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Massachusetts Bay Insurance Co. v. American Healthcare Services Association

Supreme Court of New Hampshire, Rockingham

September 28, 2017

MASSACHUSETTS BAY INSURANCE COMPANY
v.
AMERICAN HEALTHCARE SERVICES ASSOCIATION & a.

          Argued: March 1, 2017

          Preti Flaherty Beliveau & Pachios, PLLP, of Concord (William C. Saturley on the brief), and Hangley Aronchick Segal Pudlin & Schiller, of Philadelphia, Pennsylvania (Ronald P. Schiller and Daniel J. Layden on the brief, and Mr. Schiller orally), for Arch Specialty Insurance Company.

          Mallory & Friedman, PLLC, of Concord (Mark L. Mallory on the brief and orally), for Triage Staffing, Inc.

          Sheehan Phinney Bass & Green, PA, of Manchester (James Q. Shirley and Megan C. Carrier on the brief, and Mr. Shirley orally), for Exeter Hospital, Inc.

          LYNN, J.

         Defendant Arch Specialty Insurance Company (Arch) appeals multiple orders of the Superior Court (McHugh and Anderson, JJ.), granting summary judgment to defendants Triage Staffing, Inc. (Triage), Exeter Hospital, Inc. (Exeter), and American Healthcare Services Association (AHSA) on their petitions for declaratory judgment, and denying Arch's cross-motion for summary judgment. The court ruled that Arch is required to defend and indemnify Triage, Exeter, and AHSA, pursuant to two insurance policies that Arch issued to Triage, for claims asserted against the defendants by patients of Exeter who contracted Hepatitis C (Exeter Patients). On appeal, Arch argues that the trial court erred in finding inapplicable certain exclusions found in the insurance policies and in determining that the claims involved multiple occurrences under the policies. We affirm in part, reverse in part, vacate in part, and remand.

         I

         In light of the arguments raised, it is important to state the facts and procedure in some detail. The pertinent facts of this case arise from the conduct of David Kwiatkowski, a cardiac catheter laboratory technician who was infected with the Hepatitis C virus. While working at Exeter, Kwiatkowski diverted opioid drugs to his own use and, after injecting himself with such drugs, returned the contaminated needles to the hospital's supply, where they were used in the treatment of numerous patients, some of whom contracted Hepatitis C. Exeter is a member of AHSA, a company that accredits and grades people in the healthcare industry. Exeter and AHSA contracted with Triage, a staffing company that places medical personnel in medical facilities across the country. Pursuant to these contracts, Triage placed Kwiatkowski at Exeter.

         In the wake of Kwiatkowski's actions, the Exeter Patients sued Triage, Exeter, and AHSA. Some of those suits have settled, while others have not. Triage, Exeter, and AHSA each carry insurance through a different insurance company: Arch primarily insures Triage; Hanover Insurance Company primarily insures Exeter; and Massachusetts Bay Insurance Company (MBIC) primarily insures AHSA. This appeal chiefly concerns whether and to what extent the policies that Arch issued to Triage provide coverage to Triage, as a named insured, and to Exeter and AHSA, as additional insureds.

         In 2008, Triage and AHSA entered into a staffing agreement. Triage agreed to provide temporary workers to AHSA member hospitals, such as Exeter, and to screen the qualifications and competence of those temporary workers. Additionally, Triage agreed to indemnify AHSA and AHSA member hospitals and to maintain certain minimum coverage of employers' liability insurance, professional liability insurance, and comprehensive general liability insurance.

         To that end, Triage purchased two relevant policies from Arch: one policy providing coverage from January 1, 2011, to January 1, 2012, and a second policy providing coverage from January 1, 2012, to January 1, 2013. Except for the coverage periods, the policies are identical. Each policy includes three different coverage forms: professional liability; general liability; and umbrella liability, which covers both professional and general liability.

         Pursuant to the AHSA staffing agreement, Triage placed Kwiatkowski at Exeter Hospital on April 1, 2011. On or about October 16, 2011, Exeter hired Kwiatkowski, at which point he ceased to be a Triage employee. Kwiatkowski continued to work for Exeter until the hospital placed him on administrative leave on May 21, 2012, and subsequently terminated him on June 29, 2012.

