Westfield Insurance Company v. Orthopedics and Sports Medicine Center of Northern Indiana, Inc. et al

Filing 84

OPINION AND ORDER GRANTING 64 MOTION for Summary Judgment by Plaintiff Westfield Insurance Company. Clerk DIRECTED to enter declaratory judgment in favor of Plaintiff Westfield Insurance Company and against all Defendants declaring that no coverage exists under Commercial Package Policy No. TRA 3413228 based on the personal and advertising injury, umbrella personal and advertising injury, bodily injury and property damage, and umbrella bodily injury and property damage coverage provisions, and thus, Plaintiff has no duty to defend or indemnify Defendants Orthopaedics and Sports Medicine Center of Northern Indiana Inc, ASC Surgical Ventures LLC, or Orthopaedics and Sports Medicine Center of Northern Indiana Inc Physicians with respect to the claims asserted by the Individual Defendants in the Lawsuits filed in Elkhart Superior Court and the Medical Malpractice Complaints filed with the Indiana Department of Insurance. Signed by Judge Rudy Lozano on 3/28/17. (cer)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
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WESTFIELD INSURANCE COMPANY,
Plaintiff,
vs.
ORTHOPEDIC AND SPORTS
MEDICINE CENTER OF NORTHERN
INDIANA, INC., et al.,
Defendants.

NO. 3:14–CV-1548

OPINION AND ORDER
This matter is before the Court on the Motion for Summary
Judgment

filed

by

Plaintiff

Westfield

(“Westfield”), on March 31, 2016 (DE #64).

Insurance

Company

For the reasons set

forth below, Westfield’s Motion for Summary Judgment (DE #64) is
GRANTED.

The Clerk of the Court is DIRECTED to enter a DECLARATORY

JUDGMENT in favor of Westfield and against all defendants declaring
that no coverage exists under Commercial Package Policy No. TRA
3413228 based on the personal and advertising injury, umbrella
personal

and

advertising

injury,

bodily

injury

and

property

damage, and umbrella bodily injury and property damage coverage
provisions, and thus, Westfield has no duty to defend or indemnify
defendants

Orthopedic

and

Sports

Medicine

Center

of

Northern

Indiana, Inc. (“OSMC”), ASC Surgical Ventures, LLC (“ASC”), or
their physicians (“OSMC Physicians”) with respect to the claims

‐1‐ 

asserted by the other individual defendants in the lawsuits filed
in Elkhart Superior Court and the proposed medical malpractice
complaints filed with the Indiana Department of Insurance.

BACKGROUND
NECC was a compounding pharmacy that made preservative-free
methylprednisolone acetate (“MPA”).

MPA is an epidural steroid

medication that is administered by injection for pain management.
Defendants OSMC and its affiliate ASC purchased preservative-free
MPA from NECC to treat patients with back pain. In September 2012,
a

multistate

outbreak

of

fungal

meningitis,

lumbar

fungal

infections and related injuries arose as a result of patients
receiving injections of contaminated preservative-free MPA that
had

been

compounded

by

NECC.

Patients

injected

with

the

contaminated MPA suffered bodily injury or death.
Over 150 patients, spouses of patients, parents of patients,
personal

representatives

of

deceased

patients,

and

powers

of

attorneys who are residents of Indiana or Michigan (together,
“Individual Defendants”) filed lawsuits against OSMC, ASC, and
OSMC Physicians (together, “OSMC Defendants”) in Elkhart Superior
Court (“Lawsuits”). The Lawsuits allege the bodily injury or death
of patients as a result of being injected with contaminated
preservative-free MPA that had been compounded by NECC and ordered
and administered by the OSMC Defendants.

‐2‐ 

Most of the Individual

Defendants

also

Department

of

filed

proposed

Insurance

complaints

alleging

with

similar

the

claims

Indiana
(“Medical

Malpractice Complaints” or “Malpractice Complaints”).
The

OSMC

indemnify

Defendants

them

against

requested
the

that

Lawsuits

Westfield

and

defend

Medical

and

Malpractice

Complaints pursuant to several insurance policies.

Westfield

refused to defend the OSMC Defendants, and filed the instant
declaratory judgment action.

Westfield now moves for summary

judgment, asking the Court to find that the insurance policies do
not provide coverage for the claims in the Lawsuits and Medical
Malpractice Complaints, and that Westfield has no duty to defend
or indemnify the OSMC Defendants in those actions.
The OSMC Defendants do not oppose Westfield’s motion for
summary judgment.

The Individual Defendants oppose this motion in

part.

Intervenor Stephen W. Robertson, Commissioner,

(DE #70.)

Indiana Department of Insurance, as Administrator of the Indiana
Patients’

Compensation

Fund

(“PCF”),

Westfield’s motion for summary judgement.

filed

a

response

(DE #79.)

to

Westfield

filed reply briefs to the Individual Defendants’ opposition and
PCF’s response brief.

(DE #73, DE #80.)

On November 7, 2016, Westfield filed a notice of additional
authority in support of its summary judgment motion, and attached
Robertson v. Anonymous Clinic, 63 N.E.3d 349, 361 (Ind. Ct. App.
2016).

(DE #81.)

The Individual Defendants objected to the

‐3‐ 

Court’s consideration of Robertson because the appellant PCF had
filed a petition to transfer to the Indiana Supreme Court.
#82.)

(DE

The petition to transfer was denied on February 16, 2017,

and the Court of Appeals certified Robertson on February 22, 2017.
(See DE #83.)

Therefore, the Individual Defendants’ objection is

moot.
SUMMARY JUDGMENT STANDARD
Summary judgment must be granted when “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.”

Fed. R. Civ. P. 56(a).

A genuine

issue of material fact exists when “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct.
2505, 91 L. Ed. 2d 202 (1986).

Not every dispute between the

parties makes summary judgment inappropriate; “[o]nly disputes
over facts that might affect the outcome of the suit under the
governing

law

will

properly

preclude

the

entry

of

summary

judgment.” Id. To determine whether a genuine dispute of material
fact exists, the Court must construe all facts in the light most
favorable

to

the

non-moving

party

inferences in that party’s favor.
F.3d 355, 358 (7th Cir. 2010).

and

draw

all

reasonable

See Ogden v. Atterholt, 606
A party opposing a properly

supported summary judgment motion may not rely on allegations in
her own pleading, but rather must “marshal and present the court

‐4‐ 

with the evidence she contends will prove her case.”

Goodman v.

Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010).
“[I]nferences relying on mere speculation or conjecture will not
suffice.”

Stephens v. Erickson, 569 F.3d 779, 786 (7th Cir. 2009)

(citation omitted). The party with the burden of proof on an issue
can obtain a summary judgment “only where the evidence is so onesided that it points inescapably” in the movant’s favor, and “every
reasonable jury” would decide that the movant has met its burden
of proof.

Thorne v. Member Select Ins. Co., 899 F. Supp. 2d 820,

824 (N.D. Ind. 2012) (citations omitted).

If the non-moving party

fails to establish the existence of an essential element on which
he bears the burden of proof at trial, summary judgment is proper.
Massey v. Johnson, 457 F.3d 711, 716 (7th Cir. 2006).
“Interpretation of a written contract, including a contract
of insurance, typically presents a question of law suitable for
resolution on motions for summary judgment.”

Royer v. USAA Cas.

Ins. Co., 781 F. Supp. 2d 767, 770 (N.D. Ind. 2011) (citation
omitted).

“When the question presented is whether an insurance

policy provides liability coverage for a particular claim or
lawsuit, the central material facts are ordinarily the terms of
the

written

allegations

contract
in

the

and

the

underlying

omitted).

‐5‐ 

contents

of

litigation.”

the
Id.

plaintiff's
(citation

FACTS
The Court finds the following undisputed facts to be supported
by admissible evidence in the record:1
OSMC operates a medical clinic in Elkhart County, Indiana.
ASC is the operating entity for the clinic where OSMC’s physicians
perform

orthopedic

surgeries

and

pain

including epidural steroid injections.
steroid

medication

that

OSMC’s

management

procedures,

ASC ordered the epidural

physicians

administered

to

patients, including MPA.
In

2005,

OSMC’s

physicians

preservative-based MPA to patients.

had

been

administering

OSMC’s physicians became

concerned about reports in medical literature that injections of
preservative-based MPA could cause arachnoiditis and injury to the
spinal cord.

