 8, 852 A.2d at 102. Because the com plaint di d not im ply or exp licitly allege an adv ertising in jury, Wa lk relied on extrinsic evidence in su pport of his argument that a potentiality of coverage existed. Specifically, Walk relied on his deposition testimony, Schinnerer s answers to interrogatories in the underlying suit, and a settlement demand letter. The crux of Walk s argument was that -12- Schinnerer s claim poten tially was covered by the Policy because Schinnerer s allegations that he violated the non-co mpetition ag reements s tem from the advertisin g activity on his part. Walk, 382 Md. at 13, 852 A.2d at 105. The insurer argued that Walk s marketing efforts were not advertisements and that if they were, the plaintiff in the underlying suit never alleged anything with respect to the content of such advertisements and mentioned Walk s marketing efforts merely to prove that Walk breached contracts prohibiting him from soliciting Schinnerer s clients. Walk, 382 M d. at 14, 8 52 A.2 d at 105 . In Walk we said that extrinsic evidence must . . . relate in some manner to a cause of action actually alleged in the complaint and cannot be used by the ins ured to create a new , unasserted claim that would create a duty to de fend. Un asserted cau ses of action that could potentially have been supported by the factual allegations or the extrinsic evidence cannot form the basis of a duty to defend because they do not demons trate a reasonable potential that the issue triggering coverage will be genera ted at trial . Walk, 382 Md. at 21-22, 852 A.2d at 110 (quoting Reames v. State Farm Fire and Ca s. Ins., 111 Md. App. 546, 561, 683 A.2d 179, 186 (1996)). We concluded that Walk stretched the concept of potentiality too far, as general references to the marketing materials did not transform the claims into ones for advertising injuries. We held that [b]ecause Schinnerer never asserted that anything was copied in an advertisement, Walk [could not] establish a potentiality of an advertising injury or the reasonable potential that the issue of an advertising injury would have been generated at trial. Walk, 382 M d. at 22, 8 52 A.2 d at 110 . In the case sub judice, the Mercer complaint contained two separate counts against -13- Dr. Mosca rillo alleging the intentional torts of fraud and conspiracy to defraud. The allegations in the complaint contain n o averments or intimation s that the injury sustained by Mercer resulted from the neg ligent acts of Dr. Moscarillo, which would potentially bring the alleged intentional acts under the polic y s cover age. Thus the allegations in the complaint filed in th e Mer cer actio n do no t trigger c overag e unde r the insu rance p olicies. We turn, then, to the extrinsic information that Dr. Mo scarillo conte nds supp orts his position that Le gion ha d a duty to defen d him. Specifically, Dr. Moscarillo contends that the affidavit, reports, and deposition testimony of Mercer s psychiatric expert, Sheldon Greenberg, M.D., opined that Dr. Moscarillo had rendered an incorrect dia gnosis and , in caring for Ms. Mulder, had committed the equivalent of malpractice and further that [b]ased on Dr. G reenberg s conclusio n, Merce r alleged in se veral plead ings that D r. Mosca rillo had comm itted the equivalent of malpra ctice. Legion contend s that Dr. Greenberg s opinions were insufficient to establish that Mercer was asserting a claim for negligence or that it would have made negligence an issue at trial a nd, further, th at his opinions were offered solely for the purpose of proving an element or elements of fraud and consp iracy to co mmit f raud. W e agree with L egion. At the outset, we note that [i]n order to recover damages in an action for fraud or deceit [Mercer was required to] prove (1) that the defendant made a false representation to the plaintiff, (2) that its falsity was either known to the defendant or that the representation was made with reckless indifference as to its truth, (3) that the misrepresentation was ma de for the p urpose of defraudin g the plaintiff, (4) that the plaintiff relied on the misrepresentation and had the right to rely on it, and -14- (5) that the plaintiff suffered compensable injury resulting from the misrep resenta tion. Nails v. S & R, 334 M d. 398, 415 -416, 639 A.2d 66 0, 668-66 9 (1994) (c iting Everett v . Baltimore Gas & Elec., 307 M d. 286, 300 , 513 A.2d 882, 889 (1986); Martens Chevrolet v. Seney, 292 Md. 328, 333-334, 439 A.2 d 534, 53 7-538 (19 82); James v . Weisheit, 279 Md. 41, 44-45, 367 A.2d 482, 484-485 (1977); Suburban