         During his time at Exeter, Kwiatkowski worked in the cardiac catheterization lab, where patients undergo invasive procedures. As part of the procedures, patients are often administered two drugs: fentanyl and versed. In preparation for a procedure, nurses and physicians remove the drugs from a secure machine. Kwiatkowski was neither authorized to access the machine nor authorized to administer the drugs. In connection with his plea of guilty to federal criminal charges, Kwiatkowski admitted in federal court that, on approximately 50 occasions, prior to a medical procedure, he swapped syringes containing fentanyl for syringes that he had filled with saline. After injecting himself with fentanyl from diverted syringes, Kwiatkowski refilled the now contaminated syringes with saline to cover the diversions. Because Kwiatkowski was infected with Hepatitis C, these saline syringes were tainted with the virus. When the Exeter Patients were subsequently injected with the saline syringes, some of them became infected.

         The Exeter Patients sued Triage for Kwiatkowski's actions based upon the doctrine of respondeat superior, as well as for its alleged direct negligence in hiring, employing, training, and supervising him. They sued Exeter for medical negligence; for negligently hiring, employing, training, and supervising Kwiatkowski; for negligent or intentional infliction of emotional distress; and for willful or knowing violation of the New Hampshire Consumer Protection Act, RSA chapter 358-A (2009 & Supp. 2016).

         MBIC initiated the present action in February 2013 when it petitioned for a declaratory judgment to determine the scope of coverage available to AHSA under the Arch and MBIC policies.[1] Triage and Exeter each filed a cross-claim for declaratory judgment that Arch was required to provide them a defense and indemnity. Arch filed a counterclaim for declaratory judgment that MBIC was the primary insurer responsible for defense and indemnity of AHSA and cross-claims for declaratory judgment that Arch owed no duty to defend or indemnify Triage, Exeter, and AHSA. The Exeter Patients filed a counterclaim for declaratory judgment that MBIC was obligated to provide coverage to AHSA and a cross-claim for declaratory judgment that Arch was obligated to provide coverage to Triage, Exeter, and AHSA.[2]

         Thereafter, the parties filed numerous motions for summary judgment, motions for partial summary judgment, cross-motions for summary judgment, objections, and responses, all of which led to a series of trial court orders. In January 2014, the trial court issued an order ruling that the Arch policies' exclusion for "abuse or molestation" did not bar coverage. In April 2014, the trial court issued two orders. In the first order, it ruled that the Arch policies' exclusion for "dishonest, fraudulent, malicious, uninsurable acts" did not bar coverage based upon Exeter's conduct, with the ruling subject to reexamination at the close of discovery. The second order required Arch to contribute equally with MBIC to Exeter's past and future defense costs, subject to Arch's right to seek reimbursement of defense costs at the close of the litigation.

         Exeter moved for reconsideration of the trial court's ruling that MBIC was required to share Exeter's defense costs with Arch. In May 2014, the court denied Exeter's motion and issued an order ruling that: (1) Arch was not judicially estopped from asserting that coverage under its policies should be determined under the professional liability coverage form, not the general liability coverage form; (2) the underlying acts triggered the Arch policies' general liability coverage form; (3) the underlying acts constituted multiple occurrences under the Arch policies; (4) the underlying acts covered both the 2011 and 2012 Arch policies; (5) the Arch policies' umbrella coverage form provided coverage to both Exeter and AHSA; and (6) Arch's policies and MBIC's policies equally provided primary, rather than excess, coverage to AHSA.

         Exeter, MBIC, and Arch all filed motions for reconsideration. In June 2014, the trial court: (1) reaffirmed its prior ruling that neither the Arch policies nor the MBIC policies were in excess of the other's policies; (2) ruled the Arch policies' exclusion for "dishonest, fraudulent, malicious, uninsurable acts" did not bar coverage based upon Kwiatkowski's conduct; and (3) ruled that the Arch policies' general liability coverage form exclusion for "healthcare professional services" did not bar coverage, with the ruling subject to reexamination at the close of discovery.

         In July 2014, Arch appealed the trial court's coverage rulings to this court. We dismissed Arch's appeal as an improper interlocutory appeal because the court's orders did not finally resolve all issues among all parties.

         In May 2016, the trial court issued an order finalizing its grant of summary judgment against Arch and in favor of Triage, Exeter, and AHSA in accordance with its prior orders. The court also ruled that, because Triage, Exeter, and AHSA were the prevailing parties, they were entitled to their costs and reasonable attorney's fees from Arch pursuant to RSA 491:22-b (2010).