Based on these concerns, the physicians recommended

to ASC’s board of directors that they switch to using preservativefree MPA.

ASC’s board of directors was comprised of ASC’s Chief

1
  The Court notes that neither the Individual Defendants nor PCF

filed a “Statement of Genuine Disputes” in their response briefs
or appendices as required by the Local Rules. See N.D. Ind. L.R.
56-1(b). While their response briefs include statements of fact,
neither brief identifies material facts that they contend are
genuinely disputed in connection with Westfield’s Motion for
Summary Judgment. This approach does not comply with Local Rule
56–1(b).
The Court is “not obliged . . . to scour the record
looking for factual disputes.” Waldridge v. Am. Hoechst Corp., 24
F.3d 918, 922 (7th Cir. 1994).
Nevertheless, the Court has
attempted to sift through the parties’ versions of events,
determine which, if any, facts the parties dispute, and construe
disputed facts in the nonmovants’ favor if they provide citations
to evidence in the record.
‐6‐ 

Executive Officer (“CEO”) and eleven physicians who are OSMC staff
members.

ASC’s

board

of

directors

approved

the

switch

to

preservative-free MPA.
Dr. Gene W. Grove Sr., an OSMC physician and the medical
director

for

ASC,

testified

that

ASC’s

decision

to

use

preservative-free MPA compounded by NECC was a “medical decision”
and a “medical judgment” made by himself and “other physicians on
the ASC board [of directors].”

(DE #67-3 at 30-31.)

ASC had been

using NECC, a compounding pharmacy located in Massachusetts, as a
supplier of other medications, and had vetted NECC through its
pharmacist

consultant,

Elkhart

General

Hospital

and

General Hospital’s Pharmacy and Therapeutics Committee.

Elkhart
ASC’s

board of directors made the decision to use NECC as a supplier.2
OSMC, through ASC, began ordering preservative-free MPA from NECC
in approximately 2006.

ASC’s board of directors conducted annual

2

The Individual Defendants’ statement of facts (entitled, “Factual
Background”) does not address the OSMC Defendants’ decision to use
NECC as a supplier. PCF cites the testimony of Mary KauffmannKennel, the OSMC employee who ordered medications from NECC,
regarding this decision. Ms. Kauffmann-Kennel testified that she
“[did]n’t remember exactly that process [of who made the decision
to use NECC as the supplier of preservative-free MPA]. My memory
is because we were using them for a supplier of a couple of other
things, other medications that we continued to use them for this.”
(DE #67-4 at 12.) Westfield cites the deposition testimony of Dr.
Grove, who testified that ASC’s board of directors made the
decision to use NECC as a supplier, and that ASC had been using
NECC as a supplier for other medications prior to supplying
preservative-free MPA.
(DE #67-3 at 22-23, 40-42.)
The Court
does not find the testimony of Ms. Kauffman-Kennel and Dr. Grove
to be inconsistent.
‐7‐ 

reviews of medications used in OSMC’s medical center, and approved
the continued use of preservative-free MPA.
Preservative-free
prescription

order

MPA

form

was

that

ordered
listed

from

each

patient

individual prescription of MPA that was ordered.
be

signed

by

a

physician.

Patients

NECC

using
for

a

each

This form was to

were

injected

with

preservative-free MPA after they signed a consent form to receive
the medical procedure.
On September 26, 2012, NECC voluntarily recalled three lots
of

preservative-free

MPA

due

to

fungal

contamination.

Contaminated MPA had been distributed to OSMC’s medical center,
and allegedly injected into the bodies of some OSMC patients.

The

Center for Disease Control and Prevention later confirmed more
than

750

cases

of

fungal

infection

linked

to

injections

of

contaminated NECC-compounded MPA in 2012 and 2013, including over
350 cases within the states of Indiana and Michigan.
Lawsuits and Medical Malpractice Complaints
Beginning in April 2014, the Individual Defendants filed 26
Lawsuits against the OSMC Defendants in Elkhart Superior Court.
The complaints filed in the Lawsuits (“Lawsuits’ complaints”)
allege

theories

of

negligence,

gross

negligence,

negligent

misrepresentation and omission, negligence per se for violation of
Indiana Code § 16-42-19-16, failure to warn, punitive damages,
medical malpractice, violation of the Indiana Deceptive Consumer

‐8‐ 

Sales Act, Ind. Code §§ 24-5-0.5-1 et seq., and battery.

In

opposing the instant motion for summary judgment, the Individual
Defendants rely solely on the Lawsuits’ allegations that the OSMC
Defendants were negligent in selecting NECC as a supplier of
preservative-free

MPA,

supplier relationship.

and

in

managing

and

overseeing

that

(DE #70 at 7, 11, 12, 22, 23 n.5.)

They

summarize the Lawsuits’ negligence allegations as follows:
1.

OSMC was negligent in selecting and continuing to deal
with NECC as the latter was operating illegally under
its Massachusetts state license;

2.

OSMC was negligent in that it should have known that
NECC was operating as a bulk, mass manufacturer and
as such, it could only lawfully operate pursuant to
FDA authorization and regulation;

3.

Apart from not being properly licensed or authorized
by either the State of Massachusetts or the FDA, NECC
was
also
not
accredited
by
any
compounding
accreditation board or other similar organization[;]

4.

OSMC also failed to perform reasonable, recommended
and widely utilized due diligence in selecting NECC
as a supplier of preservative-free MPA and failed to
perform reasonable, recommended and widely utilized
due diligence in the ongoing supplier relationship
with NECC.

(DE #70 at 7 (citing DE #29-5 (Amended Complaint filed in Alcozar
v. Orthopedic and Sports Medicine Center of N. Ind., No. 20DO11404-CT-72 (Elkhart Sup. Ct.)).3

3
  The Individual Defendants

cite the Alcozar Amended Complaint
throughout their response brief as representative of the Lawsuits’
complaints. (See DE #70 at 2 n.1, 2-7, 19 (citing DE #29-5).)
The Court will do so as well.
‐9‐ 

The majority of the Individual Defendants also filed proposed
complaints of medical malpractice against the OSMC Defendants with
the

Indiana

Complaints.

Department

of

Insurance,

i.e.,

the

Malpractice

The Malpractice Complaints allege similar claims of

negligence,

gross

negligence,

negligence

per

se,

and

medical

malpractice.
Westfield’s Insurance Policies
Westfield issued Commercial Package Policy No. TRA 3413228 to
OSMC and ASC in September 30, 2011 (“Policy”), and renewed it
annually twice thereafter, for coverage through September 30, 2014
(together, “Policies”).
liability
(“BI/PD”).

(“CGL”)

The Policies include commercial general

bodily

injury

and

property

damage

coverage

The BI/PD provision states in part:
We will pay those sums that the insured becomes
legally obligated to pay as damages because of
"bodily injury" or "property damage" to which this
insurance applies. We will have the right and duty
to defend the insured against any "suit" seeking
those damages. However, we will have no duty to
defend the insured against any "suit" seeking
damages for "bodily injury" or "property damage" to
which this insurance does not apply. . . .

(DE #29-1 at 154; DE #29-2 at 142; DE #29-3 at 136.)  The Policies’
commercial

liability

umbrella

(“Umbrella”)

BI/PD

states

relevant part:
We will pay on behalf of the insured the "ultimate
net loss" in excess of the "retained limit" because
of "bodily injury" or "property damage" to which
this insurance applies. We will have the right and
duty to defend the insured against any "suit"

‐10‐ 

in

seeking damages for such "bodily injury" or
"property damage" when the "underlying insurance"
does not provide coverage or the limits of
"underlying insurance" have been exhausted. . . .
[W]e will have no duty to defend the insured against
any "suit" seeking damages for "bodily injury" or
"property damage" to which this insurance does not
apply. . . .
(DE #29-1 at 293; DE #29-2 at 282; DE #29-3 at 281.)
and

Umbrella

BI/PD

apply

only

if

“[t]he

‘bodily

‘property damage’ is caused by an ‘occurrence’. . . .”