Mgmt. v. Johnson, 236 Md. 455, 460, 204 A.2d 326, 329 (1964); Schmidt v. Millhauser, 212 Md. 585, 592-593, 130 A.2d 572, 575-576 (1957); Appel v. Hu pfield, 198 Md. 374 , 378-379, 84 A .2d 94, 95-96 (195 1); Gittings v. Von Dorn, 136 Md. 10, 15-16, 109 A. 553, 554-555 (1 920); Donnelly v. Baltimore Trust Co., 102 Md. 1, 13, 61 A. 301, 30 6 (1905); Boulden v. Stilwell, 100 Md. 543, 552, 60 A. 609, 610 (1905); Cahill v. Ap plegarth, 98 Md. 493, 499-504, 56 A. 794, 795-797 (1904); Robertson v. Parks, 76 Md. 118, 131 -133, 24 A. 411 , 412-413 (1892 ); McAleer v. Horsey, 35 Md. 4 39, 452 -454 (1 872)). See also Hoffman v. Stamper, 385 Md. 1, 867 A.2d 276 (2005). In the alternative, if Mercer intended to prove an allegation of negligenc e, it would have to show (1) that the defendant was under a duty to protect the plaintiff from injury, (2) that the defendant breached that duty, (3) that the plaintiff suffered actual injury or loss, and (4) that the loss or injury proximately resulted from the defendant's b reach o f the du ty. Rhaney v. Univ. of Maryland E. Shore, 388 M d. 585, 596 , 880 A.2d 357, 363 -64 (2005 ); see also Muthu kumara na v. Mo ntgome ry Coun ty, 370 Md. 447, 486, 805 A.2d 372, 395 (2002 ). We conclude, as discussed infra, that Legion presented evidence that Dr. Mo scarillo breached the standard of care in an attempt to establish that Dr. Moscarillo made a false -15- representation (and his conduct was therefore fraudulent), not to establish that Dr. Mosc arillo s co nduct w as negl igent. Dr. Greenberg s affidavit, in our view, does not support Dr. M oscarillo s contention that negligence would have been made a central issue at trial. The Court of Special A ppeals correctly noted that [w]hile Dr. Greenberg s affidavit did refer to deviations from the standa rd of ca re, he was clearly referring to intentional, not negligent, deviations from the standa rd of ca re. Mosca rillo, 169 Md. App. at 148, 899 A.2d at 963. The following excerpts from Greenberg s affidavit, in our view, supports this conclusion: ¢ ¢ ¢ ¢ ¢ ¢ The amelioration of M ulder s symptoms and h er high level of functioning suggest manipulative behavior. This suggests a disingenuous presentation or overemphasis of symptoms to a psychiatrist for the purposes of secondary gain, in this cas e, disability paymen ts . . . . The impression s that Dr. Moscarillo had given regard ing Mulder s functional capacity are sus pect becau se of the un usual clinical interactio n that oc curred in the rel ationsh ip with this patie nt . . . . The records show an unusual degree of involvement by the patient, and an unusual collaboratio n betwee n the psychiatrist a nd the patie nt in developing a certain clinical picture, which essentially distorted the funda menta l diagno sis . . . . Dr. Moscarillo s statement in the disability application that Ms. Mulder was disabled raises questions abou t his motivatio n, his alliance, h is boundaries, with this patie nt and it high lights wha t the therapeu tic alliance between Dr. Moscarillo and Ms. Mulder had been at that time. The doctor is not supposed to be in alliance with the patient ag ainst a company and shou ld not chan ge his objec tive finding s in disability evalua tions . . . . I conclude that Dr. Moscarillo was attempting to protect Mulder s financial interests and to offer her some kind of protection by filling out the disability application to indicate that Mulder was disabled and unable to wor k . . . . I conclude that Dr. M oscarillo clearly fa iled to mainta in the appro priate -16- ¢ ¢ ¢ boundaries; I think his clinical judgment was affected by his unusual alliance with this patient. Dr. Moscarillo allowed Mulder to unduly influence his decisions, and his treatment of Mulder, including what he put on the disability forms. Dr. Mo scarillo s behavior raises serious questio ns abo ut his ob jectivity in h is treatm ent of M ulder . . . . This suggests that Dr. Moscarillo distorts the data for his patient rather than ascertain the truth and arrive at a therapeutic diagnosis that fits the data . . . . This is further evidence of a collaborative collusive relationship against the corp oration , Muld er s for mer em ployer . . . . Mulder also inappropriately coached Dr. Moscarillo when she gave him a typewritten document which contained answers to United Healthcare s questions. T hat is unheard of and Dr. Moscarillo appeared to acce pt Mu lder s an swers, w ithout q uestion ing her . . . . Dr. Greenberg s affidavit, viewed as a whole, and as evidenced by the above cited portions, indicates Mercer intended to lay the foundation for fraud and not to prove a case of negligenc e. Accord ingly, contrary to Dr. Moscarillo s urging , Dr. Greenberg s affidavit does not establish a reasonable potential that the issue of negligence would have been generated at trial. Similarly, Dr. Greenberg s deposition testimony laid the foundation for a compen sable claim of fraud or conspiracy to defraud but did not provide evidence that negligenc e would have bee n a central issu e at trial. 