         Arch subsequently filed the present appeal.[3] On appeal, Arch argues that the trial court erred by granting summary judgment in favor of Triage and Exeter because: (1) three exclusions barred coverage under the general liability coverage form; (2) two exclusions barred coverage under the umbrella coverage form; and (3) the underlying actions constitute only a single occurrence under the policies. Additionally, although Exeter did not file a notice of cross-appeal, it now asks us to consider the issue of Arch's obligation to contribute to Exeter's defense costs.

         II

         In reviewing a trial court's rulings on cross-motions for summary judgment, we "consider the evidence in the light most favorable to each party in its capacity as the nonmoving party and, if no genuine issue of material fact exists, we determine whether the moving party is entitled to judgment as a matter of law." Conant v. O'Meara, 167 N.H. 644, 648 (2015) (quotation omitted). "If our review of that evidence discloses no genuine issue of material fact and if the moving party is entitled to judgment as a matter of law, then we will affirm the grant of summary judgment." Id. (quotation omitted). "We review the trial court's application of the law to the facts de novo." Id. (quotation omitted).

         "In a declaratory judgment action to determine the coverage of an insurance policy, the burden of proof is always on the insurer, regardless of which party brings the petition." Cogswell Farm Condo. Ass'n v. Tower Group, Inc., 167 N.H. 245, 248 (2015) (quotation omitted); see RSA 491:22-a (2010). "The interpretation of insurance policy language is a question of law for this court to decide." Cogswell Farm, 167 N.H. at 248 (quotation omitted). "We review questions of law de novo." Id. (quotation omitted). "We first look to the plain and ordinary meaning of the policy's words in context, and we construe the terms of the policy as would a reasonable person in the position of the insured based on more than a casual reading of the policy as a whole." Id. (quotation omitted). "This is an objective standard." Id. (quotation omitted).

         "Insurers are free to contractually limit the extent of their liability through use of a policy exclusion, provided it violates no statutory provision." Progressive N. Ins. Co. v. Concord Gen. Mut. Ins. Co., 151 N.H. 649, 653 (2005) (citations omitted). "Such language must be so clear, however, as to create no ambiguity that might affect the insured's reasonable expectations." Id. (quotation omitted). "In determining whether an ambiguity exists, we look to the claimed ambiguity, consider it in its appropriate context, and construe the words used according to their plain, ordinary, and popular definitions." Id. (quotation omitted). "Policy terms create an ambiguity when the parties may reasonably differ about the interpretation of the language." Id. "Ultimately, we interpret exclusion language to mean what a reasonable person would construe it to mean." Id. (quotation omitted). "The insurer asserting an exclusion of coverage . . . bears the burden of proving that the exclusion applies." Id.

         A

         Arch first argues that the "healthcare professional services" exclusion in the general liability coverage form excludes coverage. Arch contends that the exclusion bars coverage for claims that allege damage resulting from the provision of medical services, regardless of whether Triage performed those medical services. Triage argues that the exclusion only bars coverage if damage resulted from medical services that it performed. Thus, Triage argues that because the Exeter Patients allege that Triage negligently hired and supervised Kwiatkowski, but not that Triage performed medical services, the exclusion does not apply. Exeter argues that its own coverage is derivative of Triage's coverage; thus, it contends, the exclusion applies to Exeter only if Triage performed medical services.[4]

         The healthcare professional services exclusion provides that the insurance does not apply to any claim that alleges "'Bodily injury' or 'property damage' that result[s] from the performance of or failure to perform 'health care professional services.'"[5] The policy defines "Health care professional services" to include, as relevant: "Medical, surgical, dental, x-ray, nursing, mental, or similar 'health care professional services' or treatments" and "[p]roviding or dispensing of food, beverages, medications or medical supplies or appliances in connection with [the foregoing] services."

         According the words their plain and ordinary meanings, we conclude that the healthcare professional services exclusion plainly applies to any claim that alleges bodily injury that results from the provision of medical services, regardless of whether Triage performed those services. Contrary to Triage's and Exeter's interpretations, the exclusion is not restricted to situations in which Triage provided the medical services. The exclusion sets forth a type of harm for which coverage is excluded: bodily injury that results from the provision of medical services. That is precisely the type of harm that occurred in this case: the Exeter Patients' claims allege a bodily injury (their infection with Hepatitis C) that resulted from a medical ...


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