The BI/PD
injury’

or

(DE #29-1

at 154, 293; DE #29-2 at 142, 282; DE #29-3 at 136, 281.)

The

Policies define “occurrence” as “an accident, including continuous
or repeated exposure to substantially the same general harmful
conditions.”

(DE #29-1 at 168, 308; DE #29-2 at 156, 297; DE #29-

3 at 150, 297.)

The term “suit” is defined as “a civil proceeding

in which damages because of ‘bodily injury,’ ‘property damage’ or
‘personal and advertising injury’ to which this insurance applies
are alleged.”

(DE #29-1 at 169, 309; DE #29-2 at 157, 298; DE

#29-3 at 151, 298.) The term “bodily injury” is defined to include
bodily injury, sickness or disease sustained by a person, including
death resulting from any of these at any time.
The Policies also include personal and advertising injury
coverage (“PAI”), which states in part:

“[w]e will pay those sums

that the insured becomes legally obligated to pay as damages
because

of

‘personal

and

insurance applies. . . .”

advertising

injury’

to

which

this

(DE #29-1 at 159; DE #29-2 at 147; DE

‐11‐ 

#29-3 at 141.)

The Umbrella PAI provision states in part, “[w]e

will pay on behalf of the insured the ‘ultimate net loss’ in excess
of the ‘retained limit’ because of ‘personal and advertising
injury’ to which this insurance applies. . . .”

(DE #29-1 at 298;

DE #29-2 at 287; DE #29-3 at 286.)
The Policies set forth several exclusions at issue in this
matter.

The BI/PD and Umbrella BI/PD include an “Expected Or

Intended Injury” exclusion, which states that this insurance does
not apply to “‘[b]odily injury’ or ‘property damage’ expected or
intended from the standpoint of the insured.”

(DE #29-1 at 155,

294; DE #29-2 at 143, 283; DE #29-3 at 137, 282.)

By endorsement,

the BI/PD includes an exclusion for “Services Furnished By Health
Care Providers” (“Health Care Services Exclusion”).

The Health

Care Services Exclusion states in relevant part:
With respect to any operation shown in the Schedule
[which identifies “Medical & Orthopedics”], this
insurance does not apply to "bodily injury", "property
damage", or "personal and advertising injury" arising
out of:
1.
The rendering or failure to render:
a. Medical, surgical, dental, x-ray or nursing
service, treatment, advice or instruction . .
.
b.
Any
health
or
therapeutic
service,
treatment, advice or instruction; or . . .
2.
The furnishing or dispensing of drugs. . . .
(DE #29-1 at 140; DE #29-2 at 128.)

‐12‐ 

The

Umbrella

BI/PD

includes

a

“Professional

Services”

exclusion which states in relevant part that the insurance does
not apply to:
"Bodily injury" or "property damage" due to rendering or
failure to render any professional service. This
includes but is not limited to:
. . .
(5) Medical, surgical, dental, x-ray or nursing
services treatment, advice or instruction;
(6) Any health or therapeutic service treatment,
advice or instruction;
. . .
(11) Services in the practice of pharmacy. . . .
(DE #29-1 at 297; DE #29-2 at 286; DE #92-3 at 285-86.)
The

OSMC

Defendants

requested

that

Westfield

defend

and

indemnify them under the Policies against the Lawsuits and the
Malpractice

Complaints.

Westfield

denied

coverage

under

the

Policies, declined to defend the OSMC Defendants in the Lawsuits
and Malpractice Complaints, and commenced this declaratory action.
State Court Declaratory Judgment Action
In October 2014, nearly all of the Individual Defendants filed
a complaint for declaratory judgment in Alcozar v. Orthopedic and
Sports Medicine Center of Northern Indiana, No. 20D01-1410-CT-216,
in Elkhart Superior Court (“State DJ Action”).

The complaint

sought

Lawsuits

a

declaration

Malpractice

Complaints

Malpractice

Act

that

(“MMA”)

are

the

claims

subject

and

are

malpractice insurance policies.

in

to

covered

the

the
by

and

Indiana

Medical

certain

medical

PCF intervened in the State DJ

‐13‐ 

Action, and the parties filed cross motions for summary judgment.
PCF argued that the negligence claims were not subject to the MMA.
The Elkhart Superior Court granted OSMC’s and the plaintiffs’
motions for summary judgment, and denied PCF’s motion for summary
judgment, holding that the claims fall within the scope of the
MMA.

(DE #67-40 at 14, ¶34.)

The court also held that OSMC’s

medical malpractice insurer has a duty to defend and indemnify
OSMC, except to the extent that the medical malpractice policies
limit the insurer’s liability.

(Id. at 15, ¶¶39-40.)

PCF filed

an interlocutory appeal of the ruling, which the Indiana Court of
Appeals recently affirmed in Robertson v. Anonymous Clinic, 63
N.E.3d 349 (Ind. Ct. App. 2016), trans. denied.4
DISCUSSION
The parties do not dispute that Indiana law governs the
coverage

obligations

and

duties

to

defend

arising

from

the

Policies. In Indiana, “[t]he interpretation of an insurance policy
is primarily a question of law for the court, and it is therefore

4

 In Robertson, PCF brought a consolidated interlocutory appeal of
the ruling in the State DJ Action, as well as a similar ruling in
an action brought in St. Joseph Superior Court in which other
injured patients (or those suing on their behalf) sued a medical
clinic in St. Joseph County that had injected patients with
contaminated MPA compounded by NECC. See 63 N.E.3d at 354 (noting
that six actions in St. Joseph Superior Court had been consolidated
under In re Steroid Litigation). Like the Elkhart Superior Court,
the St. Joseph Superior Court had ruled that the negligence claims
against the clinic were governed by the MMA. Id. The Court of
Appeals affirmed this ruling. Id. at 364. 

‐14‐ 

a question which is particularly suited for summary judgment.”
Wagner

v.

Yates,

omitted).

912

N.E.2d

805,

808

(Ind.

2009)

(citation

In an insurance policy dispute under Indiana law, “the

insured has the burden of proving that the coverage applies, and
the insurer, if relying on an exclusion to deny coverage, has the
burden of demonstrating that the exclusion is applicable.” Bowman,
Heintz, Boscia & Vician, P.C. v. Valiant Ins. Co., 35 F. Supp. 3d
1015,

1023

(N.D.

Ind.

2014)

(citation

omitted).

“Generally

speaking, contracts for insurance are subject to the same rules of
construction as other contracts.”

Id.

“[C]lear and unambiguous

language in an insurance policy should be given its plain and
ordinary

meaning,

even

if

those

terms

limit

an

insurer’s

liability.” Everett Cash Mut. Ins. Co. v. Taylor, 926 N.E.2d 1008,
1012 (Ind. 2010) (internal citation omitted).

“If the terms of a

written contract are ambiguous, it is the responsibility of the
trier-of-fact to ascertain the facts necessary to construe the
contract.”

Newnam Mfg., Inc. v. Transcon. Ins. Co., 871 N.E.2d

396, 401 (Ind. Ct. App. 2007). Where policy language is ambiguous,
Indiana courts generally construe it strictly against the insurer
and in favor of the insured.
omitted).

Taylor, 926 N.E.2d at 1012 (citation

However, where “a case involves a dispute between a

third party and an insurer, the court does not construe [the
policy] strictly against the insurer, but determines the general
intent of the contract from a neutral stance.”

‐15‐ 

Empire Fire v.

Frierson, 49 N.E.3d 1075, 1079 (Ind. Ct. App. 2016) (citations
omitted). “In addition, an ambiguity does not exist simply because
an

insured

and

an

insurer

disagree

about

the

meaning

of

a

provision, but only if reasonable people could disagree about the
meaning

of

the

contract’s

terms.”