4 4 The following excerpts from the transcript support our conclusion that Dr. Greenberg s deposition does not establish a reasonable potential that the issue of negligence would b e raised at trial: Q: And how did that paragraph come to bear on your opinions in the Mercer case? A: Well, without having spoken to Dr. Moscarillo, the question comes up was he facing an ethical dilemma or did he was he even considering the ethical questio ns in so me of his beh avior . . . . (contin ued...) -17- Dr. Moscarillo also points to Dr. Greenberg s written report, filed in the Mercer litigation, arguing that the report supports his claim that negligence would be made a central issue at trial. Specifically, Dr. Greenberg noted that he found that [s]erious questions are to be raised reg arding the d iagnosis, auth enticity, reliability and validity of the clinical findings. The Court of Special Appeals correctly observed that Dr. Greenberg 4 (...continued) Q: And what s your opinion in that regard? A: It s not reflecte d in his notes . I didn t recall se eing it reflecte d in his deposition, so the it is no t clear wha t his attitude or th oughts w ere to the ethics o f the situ ation . . . . Q: What does th[e] term [therapeutic alliance] mean to you? A: Well, in the context of the treatment of Dr. Moscarillo with Ms. Mulder, an appropriate therapeutic alliance would have been to do what is right for and with the patient. A doctor mu st maintain h is credibility, objectivity, his honesty, his integrity, that if a patient, for instance, is wrong in her evaluation of the situations or has distortions about the world, if you will, a doctor has a responsibility to work th rough tho se issues. A nd essentia lly the doctor has to maintain a position of consistent with ethics and appropriate psychiatric disciplin e and h onesty . . . . Q: Okay. In wha t regard was he a co llaborator? A: He essentially went along with what she what he believes she wanted at that time and what he may have believed that she was requesting of him rather than w hat mig ht have been in her bes t therape utic inter ests . . . . Q: Well, maybe I ll rephrase the question. D o you see in Dr. Mo scarillo s section of the disability application which is on the final page, do you see evidence there that she was in active collaborator in preparing the wording of that docum ent? A. No. I do not see any evidence of any active collaboration per se, but there s an appearance of an unusual degree of collaboration between the doctor and patient in the prep aration of this docume nt. (Emphasis added ). -18- repeated his claims of a collusive collaboration between [Dr. Moscarillo] and Mulder. In fact, in the report, he flatly charged [Dr. Moscarillo] with being a party to Mu lder s decep tion and un ethical cond uct. Pointing to the significant fee [Dr. Moscarillo] earned for the therapy Mulder received, he further suggested that [Dr. M oscarillo] ma y have bee n exploiting the situation for his own financial benefit. Mosca rillo, 169 Md. App. at 149, 899 A.2d at 963. Dr. Greenberg s report, in our view, supports only the allegations in the complaint, allegations of fraud and conspiracy to defraud. Lastly, Dr. Moscarillo points to pleadings filed in the Mercer litigation as extrin sic evidence that there w as a potentia lity that negligence would have been a central issue a t trial. Evaluating each pleading in its totality, we conclude that, although the various pleadings contained language that Dr. Moscarillo s claimed diag nosis of M ajor Dep ression is medically unsupportable and contrary to the accepted standards o f care and practice in psychiatr y, each filing advanced a cause of action for fraud. In Walk, we warned that pulling stray phrases out of . . . letters and discovery does not act to transform allegations into coverage trigg ering cla ims. Walk, 382 Md. at 13, 85 2 A.2d at 105. In this case , Dr. Mosca rillo did just that, pu lling stray phrases from the e xtrinsic mate rials, inapprop riately asserting that they are evidence of negligence.5 We have, as suggested by