Steele v Healthcare Professionals Ins. Co.
Annotate this CaseDecided on October 13, 2020
Supreme Court, Dutchess County
Christine Steele, Plaintiff,
against
Healthcare Professionals Insurance Company and SPYROS PANOS, M.D., Defendants.
2019-54012
For Plaintiff:
Nancy M. McGee, Esq.
Wissell and McGee, LLP
80-02 Kew Gardens Road, Suite 307
Kew Gardens, NY 11415
For Defendant HPI" target="_blank">Selective Ins. Co. of Am. v County of Rensselaer, 26 NY3d 649, 655 [2016] (internal quotation marks and citation omitted)). Hence, although both sides submitted extrinsic evidence in support of their positions, the Court need not consult it to reach a proper determination of the instant dispute. Rather, the Court looks to the language of the policies to ascertain their meaning and intent. Cohen & Slamowitz, LLP v Zurich American Insurance Company, 168 AD3d 905 [2nd Dept 2019].
In Cohen, supra, the court clearly enunciated the law surrounding interpretation of insurance policies as follows:
In construing policy provisions defining the scope of coverage pursuant to a policy of insurance, courts first look to the language of the policy. The policy is read in light of common speech and the reasonable expectations of a businessperson and in a manner that leaves no provision without force and effect. The unambiguous terms of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such terms is a question of law for the court. The mere assertion by one that contract language means something different to him or her, where it is otherwise clear, [*13]unequivocal and understandable when read in connection with the whole contract, is not in and of itself enough to raise a triable issue of fact. However, if the terms of the policy are ambiguous, any ambiguity must be construed in favor of the insured and against the insurer. (Id. at 905-906 (internal quotations and citations omitted)).
When all policy terms are read in conjunction with each other in such a way as to give meaning to all of the terms as required by law, the conclusion is obvious — HPIC's policies were triggered upon exhaustion of the MLMIC primary policies in the claim year. In fact, the clear language of the HPIC policies provides that the coverage supplied to Panos is excess to a policy issued to him by MLMIC, so long as that policy provided primary coverage in the requisite amounts. Significantly, the Declaration Page does not identify the Underlying Policy by a specific policy term or a specific policy number. This is because the HPIC policy contemplates claims being made well after the occurrence year, with such claims outside the occurrence year nonetheless being covered by HPIC's policy. Reinforcing this determination is the fact that the policy states that it will answer a claim "no matter when it is brought against you". See NYSCEF Doc #3, Notice of Excess Coverage at 3. In addition, the regulatory definition of an occurrence policy states that such policies will answer claims which "may be made during or subsequent to the policy period". 11 NYCRR §73.1(j).
As previously stated, HIPC contends that its policy is not implicated because the primary layer of insurance issued by MLMIC to Panos in the occurrence year has not been exhausted. HPIC's interpretation ignores, and renders extraneous, the language of both its policy and the applicable regulation. HPIC's position fails to appreciate that coverage under a claims-made policy is not determined by the date of an occurrence. By requiring exhaustion of the Underlying Policy in effect during the occurrence year, HPIC effectively seeks to convert its policies to claims-made policies in the occurrence year or to require exhaustion of TWO Underlying Policies. Oddly, HPIC fails to realize that its interpretation would have this effect.
As Plaintiff argues, this constitutes a double trigger, a requirement not stated in the policy. Conspicuous by its absence from the policy is any language that would incorporate a requirement for the exhaustion of two primary insurance policies in order for the excess policy to be implicated. Yet, HPIC offered this interpretation. Under HPIC's analysis, in order for there to be coverage for Panos' malpractice, both the primary claims-made policy in the claim year and the primary claims-made policy in the occurrence year would have to be exhausted. This position does not square with HPIC's own argument that the applicable Underlying Policy is referenced on its Declaration Page, as there is only one Underlying Policy referenced on its Declaration Page. To be sure, HPIC's strained and convoluted construction of its policy is inconsistent with the underpinnings of Section 18 and the statutory definitions set forth in the applicable regulations.
As a matter of statutory definition, an occurrence policy applies to occurrences, irrespective of when the claim is interposed. Indeed, as quoted above, 11 NYCRR 73.1(j) clearly states that an occurrence policy covers "incidents, acts or omissions that occurred during the policy period" and, significantly, "where a claim may be made during or subsequent to the policy period." To assert otherwise negates the inclusion of such language in the regulation. Moreover, the very definition of "occurrence policy" under 11 NYCRR § 73.1(j) plainly sets forth the interaction between an occurrence based policy and a claims-made policy by stating that an occurrence policy is determined by the date of the incident even "where a claim may be made during or subsequent to the policy period." (Emphasis added). Simply put, inherent in the definition of an occurrence policy is the fact [*14]that a claim against such policy may be made during or after the policy year of the occurrence.