Id.

(citations

omitted).

Ultimately, “[t]he meaning of an insurance contract can only be
gleaned from a consideration of all its provisions, not from an
analysis of individual words or phrases.

[The Court] must accept

an interpretation of the contract language that harmonizes the
provisions rather than the one which supports a conflicting version
of the provisions.”

Adkins v. Vigilant Ins. Co., 927 N.E.2d 385,

389 (Ind. Ct. App. 2010) (citations omitted).

The power to

interpret insurance policies does not extend to changing their
terms;

the

Court

will

not

give

policies

an

construction in order to provide additional coverage.

unreasonable
Id.

Westfield argues that it has no duty under the Policies to
defend or indemnify the OSMC Defendants for claims made in the
Lawsuits and the Malpractice Complaints.

An insurer’s duty to

defend is broader than its duty to indemnify.

Newnam Mfg., Inc.,

871 N.E.2d at 401; see Ind. Farmers Mut. Ins. Co. v. N. Vernon
Drop Forge, Inc., 917 N.E.2d 1258, 1267 (Ind. Ct. App. 2010) (“If
the policy is otherwise applicable, the insurance company is
required to defend even though it may not be responsible for all
of the damages assessed.”).

Indiana courts have determined that

‐16‐ 

an insurer’s duty to defend is based on the allegations in the
complaint and “those facts known or ascertainable by the insurer
after

reasonable

investigation.”

(citation omitted).

Newnam,

871

N.E.2d

at

401

If the pleadings demonstrate that “a claim is

clearly excluded under the policy, then no defense is required.”
Id.
Issues Not In Dispute
Westfield’s motion for summary judgment raises several issues
that have been conceded by the Individual Defendants.5

Westfield

argues that no coverage exists for the Individual Defendants’
claims under the PAI or Umbrella PAI coverage of the Policies.

In

response, the Individual Defendants concede that the PAI and
Umbrella PAI are not applicable or relevant to their claims, and
thus, do not provide coverage for their claims.
In addition, Westfield contends that the Policies do not
provide coverage for the Individual Defendants’ punitive damages
claims, in part because courts have held that such coverage is
void as against public policy.

See Exec. Builders, Inc. v.

Motorists Ins. Cos., No. IP 00–0018–C–T/G, 2001 WL 548391, at *5

5

  The OSMC Defendants did not respond to Westfield’s motion for
summary judgment. See N.D. Ind. L.R. 56-1(b) (“A party opposing
the motion must . . . file and serve (A) a response brief”). Their
failure to respond results in a waiver of any arguments in
opposition to the motion. Nichols v. Michigan City Plant Planning
Dep't, 755 F.3d 594, 600 (7th Cir. 2014) (“The non-moving party
waives any arguments that were not raised in its response to the
moving party’s motion for summary judgment.”).

‐17‐ 

(S.D. Ind. Mar. 30, 2001) (noting “it is contrary to Indiana public
policy to allow an insured to avoid liability for a punitive damage
award by means of insurance where the insured is held directly
liable for the acts giving rise to the punitive damage award”).
Westfield also asserts that the Individual Defendants’ fraud and
misrepresentation claims are subject to the Policies’ Expected Or
Intended Injury Exclusion.

See United Servs. Auto. Ass’n v.

Caplin, 656 N.E.2d 1159, 1162 (Ind. Ct. App. 1995)  (where the
complaint sounded exclusively in intentional fraud, insurer was
not required to defend the insureds under policies that “excluded
coverage for expected or intended losses”).

In response, the

Individual Defendants concede that the Policies do not provide
coverage for punitive damages or intentional acts, including fraud
claims.
The

Individual

Defendants

acknowledge

that

“Westfield’s

motion should be granted as to any claims asserting coverage under
the Westfield PAI policy and as to any claims for punitive damages
or for fraud or intentional tort.”

(DE #70 at 25.)

Because

Westfield and the Individual Defendants are in agreement, and the
OSMC Defendants raise no objection, the Court holds that no
coverage exists, and no duty to defend or indemnify arises, under
the

PAI

and

Umbrella

Malpractice Complaints.

PAI

with

respect

to

the

Lawsuits

and

In addition, the Court holds that no

coverage exists, and no duty to defend or to indemnify arises,

‐18‐ 

under the Policies with respect to any fraud and intentional tort
claims, and any claims for punitive damages asserted in the
Lawsuits and Malpractice Complaints.
The Medical Malpractice Complaints
Westfield maintains that it has no duty to defend the OSMC
Defendants against the Malpractice Complaints because the BI/PD
and Umbrella BI/PD limit the duty to defend to any “suit” seeking
damages.
136,

(DE #29-1 at 154, 293; DE #29-2 at 142, 282; DE #29-3 at

281.)

The

Individual

Defendants

filed

the

proposed

Malpractice Complaints with the Indiana Department of Insurance
pursuant to the MMA, Ind. Code § 34-18-1-1, et seq.6

Under the

MMA, the Malpractice Complaints will be addressed by a medical
review panel (“panel”).

See Ind. Code § 34-18-8-4 (“[A]n action

against a health care provider may not be commenced in a court in
Indiana before: (1) the claimant’s proposed complaint has been
presented to a medical review panel established under IC 34-18-10
. . . and . . . an opinion is given by the panel.”). “The panel
has the sole duty to express the panel’s expert opinion as to
whether or not the evidence supports the conclusion that the

6

  PCF, the Individual Defendants and Westfield maintain that the
Court should decide the instant motion based on the language of
Westfield’s insurance policies, without interpreting the MMA.
That being said, they do not raise concerns with the Court’s
consideration of MMA provisions relevant to determining whether
the Malpractice Complaints are “suits” seeking damages under the
Policies. The Court will consider the cited MMA provisions for
this limited purpose.

‐19‐ 

defendant

or

defendants

acted

or

failed

to

act

within

appropriate standards of care as charged in the complaint.”
Code § 34-18-10-22(a).

the
Ind.

The panel does not have jurisdiction to

award damages against the OSMC Defendants.

(See DE #79, at 13-14

(PCF acknowledging that “the Medical Review Panel cannot award
damages against the OSMC defendants”).)
The Individual Defendants do not argue that the Malpractice
Complaints are suits seeking damages.

Rather, they respond that

they filed negligence claims in Elkhart Superior Court, and that
those Lawsuits qualify as suits seeking damages under the BI/PD
and Umbrella BI/PD.

Westfield acknowledges that if the panel

determines that the OSMC Defendants failed to act within the
appropriate standard of care, the Individual Defendants may bring
a civil suit seeking damages against the OSMC Defendants.

Because

the panel cannot award damages to the Individual Defendants, the
Malpractice Complaints do not qualify as suits seeking damages
under the BI/PD or Umbrella BI/PD.

Thus, the Court holds that no

coverage exists, and no duty to defend or to indemnify arises,
under the BI/PD and Umbrella BI/PD with respect to the Malpractice
Complaints.
The Lawsuits
The
Umbrella

Individual
BI/PD

Defendants

provide

maintain

coverage

negligence by the OSMC Defendants.

‐20‐ 

for

the

that

the

Lawsuits’

BI/PD
claims

and
of

Westfield argues that these

claims are not covered by the BI/PD or Umbrella BI/PB because: (1)
they do not allege an “accident” or “occurrence”; (2) they are
excluded from coverage under the BI/PD’s Health Care Services
Exclusion; and (3) they are excluded from coverage under the
Umbrella BI/PD’s Professional Services Exclusion.7
“Occurrence”
Westfield asserts that the Lawsuits’ claims do not allege an
“occurrence” as required by the BI/PD and the Umbrella BI/PD, but
rather, allege professional errors or omissions.

The BI/PD and

Umbrella BI/PD provide coverage for damages for bodily injury
caused by an “occurrence.”
“an

accident,

including

The Policies define “occurrence” as
continuous

or

repeated

substantially the same general harmful conditions.”

exposure

to

(DE #29-1 at

168, 308; DE #29-2 at 156, 297; DE #29-3 at 150, 297.)