Dr. Moscarillo, gleaned the substance of the underlying tort action from the complaint and extrins ic evidence. That substance, however, suggests that the only issue to be tried was one of fraud. Moreover, the extrinsic evidence presented in this case does not relate to a cause of action 5 From the record presented to this Court for review, it appears unlikely that Mercer would have had standing to bring an action for negligence against Dr. Moscarillo. -19- actually alleged in the complaint. Despite the warning in Walk, Dr. Mo scarillo imagines a new, unasserted c laim , specific ally, negligence. And, as we noted in Walk, an argument that an unasserted cause of action, even if it could potentially have been supported by the factual allegations or the extrinsic evidence, cann ot form the basis of a d uty to defend. Dr. Moscarillo s contention is of that variety. We see no compelling reason to discontinue our adherence to Walk. Accord ingly, we hold that the extrins ic evidence to which D r. Mosca rillo points fails to e stablish the po tentiality that neglige nce wo uld be an iss ue at trial. B. We next turn to Dr. Moscarillo s assertion that the fraud exclusion contained in the professional liability insurance policy issued by Legion is inapplicable and therefore does not discharge the insurer s d uty to defend . Dr. Mo scarillo s argu ment is that the fraud exclusion does not apply to exclude coverage because allegations of fraud are insufficient to trigger the exclusion and that the exclusion d enies only indemnity for proven acts of fraud, but has no effect on the duty to defend. Legion argues, however, that the plain language of the P olicy, when applied to the facts of this case, excludes coverage. We agree with Legion. Dr. Moscarillo s argument focuses on the fraud exclusion, specifically, the word com mitted. Dr. Moscarillo contends that by use of the past tense, Legion has limited the fraud exclusion to scenarios in which the act of fraud has been p roven. Dr. Mo scarillo s argument follows, then, that the exclusion does no t apply to alleged acts of fraud. In sup port of his contention, Dr. Moscarillo points to other exclusions contained within the insurance -20- policy, noting that so me of tho se exclusio ns specifically exclude claims that are real or alleged and in contradistinction, the fraud exc lusion doe s not use this temporizing language. We interpret the Policy and its fraud exclusion in conformity with the well settled principles of contrac t interpretation dis cussed , supra. In the case before us, the exclusion reasonably may be read as intending to exclude coverage for claims of fraud, whether they are proven or unproven. The Exclusions subheading indicates that the Policy does not apply to any of the situations outlined in the paragraphs that follow. Specifically, the entire policy does not a pply to any Claim arising out o f or in connec tion with an y dishonest, fraudulen t, criminal, maliciously or d eliberately wro ngful acts or omissions, or violations of law committed by an Insured . We find Dr. Mo scarillo s interpre tation of the e xclusion to be inconsistent with the plain language of the excl usio n. Under Dr. Mo scar illo s theo ry, Legion would have a duty to defend Dr. Moscarillo in all cases in which allegations are made that Dr. Moscarillo s conduct was dishonest, f raudulent, c riminal, malic ious or delib erately wrongf ul. In our view , this is precisely the sort of conduct the policy sought to exclude from coverage; claims of intentional conduct, w hether fina lly adjudicated o r not. We h ave said in the context of interpretin g an exclu sionary clause in an insuran ce contrac t that, in determining whether an individu al s liability is within the coverage of the policy, the terms of an insurance policy determine the reach and extent o f its cov erage. Aragona v. St. Paul Fire & Marine Ins. Co., 281 Md. 369, 379-80, 378 A.2d 1346, 1351 (1977)(noting that as to exclusiona ry clauses in insu rance con tracts that the in surance ca rrier contracte d to -21- underw rite a specific coverage and should not subseque ntly be expecte d to assum e liability for a risk which it expressly excluded )(citations omitted). Accordingly, we hold that the Policy exclud ed from c overage th e conduc t alleged in this case. Therefore, Legion had no duty to de fend o r indem nify Dr. M oscarillo . JUDGMENT OF THE COURT OF SPECIAL APPEALS AFFIRMED. COSTS IN TH IS COURT AND IN THE COURT OF SPECIAL APPEALS TO BE PAID BY PETITIONER. -22-

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