Second Appellate District Enforces Claims Made And Reported Policy Terminology
The unpublished case of Beta Healthcare Group Risk Management Authority v. Norcal Mutual Insurance Company, No. B216295 (July 28) involves a coverage dispute between Beta and Norcal over a malpractice claim. In 2006, Dr. Michael Wang operated on the spine of Marteen Moore at the USC University Hospital. Dr. Anne Anglim treated an infection to the surgical wound. On December 3, 2007, Moore sued the hospital, Dr. Wang, Dr. Anglim and others in federal court. Moore’s action was tendered to Norcal and Beta for a defense. When Norcal denied coverage for Dr. Anglim, Beta began paying her defense costs. Norcal asserted that coverage was properly denied because Norcal did not receive notice of a claim against Dr. Anglim until after the Norcal policy was canceled. That cancellation was effective October 1, 2007. Beta sued Norcal for a declaration of Norcal’s defense and indemnity obligations. Norcal’s obligations, it argued, were triggered when it received notice in September 2007 of a medical incident involving Moore. The parties filed cross-motions for summary judgment on Norcal’s obligations. Norcal prevailed.
Division Two of the Second Appellate District affirmed. The Norcal claims made and reported policy, it found, plainly indicated what constituted notice of a claim and how it should be communicated. The particular insured must be identified as part of that process. Nowhere was it suggested that notice of a claim against one physician constituted notice of a claim against a second physician and that the second physician’s (or its principal’s, in this case the hospital’s) obligation to report is thereby absolved. The policy indicated that liability must be evaluated on a per physician basis. However, not all policy provisions did indicate that a “claim” relates to a single insured, and Beta relied on those to advance a contrary argument. The appellate court conceded that the word “claim” was not adequately defined in the policy, but that this did not render the policy ambiguous. Beta’s urged meaning, it found, was unreasonable because it conflicted with other provisions in the policy. The effect of Beta’s interpretation would be to convert the coverage made available to a nonreporting physician such as Dr. Anglim from a claims made and reported form to an occurrence policy. The Court also rejected the argument that the policy’s separation of insureds provision did not modify the claims reporting provisions. The Court recognized that it may well be that the purpose of the provision is to guarantee that all insureds are not denied coverage because an exclusion applies to one insured — that is, the clause aims at protecting insureds, but, in its view, the appellate court went on, it would ignore the plain language of the policy to treat the Norcal policy as separate insurance for purposes of exclusions, but not for the reporting of claims.
July 28, 2010
Posted in: Blog