Indiana

courts define “accident” as “an unexpected happening without an
intention or design.”

Tri-Etch, Inc. v. Cincinnati Ins. Co., 909

N.E.2d 997, 1002 (Ind. 2009).
Westfield contends that Indiana courts recognize a difference
between
omission.

an

accident/occurrence

and

a

professional

error

or

An accident/occurrence is covered by CGL insurance,

7

 In their answer to Westfield’s first amended complaint, the OSMC
Defendants admit that the Lawsuits’ complaints: (1) do not allege
an “accident” or “occurrence” for purposes of the BI/PD and
Umbrella BI/PD (DE #40 at 86, ¶4.19); (2) are subject to the Health
Care Services Exclusion (id. at 84, ¶4.16); and (3) are subject to
the Professional Services Exclusion (id. at 88, ¶4.27).

‐21‐ 

while a professional error or omission is covered by errors and
omissions (“E&O”) insurance.

See, e.g., Tri-Etch, 909 N.E.2d at

1002 (noting “the distinction between an ‘occurrence’ as the term
is used in CGL policies, and claims based on ‘commercial or
professional conduct.’

Claims based on negligent performance of

commercial or professional services are ordinarily insured under
‘errors

and

omissions’

or

malpractice

policies.”)

(internal

citation omitted); Terre Haute First Nat. Bank v. Pacific Employers
Ins. Co., 634 N.E.2d 1336, 1338 (Ind. Ct. App. 1993) (holding
bank’s

negligent

administration

of

a

guardianship

was

“professional relationship,” not an “accident”); Allstate Ins. Co.
v. Preferred Fin. Sols., Inc., 8 F. Supp. 3d 1039, 1051 (S.D. Ind.
2014) (holding failures to deliver debt-reduction services in the
manner required by Georgia law were business errors or omissions,
not an “accidental event” covered by CGL policies); U.S. Liab.
Ins. Co. v. Parchman, No. 1:11–cv–01244, 2013 WL 2600406, at *5
(S.D. Ind. Jun. 11, 2013) (holding party’s failure to hire adequate
security, maintain proper permits, or maintain the premises in a
reasonably safe condition, was not an “accident” under a CGL
policy).
In Tri-Etch, Inc. v. Cincinnati Insurance Company, a robber
had abducted a liquor store employee before the store closed at
midnight, tied him to a tree, and severely beat him.
at 999.

909 N.E.2d

The store’s security service, which was to call the store

‐22‐ 

manager within thirty minutes if the alarm was not set at closing,
did not call the manager until after 3:00 a.m.

Id.

The employee

was found alive at 6:00 a.m., but later died from his injuries.
Id. The employee’s estate brought a wrongful death action alleging
that the security service was negligent for failing to call the
manager within thirty minutes, and that if the service had acted
promptly, the employee would have been found earlier and survived.
Id.

One of the security service’s insurers disputed its duty to

defend and indemnify the security service against the wrongful
death claim under CGL and umbrella policies.
The

policies

defined

“occurrence”

as

“an

Id. at 999-1000.

accident,

including

continuous or repeated exposure to substantially the same general
harmful conditions.”

Id. at 1001.

The Indiana Supreme Court held

that the security service’s failure was not an “occurrence” covered
by the policies, but rather, was a professional error analogous to
lawyer malpractice:
Lack of intentional wrongdoing does not convert every
business error into an “accident.” This failure is the
same sort of claim as lawyer malpractice, or an insurance
agent’s failure to secure coverage as the client
directed.
1 Couch on Insurance § 1:35 (3d ed. 2005)
(“Within professional liability insurance, several
different coverages are available . . . [including]
errors and omissions (E & O) coverage protecting against
liability based on the failure of the insured, in his or
her professional status, to comply with what can be
considered in simplistic terms to be the standard of
care for that profession. . . .”). Tri–Etch’s failure
was just such an “error or omission,” not an “accident,”
and for that reason it is not an “occurrence” covered by
[the insurer’s] CGL and umbrella policies.
The CGL

‐23‐ 

policy does not guarantee the quality of work or products
of its insureds.
909 N.E.2d at 1001.

To the extent the security service had a duty

to the store employee, it arose from its contract with the store,
which “may give rise to tort liability.

But it does not convert

a failure to meet a standard of care under a contractually assumed
duty into an ‘accident.’”
The
assertion

Individual
that

the

Id. (internal citation omitted).

Defendants
Lawsuits’

professional error or omission.

do

not

address

negligence

claims

Westfield’s
involve

a

Relying upon Sheehan Construction

Company v. Continental Casualty Company, 935 N.E.2d 160 (Ind.
2010), they maintain that the Lawsuits allege negligence and injury
falling within the terms “accident” or “occurrence” under the
Policies.

In Sheehan, homeowners sued a general contractor for

negligent construction of their homes.

The contractor had hired

subcontractors who performed the allegedly negligent work.

The

CGL

for

policies

at

issue

insured

Sheehan

against

liability

“property damage” caused by an “occurrence,” which was defined as
“an accident, including continuous exposure to substantially the
same general harmful conditions.”

Id. at 170.

Sheehan’s insurer

filed an action seeking a declaration that it had no duty to
indemnify Sheehan.

Id. at 164.

The trial court ruled in favor of

the insurer in part because it found no “occurrence” under the
policies.

Id.

The Indiana Supreme Court disagreed, explaining:

‐24‐ 

The question presented is whether faulty workmanship is
an accident within the meaning of a standard CGL policy.
In our view the answer depends on the facts of the case.
For example, faulty workmanship that is intentional from
the viewpoint of the insured cannot be an “accident” or
an “occurrence.”
On the other hand if the faulty
workmanship is “unexpected” and “without intention or
design” and thus not foreseeable from the viewpoint of
the insured, then it is an accident within the meaning
of a CGL policy.
935 N.E.2d at 170.

Sheehan does not address the distinction

between an accident and a professional error or omission, but cites
Tri-Etch with approval, indicating that the Indiana Supreme Court
did not intend to call its decision in Tri-Etch into question.
See id.
The Individual Defendants maintain that, like the contractor
in Sheehan who hired subcontractors to do the allegedly negligent
construction

work,

“OSMC

in

effect

hired

NECC

to

compound

preservative-free MPA, which OSMC then purchased from NECC.”
#70 at 21.)

(DE

They contend that the alleged injuries constitute an

“accident” under the Policies because they were “unexpected” and
“without intention or design” by the OSMC Defendants.

(Id.)

However, “[l]ack of intentional wrongdoing does not convert every
business error into an ‘accident.’”

Tri-Etch, 909 N.E.2d at 1001.

The Court finds the Lawsuits’ claims are more akin to those
in

Tri-Etch

than

those

in

Sheehan.

The

Lawsuits

allege

a

professional relationship between the OSMC Defendants, who “are
engaged in the business of providing health care,” and the patients

‐25‐ 

to whom they administered the epidural MPA injections.
2.)

(DE #70 at

They allege that the OSMC Defendants were negligent in

selecting NECC to supply preservative-free MPA and in managing
that

supplier

relationship,

in

part

by

failing

to

perform

“recommended and widely utilized due diligence.”

(Id. at 7.)

Grove,

OSMC

the

medical

testified

that

compounded

by

the
NECC

director

for

decision
was

a

ASC

to

and

use

“medical

an

physician,

preservative-free

decision”

and

a

administering

MPA

“medical

judgment” made by physicians on ASC’s board of directors.
#67-3 at 30-31.)

Dr.

(DE

ASC’s board of directors decided to switch from

preservative-based

MPA

based on concerns for patient safety.

to

preservative-free

MPA

The board considered ASC’s

pharmacist consultants’ vetting of NECC as a supplier, and approved
the continued use of preservative-free MPA in annual reviews.

It

is reasonable to infer that these decisions involved a professional
standard of care.

See Robertson, 63 N.E.3d at 362 (“It is

reasonable to assume that OSMC weighed the potential benefits of
using preservative-free MPA from NECC against the potential risks
and determined that purchasing the medication from NECC was a
reasonable approach.

