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‐
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