E-Alert Case Updates
Maryland Federal District Court Grants Defendant Physician’s Partial Motion for Summary Judgment
Catlin Specialty Insurance Co. v. Barry I. Aron, M.D.
In Catlin Specialty Insurance Co. v. Barry I. Aron, M. D., the Maryland District Court was asked to decide a medical malpractice insurance coverage dispute involving Defendant, Dr. Barry I. Aron (“Dr. Aron”) an obstetrician/gynecologist who had purchased an insurance policy from Plaintiff Catlin Specialty Insurance Co. (“Catlin”). After becoming aware of a claim by Defendant Sherry Marie Pfenninger (“Ms. Pfenninger:”) against Dr. Aron arising out of 2010 surgery, Catlin filed a declaratory judgment action to determine the scope of its duty to defend and indemnify Dr. Aron and Barry I. Aron, M.D., P.C. (Dr. Aron’s profession corporation). Pending before the district court were the Defendants’ Motion for Partial Summary Judgment and the Plaintiff’s Motion for Summary Judgment. After reviewing the facts of the case, The Honorable District Judge Richard D. Bennett granted the Motion of Defendants, Dr. Barry I. Aron and Barry I. Aron, M.D., P.C. for Partial Summary Judgment, and denied Plaintiff’s Motion for Summary Judgment.
By way of background, Dr. Aron purchased one-(1) year insurance policies from Catlin Specialty Insurance Co. over the course of several years. The 2012 Policy ran from January 1. 2012 to January 1, 2013, while the 2013 Policy ran from January 1, 2013 to January 1, 2014. Both policies named Dr. Aron as the “named insured” and included Barry I. Aron, M.D., P.C. – Dr. Aron’s professional corporation – as an “additional named insured.” According to the 2012 Policy, the extent of coverage was as follows:
Additionally, one of the conditions of the Policy was that the insured – i.e., Dr. Aron – had to provide Catlin Specialty Insurance with written notice of a claim by the expiration of the applicable policy. The 2012 Policy explained how the timing of the claim and the reporting of the claim were to be calculated, and considered a claim to be reported “on the date when [Catlin Specialty Insurance Co.] first receives written notice from a Named Insured, Additional Insured or Additional Named Insured that a claim has been made against an Insured as a result of an alleged loss event to which this Policy applies.” Finally, the policy identified several coverage exclusions. Of particular importance in this case was an express exclusion of coverage for “claims, incidents or loss events which were first brought to the attention of the Insured or reported to another insurer prior to the inception date.”
Dr. Barry Aron was an obstetrician/gynecologist practicing in Charles County, Maryland, who performed surgery on Defendant Sherry Marie Pfenninger (“Ms. Pfenninger”) on December 30, 2010. The surgery – known as a pelvic laparotomy – required Dr. Aron to make an incision in the abdominal wall to removal a cystic mass. A subsequent, pathological examination revealed that Dr. Aron had removed a small segment of Ms. Pfenninger’s right ureter, which caused Ms. Pfenninger to sustain a series of health-related problems. Dr. Aron renewed his policy with Catlin Specialty Insurance for the 2012 calendar year. When the renewal application asked whether “any claim or suit for alleged malpractice ever been brought against [Dr. Aron], or [if he was] aware of circumstances that might reasonably lead to such a claim or suit,” Dr. Aaron responded in the affirmative in his application, but did not include a “claims supplement” with respect to Ms. Pfenninger’s claim as the application directed. Nevertheless, Catlin Specialty Insurance renewed Dr. Aron’s policy.
In November 2012, when Ms. Pfenninger notified Dr. Aron of her intent to file a medical malpractice claim against him, Dr. Aron contacted Catlin Specialty Insurance, which denied Dr. Aron’s claim. The denial notice stated that “[b]ecause you waited to report this claim past the expiration date of the applicable policy [i.e., December 31, 2012], Catlin has no obligation to defend or indemnify you in connection with this claim.” On March 18, 2013, Catlin Specialty Insurance filed an action seeking a declaratory judgment that Catlin had no duty to defend or indemnify Dr. Aron then filed an action against Dr. Aron and his professional corporation, Barry I. Aron, M.D., P.C. alleging medical malpractice.