This decision is obviously one that was made

using professional judgment.”).

The OSMC Defendants’ alleged

negligence in making these decisions is “based on the failure of
the insured, in his or her professional status, to comply with .

‐26‐ 

. . the standard of care for that profession.”

Tri-Etch, 909

N.E.2d at 1001 (quoting 1 Couch on Insurance § 1:35).
The failure to meet a standard of care under a contractually
assumed duty is not an “accident.”

Tri-Etch, 909 N.E.2d at 1001;

see Allstate Ins. Co., 8 F. Supp. 3d at 1050 (“a business’s failure
to perform its services in the manner it had promised is an ‘error
or omission’ but not by any stretch an ‘accident’”).

Although the

OSMC Defendants “did not intentionally commit wrongdoing, this
failure does not convert [their] actions into an ‘accident.’”
Parchman,

2013

WL

2600406,

at

*5

(finding

insured’s

alleged

negligence in failing to hire adequate security, maintain proper
permits, and maintain the premises in a reasonably safe condition
was

“commercial

happening

or

without

professional,”
intention

or

and

“not

design’”).

‘an
The

unexpected
Lawsuits’

negligence claims allege a professional error or omission, rather
than an accident or occurrence.

The Court therefore finds that

the Lawsuits’ claims that the OSMC Defendants were negligent in
selecting NECC as a supplier of preservative-free MPA and in
managing that supplier relationship do not allege an “accident” or
“occurrence” under the BI/PD or Umbrella BI/PD.8

8
  Westfield also argues that the Lawsuits’ negligence claims are

not covered by the BI/PD or Umbrella BI/PD because the selection
and purchase of MPA from NECC does not satisfy the requirement of
a direct causal connection between an alleged occurrence and bodily
injury. See Huntzinger v. Hastings Mut. Ins. Co., 143 F.3d 302
(7th Cir. 1998).
Because the Court has determined that these
‐27‐ 

Exclusions from Coverage
Even if the Lawsuits’ negligence claims were to allege an
“accident” or “occurrence” under the BI/PD and Umbrella BI/PD,
these claims are excluded from coverage under the BI/PD’s Health
Care Services Exclusion and the Umbrella BI/PD’s Professional
Services Exclusion.

See Tri-Etch, 909 N.E.2d at 1004 (holding

that “[a]part from the fact that Tri-Etch’s error does not qualify
as an ‘occurrence,’ there is no coverage” because the insured’s
actions fell “squarely within exclusions of the umbrella policy”).
A coverage exclusion is usually an affirmative defense, with the
insurer bearing the burden of proof. Hoosier Ins. Co. v. Audiology
Found.

of

Am.,

745

N.E.2d

300,

309

(Ind.

Ct.

App.

2001).

“Generally, insurers are allowed to limit liability in any manner
which

is

not

unambiguous

inconsistent

exclusionary

enforcement.”

Id.

with

public

clause

is

policy.”

ordinarily

Id.

“[A]n

entitled

to

However, exclusions must be plainly expressed

in the policy, and any doubts as to coverage will be construed
against the insurer.
Westfield

Id.

maintains

that

Indiana

courts

analyze

the

“efficient and predominate cause” of the injuries to determine
whether claims are subject to policy exclusions.

In Wright v.

claims do not allege an occurrence under the BI/PD or Umbrella
BI/PD, it need not address the application of Huntzinger to this
matter.
‐28‐ 

American States Insurance Company, 765 N.E.2d 690 (Ind. Ct. App.
2002), one child died and another was injured while riding in a
van being driven by a daycare center employee when the van was
involved in a collision. The court held that an auto-use exclusion
in the daycare center’s CGL policy excluded coverage for a claim
of negligent supervision, explaining:
the efficient and predominating cause of the injuries
was [the driver’s] use of the van. Without the use of
the van, there would be no lawsuit.
[The injured
parties] are not alleging that [the daycare center’s]
failure to investigate [the driver’s] driving record, or
its employment of an incompetent driver with a suspended
license was a separate or independent proximate cause of
the harm.
The immediate and efficient cause of [the
children’s] injuries and the [injured parties’] claims
arising from those injuries is [the driver’s] use of the
automobile.
Id. at 697; see Ill. Farmers Ins. Co. v. Wiegand, 808 N.E.2d 180,
190 (Ind. Ct. App. 2004) (holding that a policy containing a motor
vehicle exclusion barred coverage for a negligent supervision
claim because the “immediate and efficient cause” of the minor’s
injuries and the claims arising from those injuries was the minor’s
use of the ATV, “and without the use of the ATV, there would be no
claim for negligent supervision”); Property-Owners Ins. Co. v.
Ted’s Tavern, Inc., 853 N.E.2d 973, 983 (Ind. Ct. App. 2006)
(holding that a liquor liability exclusion in a CGL policy excluded
coverage for negligent hiring, training and supervision claims
where “the immediate and efficient cause of the injuries was drunk
driving

precipitated

by

the

negligent

‐29‐ 

service

of

alcohol”);

Westfield Ins. Co. v. Hill, 790 F. Supp. 2d 855, 866 (2011)
(finding that homeowners insurance policy containing an exclusion
for sexual molestation and physical abuse precluded coverage of
negligent

supervision

and

failure

to

warn

claims

where

“the

efficient and predominant cause of Doe’s injuries was Comford’s
sexual molestation and physical abuse”).
Westfield contends that the “efficient and predominate cause”
of the Individual Defendants’ injuries was the OSMC Physicians’
injection of contaminated MPA into the patients’ bodies.

The

Individual Defendants allegedly suffered injuries due to the OSMC
Defendants’ administration of contaminated MPA to patients.

(See,

e.g., DE #29-5 at 34, ¶163 (alleging plaintiffs suffered injury or
death “due to their receiving contaminated NECC drugs purchased by
OSMC”), ¶164 (alleging surviving plaintiffs have suffered and will
continue to suffer injuries “as a direct result of being exposed
to NECC’s Contaminated Drugs”).)

Several Individual Defendants

admit that they would not have suffered any of their alleged
injuries or damages if they or their decedents had not received
injections of contaminated MPA.

(See DE #67-2 ¶5.1 (citing DE

#67-6 – #67-30 (Individual Defendants’ responses to Westfield’s
First Set of Interrogs.).)
The Individual Defendants do not dispute that Indiana courts
apply

the

“efficient

and

predominating

cause”

analysis

determine whether a policy excludes coverage for a claim.

‐30‐ 

to

Nor do

they deny that they would not have suffered any of the injuries or
damages alleged in the Lawsuits if patients had not been injected
with contaminated MPA.

They argue that Westfield mischaracterizes

their negligence claims as based on the injections of contaminated
MPA, and assert that the negligence that caused the harm was the
OSMC Defendants’ “failure to select a compliment [sic] and legally
operating supplier of preservative free MPA and its negligence in
overseeing the relationship with that supplier.”
n.5.)

(DE #70 at 23

But the Individual Defendants do not assert that the

Lawsuits allege any injury that is separate or independent from
the injury caused by the injection of the contaminated MPA into
the patients’ bodies.

See Hill, 790 F. Supp. 2d at 866 (efficient

and predominating cause of the injury was acts of molestation where
the complaint did not allege tortious conduct that was “divorced
from [the molester’s] actions” or “assert any claim for damages .
.

.

independent

of

the

injuries

caused

by

[the

molester’s]

actions”); Wright, 765 N.E.2d at 697 (efficient and predominating
cause of the injuries was the use of the van where the injured
parties did not allege that the insured’s failure to investigate
the driver’s record or its employment of an incompetent driver
“was a separate or independent proximate cause of the harm”).
“Although the [OSMC Defendants’] actions or omissions could have
contributed in some way,” it is undisputed that the Individual
Defendants

would

have

no

injury

‐31‐ 

without

the

injections

of

contaminated MPA into the patients’ bodies.
at 866.