The Tail Coverage
HPIC builds on its unsubstantiated argument regarding claims-made policies, further asserting, based on Morris' statement, that the policies "were not in effect during [the] periods (2011-2012, 2012-2013 and 2013-2014)" when Panos had tail coverage. Morris' statement, and HPIC's reliance on it, is blind to the language of its policies which explicitly refer to tail coverage and it reflects no understanding of how an occurrence policy interacts with a tail.
As stated above, after MLMIC declined to renew Panos' primary insurance policies following the 2010-2011 policy year, Panos opted to continue coverage by availing himself of extended claims reporting coverage. Extended reporting period or tail coverage is defined by 11 NYCRR §73.1(d) as:
Extended reporting period coverage, tail or tail coverage means coverage for that period of time specified in the policy wherein claims first made after termination of coverage under the policy, for injury or damage that occurs during the policy term, or that occurs on or after the retroactive date, if any, will be considered made during the policy term.
HPIC contends that its policies are not excess to tails, stating, using Morris' verbiage, that its policies "were not in effect" when the primary coverage was pursuant to the tails. This position is wholly without merit. The fact that primary coverage emanated from a tail as opposed to a separate policy is of no consequence. HPIC's policies clearly contemplated that an Underlying Policy may operate in conjunction with tail coverage. This is plainly stated in Item 3 of the Occurrence Policy Form:
If the underlying insurance specified in the Declaration and required to be maintained by the Named Insured as a condition of this policy is issued on a claims-made basis, coverage by the Company will be effective only if the Underlying Policy, a renewal thereof or tail coverage is in effect when the claim is made AND the injury or death giving rise to the claim arose out of the rendering of or failure to render, DURING THIS POLICY PERIOD ... . (Emphasis in italics added).
It is again plainly stated in Roman Numeral I, where the insurer agrees to pay on behalf of the Named Insured all the sums in excess of the limits of liability of the Underlying Policy as set forth in the Declarations, but only up to a total amount of the limits of liability provided herein, which the Named Insured shall become legally obligated to pay as damages because of injury to any one person, including death resulting therefrom, arising out of the rendering of or failure to render, during this excess coverage period, professional services by the Named Insured to any one person, or by any person for whose acts or omissions the Named Insured is legally responsible ... . HPIC Excess Insurance Policy at 3, NYSCEF Doc #3 (emphasis added).
Moreover, 11 NYCRR §73.1(d) provides that a claim asserted during tail coverage is to be treated "as if made during a policy term." This language clearly demonstrates that the regulatory intent of tail coverage is to treat claims which arise during a tail as if they arose during the policy term. Given that HPIC's policies are excess for claims asserted during the primary policy period, so, too, they are excess to claims asserted during tail coverage.
It is beyond cavil that by allowing the Underlying Policy to include coverage afforded pursuant to a claims-made policy, HPIC cannot plausibly argue that its policies did not include coverage provided pursuant to a tail. That this is so is compelled by the definition of a claims-made policy provided by 11 NYCRR 73.1(a), which states that a claims-made policy includes coverage "as long as the claim is first made during the policy period or any extended reporting period." (Emphasis added). As such, the conclusion is inescapable that coverage pursuant to the tail of a claims-made policy is the same as coverage pursuant to the claims-made policy itself. The tail merely extends the policy coverage period, as clearly indicated by its name "extended reporting period".
To reiterate the Court of Appeals' directive, "[w]hen construing insurance policies ... the language of the contracts must be interpreted according to common speech and consistent with the reasonable expectation of the average insured. Furthermore, we must construe the policy in a way that affords a fair meaning to all of the language employed by the parties in the contract and leaves no provision without force and effect. Significantly, surplusage [is] a result to be avoided." In re Viking Pump, Inc., supra at 257—58 (internal quotations and citations omitted).
HPIC's construction of its policy ignores the provision which states that the policy provides excess coverage where the "Underlying Policy, a renewal thereof or tail of coverage is in effect when the claim is made" as stated in Item 3 of Occurrence Policy Form. HPIC's construction also ignores the applicable regulations. HPIC's interpretation would render the inclusion of the words "tail of coverage in effect", which is stated in the policy, and "extended reporting period", which is stated in the regulation, to be surplusage. Therefore, HPIC's improper construction is hereby rejected.