According to the Maryland district court, the two (2) main issues raised by the parties’ cross-motions for summary judgment were: (1) whether § 19-110 of the Insurance Article of the Maryland Code applies to the insurance Policy in this case; and (2) whether Exclusion 11(ii) of the Policy excluded coverage for the claims in this case because the surgery on Ms. Pfenninger constituted an “incident” of which Dr Aron was aware prior to the commencement of the 2012 policy period. Relying on its recent decision in McDowell Building, LLC . v. Zurich American Insurance Co., Civ. A. No. RDB-12-2876, 2013 WL5234250 (Sept. 17, 2013), the district court concluded that § 19-110 could apply to claims-made-and-reported policies because Maryland law requires that timely notice provisions in insurance policies be construed as covenants rather than conditions precedent. The district court found that Ms. Pfenninger’s counsel first mailed Dr. Aron a demand letter on November 26, 2012 – therefore, the claim for which Dr. Aron sought coverage was first made while the 2012 Policy was in effect. According to the court, the operative fact was not the timing of the claim itself but the timing of the reporting of that claim. Consistent with the Court of Appeals’ interpretation in Sherwood Brands, Inc. v. Great American Insurance Co., 418 Md. 300, 13 A.3d. 1268 (2011) as well as the district court’s conclusion in McDowell Building, the court determined that the requirement of notice – even when appearing in the basic definition of a “claim” – must be construed as a covenant rather than a condition precedent. Accordingly, the court held that failure to provide timely notice constituted a breach of the Policy, and a policy breach triggers the applicability of § 19-110. On these grounds, Catlin Specialty Insurance’s denial of coverage was found to be improper absent a showing of prejudice.
With respect to the second issue regarding whether there was an “incident” that would trigger the applicability of Exclusion 11(ii), the court noted that the term “incident” was not expressly defined by the Policy. Under Maryland law, insurance contracts are interpreted like other contracts, and undefined words “are given their ‘customary, ordinary, and accepted meaning,’ unless there is an indication that the parties intended to use the words in a technical sense.” Sullins v. Allstate Ins. Co., 340 Md. 503, 508 (Md. 1995) (quoting Cheney v. Bell National Life, 315 Md. 761, 766 (1989)). “If the language in an insurance policy suggests more than one meaning to a reasonably prudent lay person, [the language] is ambiguous.” Id. If the policy language is ambiguous, then the language “will be construed liberally in favor of the insured and against the insurer as drafter of the instrument.” Dutta v. State Farm Ins. Co., 363 Md. 540, 556 (Md. 2001).
In determining the meaning of the term “incident,” the district court considered the contract as a whole. A “claim” is defined in reference to four (4) specific events: (1) the filing of a lawsuit; (2) written notice of intent to file a lawsuit or to arbitrate; (3) a written demand for money or services; or (4) a written notice of a loss event that descries, inter alia, the name of the patient and the circumstances under which the Insured became aware of an injury suffered by the patient. Because a “loss event” was defined in terms of a “settlement, award or judgment,” the term did not encompass mere injuries to patients. Accordingly, both of the expressly-defined terms contained in Exclusion 11(ii) were defined not in terms of any actual injury to a patient but instead in terms of liability (or potential liability) for such injuries, In light of the other language in the Policy, the court concluded that the term “incident” was ambiguous, and construed the Policy against Catlin Specialty Insurance. Under this reading of the term, there was no “incident” triggering the coverage exclusion. Specifically, Dr. Aron’s receipt of the pathology report indicating that he had removed part of Ms. Pfenninger’s ureter was merely an “injury” under the terms of the Policy. That is, it was not the type of “incident” indicating an impending claim against Dr. Aron that was necessary to trigger Exclusion 11(ii).
Accordingly, the court held that Catlin failed to show that coverage for Ms. Pfenninger’s claim was excluded, and therefore, the court Catlin’s Motion for Summary Judgment and granted Dr. Aron’s Motion for Partial Summary Judgment.
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