Hill, 790 F. Supp. 2d

Without the injections, “there would be no damages, no

lawsuit and no negligence claim.”

Id.

Therefore, the efficient

and predominant cause of the Individual Defendants’ injuries was
the injection of the contaminated MPA into the patients’ bodies.
Health Care Services Exclusion
The BI/PD’s Health Care Services Exclusion provides that the
insurance does not apply to bodily injury “arising out of . . .
[t]he rendering or failure to render . . . [m]edical . . . or
nursing service [or] treatment”, “health or therapeutic service
[or] treatment”, or “[t]he furnishing or dispensing of drugs.”
(DE #29-1 at 140; DE #29-2 at 128; DE #29-3 at 125.)

Westfield

maintains that this exclusion eliminates coverage of the Lawsuits’
negligence claims because the efficient and predominant cause of
the

Individual

contaminated

Defendants’

MPA

into

the

injuries,

i.e.,

patients’

the

bodies,

injection

constitutes

of
the

rendering of a medical, nursing, health or therapeutic service or
treatment, or the furnishing of drugs.
The Individual Defendants contend that the term “treatment”
in the exclusion is ambiguous as it applies to this case.

“Terms

in a contract are given their usual and common meaning unless,
from the contract, it can be determined some other meaning was
intended.”

Westfield Cos., 804 N.E.2d at 1274.

not defined in the Policies.

“Treatment” is

The American Heritage Dictionary of

‐32‐ 

the English Language defines “treatment” in part as “[t]he use of
an agent, procedure, or regimen, such as a drug, surgery, or
exercise, in an attempt to cure or mitigate a disease, condition,
or

injury.”

treatment

https://ahdictionary.com/word/search.html?q=

(last

visited

on

Mar.

14,

2017).

The

Individual

Defendants admit that “a reasonable interpretation of the policy
term ‘treatment’ is that it means the performance of the medical
treatment – here that being the injection.”

(DE #70 at 16.)

They

insist that the Lawsuits do not allege that the OSMC Defendants
were negligent in performing the injections; rather, the Lawsuits
allege the OSMC Defendants were negligent in selecting NECC as a
supplier of preservative-free MPA and in managing that supplier
relationship.

The Individual Defendants argue that because the

term “treatment” is ambiguous in this context, the Health Care
Services Exclusion should be construed in favor of the insured and
in favor of finding coverage.
While Indiana courts have not addressed the Health Care
Services Exclusion, other jurisdictions have found such exclusions
to be unambiguous and apply to similar claims.

See Maryland Cas.

Co. v. Florida Atl. Orthopedics, P.L., 771 F. Supp. 2d 1328, 133233 (S.D. Fla. 2011) (holding health care services exclusion was
not ambiguous); Colony Ins. Co. v. Suncoast Med. Clinic, LLC, 726
F. Supp. 2d 1369, 1376–77 (M.D. Fla. 2010) (holding that a medical
services exclusion barred coverage for claims alleging a failure

‐33‐ 

to have in place adequate policies, procedures, staff and assistive
technology

to

ensure

performance

of

diagnostic

tests

and

communication between medical personnel because they were “an
intricate part of the medical services provided”); Alayon Del Valle
v. Kenyon, No. CIV. 06-2105CCC, 2009 WL 3299373, at *3 (D.P.R.
Oct. 9, 2009) (holding that a health care services exclusion in a
CGL policy barred coverage for claims alleging tortfeasor was
responsible for quality management, patient safety, providing
physician training and credentialing, utilizing management and
medical

policies,

and

establishing

and

implementing

adequate

procedures, because they were “duties directly involved in the
provision of services and require the application of medical
expertise”);

Duncanville

Diagnostic

Center,

Inc.

v.

Atlantic

Lloyd's Ins. Co. of Texas, 875 S.W.2d 788, 792 (Tex. Ct. App. 1994)
(holding that a health care services exclusion in a CGL policy
excluded
sedative,

coverage

for

improperly

claims

hiring

of

and

negligently
training

the

administering
technicians

a

who

administered the drugs, and failing to institute adequate policies
and procedures).

The plain language of the Health Care Services

Exclusion eliminates coverage for bodily injury arising out of the
rendering of a medical, nursing, health or therapeutic service or
treatment, or the furnishing or dispensing of drugs.

While the

Individual Defendants argue the term “treatment” does not clearly
apply to the Lawsuits’ negligence claims, they concede that a

‐34‐ 

reasonable interpretation of “treatment” is “the performance of
the medical treatment – here that being the injection.”
at 16.)

(DE #70

The fact that patients signed consent forms to receive a

medical procedure before being injected with preservative-free MPA
also

supports

the

medical treatment.

conclusion

that

the

injections

constituted

Thus, the issue is whether the Lawsuits’

negligence claims are excluded from coverage based on the rendering
of the medical treatment of MPA injections.
As discussed above, the “efficient and predominate cause” of
the

injuries

alleged

in

the

Lawsuits

is

contaminated MPA into the patients’ bodies.

the

injection

of

While the Lawsuits

allege the OSMC Defendants were negligent in selecting NECC as a
supplier of preservative-free MPA and in managing that supplier
relationship, “creative pleading . . . cannot hide the reality
that the immediate and efficient cause of the injuries” was the
injection of the contaminated MPA.

Property-Owners, 853 N.E.2d at

983; see Hill, 790 F. Supp. 2d at 866 (finding sexual molestation
exclusion barred coverage even though the injuries were “frame[d]
. . . in the language of negligent supervision and failure to
warn”).

Without the injections, there would be no injuries, no

Lawsuits, and no negligence claims.

Because the injections are

the efficient and predominate cause of the alleged injury, and the
injections clearly constitute medical “treatment,” the Health Care
Services Exclusion eliminates coverage of the Lawsuits’ claims of

‐35‐ 

negligence in selecting NECC as a supplier of preservative-free
MPA and in managing that supplier relationship.

Therefore, the

Court holds that no coverage exists, and no duty to defend or to
indemnify arises, under the BI/PD with respect to the negligence
claims asserted against the OSMC Defendants in the Lawsuits.
Professional Services Exclusion
The Umbrella BI/PD’s Professional Services Exclusion provides
that

the

rendering

insurance
.

.

.

does
any

not

apply

professional

to

bodily

service,”

injury

“due

to

which

includes

“[m]edical . . . or nursing service [or] treatment,” “[a]ny health
or therapeutic service [or] treatment,” and “[s]ervice in the
practice of pharmacy.”
3 at 285-86.)
service.”

(DE #29-1 at 297; DE #29-2 at 286; DE #29-

The Umbrella BI/PD does not define “professional

Westfield asserts that the “efficient and predominating

cause” of the Individual Defendants’ injuries, i.e., the injection
of contaminated MPA into the patients’ bodies, eliminates coverage
of the Lawsuits’ negligence claims under this exclusion. Westfield
also maintains that this exclusion eliminates coverage because the
negligence claims are based on acts taken by the OSMC Defendants
in the course of providing professional services.
The plain language of the Professional Services Exclusion
eliminates coverage for bodily injury due to medical, nursing,
health, or therapeutic service or treatment.

Other courts have

found professional services exclusions to be unambiguous.

‐36‐ 

See,

e.g., Maryland Cas. Co., 771 F. Supp. 2d at 1332-33 (holding that
professional services exclusion was not ambiguous); see also Nat’l
Fire Ins. Co. of Hartford v. Kilfoy, 874 N.E.2d 196, 201-02 (Ill.
Ct.

App.

2007)

(holding

that

professional

services

exclusion

excluded coverage of claims of negligent hiring, administrative
supervision,

and

business

operation

of

a

surgical

facility);

Duncanville Diagnostic Center, 875 S.W.2d at 790-92 (holding that
professional services exclusion in a CGL policy excluded coverage
for claims of negligently administering a sedative, improperly
hiring and training the technicians who administered the drugs,
and failing to institute adequate policies and procedures).
The Individual Defendants maintain that the term “treatment”
in

the

Professional

Services

Exclusion

as

applied

here

is

ambiguous, and that such ambiguity should be construed against
Westfield. They cite Burton v. Choctaw County, 730 So. 2d 1 (Miss.
1997), in which the court found the term “nursing treatment” in a
professional services exclusion of a CGL policy to be ambiguous.
Id. at 8.