CONCLUSION
Plaintiff is entitled to summary judgment declaring that HPIC's excess policy was triggered when the individual or aggregate limits of MLMIC's primary policy was exhausted for the year that a claim was made. Further, in the years in which the primary coverage was pursuant to a tail, when the tail coverage was exhausted for the year the claim was made, excess coverage was similarly triggered. Because the excess policy was an occurrence policy, coverage under that policy was necessarily determined by the year in which the malpractice incident occurred. There is no requirement anywhere in HPIC's policy that the occurrence year must be the same as the claim year. Moreover, there is no requirement that two claims-made policies must be exhausted, the one in effect in the occurrence year and the one in effect in the claim year, in order to trigger excess coverage. There is no exclusion of tail coverage from HPIC's policy; to the contrary, it is expressly included.
On searching the record, the Court awards summary declaratory judgment to Plaintiff on the first and second causes of action. Succinctly stated, the Court holds that the exhaustion of a claims-made policy in the year in which a claim was made invokes the coverage afforded by the excess occurrence policy for the occurrence year. Furthermore, where the claim was made in a tail period, exhaustion of the coverage provided by the tail triggers the excess coverage in the same manner.
SUMMARY
It is ORDERED, ADJUDGED AND DECREED that the exhaustion of the claims-made policy applicable to the year in which each claim was made invoked and triggered the occurrence based policy issued by HPIC for the year of the alleged malpractice; and it is further
ORDERED, ADJUDGED AND DECREED that for those claims which were asserted in years in which primary coverage was afforded to Panos pursuant to a tail, exhaustion of the tail coverage for the claims made during the tail period invoked the excess coverage for the year in which the malpractice occurred.
Plaintiff shall have Judgment accordingly.
The foregoing constitutes the Decision and Order of the Court.
Dated:October 13, 2020
New City, NY
_____________________________
HON. PAUL I. MARX, J.S.C. Footnotes
Footnote 1:A list of the claims asserted is annexed to the Complaint as Exhibit I. NYSCEF Doc # 10. The Panos Litigation was overseen at its conclusion by the undersigned and the Hon. Lewis J. Lubell, J.S.C.
Footnote 2: Panos refused to consent to settlement of the claims as was his right under the insurance policies issued by MLMIC. In turn, MLMIC exercised its right to seek review of Panos' refusal by submitting the issue to a physician advisor appointed by the Medical Society of the State of New York, Stephanie E. Siegrist, M.D. ("Siegrist"). Panos challenged Siegrist's determination that the claims should be settled over his objection in an action entitled Panos v MLMIC, Putnam County Index #50013/2017. By Decision and Order dated February 20, 2018, this Court dismissed Panos' claims against MLMIC and Siegrist. The Court adhered to that determination on Panos' motion for re-argument/renewal in a Decision and Order dated June 22, 2018.
Footnote 3:Plaintiff's complaint alleges that HPIC is the successor to HANYS Member Hospitals Self Insurance Trust ("HANYS"). Complaint Doc # 1, ¶ 8. Plaintiff alleges that HANYS issued policies to Panos for the years 2004 through 2007 and that HPIC issued excess policies to Panos from 2007 through 2011. Id. ¶ 9-10. The parties agree that HANYS' obligations under the policies issued by it are now the obligations of HPIC. References herein will be to HPIC, regardless of which entity actually issued the policy.
Footnote 4:MLMIC also provided insurance coverage to Panos' medical group. That layer of insurance is excess to HPIC. The proceeds of that coverage have been paid into escrow by MLMIC, to be distributed after determination of this declaratory judgment action.
Footnote 5:Numerous plaintiffs had multiple surgeries performed by Panos. In some cases, Panos performed multiple surgeries on the same body part, in other cases he performed multiple surgeries on different body parts for the same plaintiff. Panos' malpractice was not limited to surgery. Some claims involved the failure to diagnose conditions while others involved the performance of surgeries which were not necessary.
Footnote 6:Defined in the Agreement as a period in which no more than 18 months elapsed between medical treatments.