The court found that “[r]easonable people could easily

differ about whether various actions constitute ‘treatment,’ and
just as easily, they could differ about whether those ‘treatments’
constitute ‘professional services.’”

Id.

The Burton court held

that the question of whether the tortfeasor’s actions “constituted
‘nursing treatment’ should have been submitted to a jury in the
face of the ambiguity.”

Id. at 9. While the Individual Defendants

‐37‐ 

contend that an ambiguity arises as to whether “treatment” includes
the OSMC Defendants’ alleged negligence in selecting NECC as a
supplier of preservative-free MPA and in managing that supplier
relationship, they concede that a reasonable interpretation of
“treatment” is “the performance of the medical treatment – here
that being the injection.”

(DE #70 at 16.)

As explained above, Indiana courts consider the “efficient
and predominating cause” of the injury to determine whether an
exclusion eliminates coverage under a policy.

The Court has found

that the efficient and predominating cause of the injuries alleged
in the Lawsuits was the injection of contaminated MPA into the
patients’ bodies.

Because the injections indisputably constitute

the rendering of a medical service or “treatment,” the Lawsuits’
negligence

claims

are

excluded

from

coverage

under

the

Professional Services Exclusion.
Even

if

the

Court

were

to

disregard

the

efficient

and

predominating cause of the alleged injuries, the Professional
Services Exclusion would still eliminate coverage of the Lawsuits’
negligence

claims.

In

Erie

Insurance

Group

v.

Alliance

Environmental, Inc., 921 F. Supp. 537 (S.D. Ind. 1996), the court
considered a CGL policy that excluded coverage for liability for
damages due to “any service of a professional nature.”

Id. at

541. The court stated that when determining whether alleged wrongs
are within the scope of a professional services exclusion, “the

‐38‐ 

focus

must

be

on

whether

the

claimant

is

seeking

to

impose

liability for acts which were taken in the course of providing
professional services and which drew upon (or at least should have
drawn upon) the professional’s training, skill, experience, or
knowledge.”

Id. at 543.

The court explained:

not every action a professional takes in the course of
providing professional services will be a professional
service for insurance purposes, but that when the
professional draws upon (or at least should draw upon)
his or her professional knowledge, experience, and
training in taking some action, that is a professional
service for insurance purposes.
Id. at 545–46 (citing Collins v. Covenant Mut. Ins. Co., 604 N.E.2d
1190 (Ind. Ct. App. 1992), vacated on other grounds, 644 N.E.2d
116 (Ind. 1994)). Thus, when “the insured is being sued for taking
actions in the course of providing professional services, and where
those actions both are reasonably related to the services being
provided and involve the use of (or failure to use) professional
knowledge,

skill,

experience,

services’ exclusion applies.”

or

training,

the

‘professional

Id. at 547.

The Individual Defendants rely upon case law from other
jurisdictions to argue that medically related conduct does not
constitute

“professional

generally

considered

specialized
professional

skill

whether

and

services

services.”
the

training  in
exclusion

Like

Erie,

alleged

conduct

determining

eliminated

those

courts

required

whether

coverage.

a
See

Jefferson Ins. Co. of N.Y. v. Nat'l Union Fire Ins. Co. of

‐39‐ 

Pittsburgh, Pa., 677 N.E.2d 225, 230-31 (Mass. Ct. App. 1997)
(ambulance company’s delay in responding to a medical emergency
due to a miscommunication regarding the emergency’s location did
not

constitute

“professional

services”

because

it

was

“nonspecialized, clerical or administrative activity requiring
neither special learning, intellectual skill, nor professional
judgment”); Duke Univ. v. St. Paul Fire & Marine Ins. Co., 386
S.E.2d 762 (N.C. Ct. App. 1990) (negligent failure to lock casters
on a dialysis chair not within the term “professional services”);
Guaranty Nat’l Ins. Co. v. North River Ins. Co., 909 F.2d 133, 136
(5th Cir. 1990) (professional services exclusion did not bar
coverage of a negligence claim for placing psychiatric patient in
an “open” fourth floor room who jumped through a window to her
death because “[t]he decision to protect the open unit patients
through screws in the window sashes rather than through fixed,
protective screens over the windows . . . was not a professional,
medical decision”); Med. Records Assocs., Inc. v. Am. Empire
Surplus Lines Ins. Co., 142 F.3d 512, 514 (1st Cir. 1998) (feesetting and billing was not “a professional service” under an E&O
policy).
Here, the evidence demonstrates that the OSMC Defendants’
selection of NECC as their supplier of preservative-free MPA and
management

of

that

supplier

relationship

was

(1)

reasonably

related to the medical services being provided, and (2) involved

‐40‐ 

the use of (or failure to use) professional knowledge, skill,
experience, or training.

See Erie Ins. Grp., 921 F. Supp. at 547.

It is undisputed that the OSMC Defendants provided medical services
to patients in the form of epidural MPA injections.

ASC’s board

of directors, consisting of 11 physicians and ASC’s CEO, made the
decision to switch from administering preservative-based MPA to
preservative-free MPA based on concerns for patient safety, and
conducted annual reviews in which they approved the continued use
of preservative-free MPA.

ASC’s pharmacist consultants vetted

NECC as a supplier of certain medications, and ASC’s board of
directors made the decision to use NECC as a supplier.
testified

that

compounded

by

the
NECC

decision
was

a

to

“medical

use

Dr. Grove

preservative-free

decision”

and

a

“medical

judgment” made by physicians on ASC’s board of directors.
#67-3 at 30-31.)

MPA

(DE

It is reasonable to assume that ASC’s board of

directors relied on the physicians’ knowledge, skill, experience
and training in making this medical decision.

The Court notes

that the Court of Appeals also had “little trouble concluding that
the

selection

preservative-free

of

preservative-free

MPA—in

MPA

made

favor

by

NECC—in

particular,
of

MPA

with

preservatives from other suppliers, were actions that involved the
exercise of professional medical skill and judgment.”

Robertson,

63 N.E.3d at 361; see id. at 364 (holding that claims “that
Defendants were allegedly negligent . . . in choosing NECC without

‐41‐ 

proper vetting, are allegations that claim negligence in decisions
that were made using professional expertise”).
The OSMC Defendants’ selection of NECC as their supplier of
preservative-free MPA and management of that supplier relationship
was reasonably related to the medical service of administering
preservative-free MPA injections to patients, and involved the use
of the physicians’ professional knowledge, skill, experience,
and/or training.
eliminates

Therefore, the Professional Services Exclusion

coverage

of

the

Lawsuits’

claims

that

the

OSMC

Defendants were negligent in selecting NECC as their supplier of
preservative-free MPA and in managing that supplier relationship.
The Court holds that no coverage exists, and no duty to defend or
to indemnify arises, under the Umbrella BI/PD with respect to the
negligence claims asserted against the OSMC Defendants in the
Lawsuits.
CONCLUSION
For the reasons set forth above, Westfield’s Motion for
Summary Judgment (DE #64) is GRANTED.

The Clerk of the Court is

DIRECTED to enter a DECLARATORY JUDGMENT in favor of Westfield and
against all defendants declaring that no coverage exists under
Commercial Package Policy No. TRA 3413228 based on the personal
and advertising injury, umbrella personal and advertising injury,
bodily injury and property damage, and umbrella bodily injury and
property damage coverage provisions, and thus, Westfield has no

‐42‐ 

duty

to

defend

or

indemnify

defendants

OSMC,

ASC,

or

OSMC

Physicians with respect to the claims asserted by the Individual
Defendants in the Lawsuits filed in Elkhart Superior Court and the
Medical Malpractice Complaints filed with the Indiana Department
of Insurance.

DATED:

March 28, 2017

/s/ RUDY LOZANO, Judge
United States District Court

‐43‐