Footnote 7:HPIC contends that it has no obligation to pay interest. This position is incorrect. In the insurance policies issued by HPIC, it agreed to pay all sums to which Panos became liable "in excess of the limits of liability of the Underlying Policy as set forth in the Declarations, but only up to a total amount of the limits of liability provided herein, which the Named Insured shall become legally obligated to pay as damages because of injury to any one person, including death resulting therefrom, arising out of the rendering of or failure to render, during this excess coverage period, professional services ". NYSCEF Doc # 3, Coverage Agreement at 3. While this language appears to limit HPIC's exposure to the face amount of its policies, the Agreement specifically stated that "interest would accrue on any unpaid Judgment, or portion thereof". Agreement ¶ 52. Finally, the parties clearly evidenced their intention as follows: "[i]t is intended that the interest to be paid by MLMIC and/or HPIC is irrespective of their policy limits". Agreement ¶ 54. Statutory interest on the judgments is an amount for which Panos became obligated when the judgments were entered. CPLR §§5003, 5004. Thus, except for the fact that the parties contracted for a different inception date for interest to accrue and for rates different than set by statute, the judgments would earn interest at 9%. Having contracted to defer interest at a reduced rate and having agreed that interest was "irrespective of policy limits", HPIC is bound to pay interest on the unpaid portion of the judgments.
Footnote 8:The disclaimer letter was directed to the undersigned and Justice Lubell because the Agreement was the product of negotiations which occurred with significant input from the court. A copy of the letter was provided to all plaintiffs' counsel in the Panos Litigation.
Footnote 9:As noted above, there was no dispute regarding these 5 claims.
Footnote 10:Roughly 4.89% of the amount awarded.
Footnote 11:Plaintiff's complaint alleges that HANYS issued an excess policy of insurance to Panos for the year 2004 as well. Plaintiff asserts the policy number is "believed to be 0515400413 for the period July 1, 2004 through June 30, 2005". Complaint ¶ 8(a). HPIC denies the existence of such a policy, although for the purposes of its motion, asserted that "the issuance or non-issuance of HPIC excess coverage for the period beginning July 1, 2004 is not relevant." Given the determinations made herein, the issuance of a policy for that period is, in fact, relevant to claims asserted by other plaintiffs. Because Steele's claim did not arise during that policy period, the Court makes no determination in this action as to whether such policy exists.
Footnote 12:The determinations made herein are applicable to all other plaintiffs who, like Steele, were awarded damages in excess of the aggregate amount of insurance available to answer the awards from the MLMIC policies and who, but for the disclaimer, are entitled to be paid under the excess policies. Agreement ¶ 50. Pursuant to the Agreement, all plaintiffs agreed to share on a pro rata basis in any available and collectible insurance proceeds. Agreement, ¶¶ 49, 50. Had they not agreed to such a distribution, it was likely, assuming plaintiffs' verdicts, that the cases which were tried first would have exhausted all coverage, leaving no insurance money available to pay the remaining plaintiffs' damages. This would have visited a gross inequity on those plaintiffs whose cases were tried later.
Footnote 13:Plaintiff asserts that there are seven policy periods. As noted above, HPIC disputes issuing a policy that covers occurrences in 2004. The Court is aware that a second declaratory judgment action entitled, Negri v HPIC and Panos, has been filed. (Dutchess County Index # 2020-53051). One of the primary issues in that case is whether HANYS , in fact, issued a policy to Panos for 2004-2005 (which was assumed by HPIC) and/or whether HPIC should be estopped from denying the existence of coverage for that period. That action is in its infant stages.
Footnote 14:While this motion was sub judice, plaintiff's counsel informed the Court that the third, fourth and fifth causes of action were being voluntarily discontinued. Hence, this Decision and Order does not address that portion of the motion which sought to dismiss those claims. A So Ordered Stipulation of Discontinuance has been filed as NYSCEF Doc #53.
Footnote 15:The Court delayed issuing this Decision and Order at the parties' request to allow settlement discussions to proceed.
Footnote 16:When submitted, Morris' affidavit was not notarized, although it was accompanied by a letter from counsel explaining that Morris was unable to obtain a notary because of COVID-19 related issues while he was in Florida. NYSCEF Doc # 42. HPIC was permitted to submit a notarized affidavit after oral argument. NYSCEF Doc # 52.
Footnote 17:Counsel for both sides refer to Panos having "purchased" the excess coverage from HPIC. That reference, given the provisions of Section 18 under which the policies are purchased by the Superintendent of Financial Services, is incorrect.
Footnote 18:Some of the pages of the HPIC policies are not numbered. Where a page is un-numbered it is referred to as such. Where pages are numbered, the page number will be indicated. Capitalized terms are as they appear in the policy.
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