Catholic Medical Center v. Fireman's Fund Insurance Company

Filing 21

///ORDER granting 15 Motion for Summary Judgment filed by Fireman's Fund Insurance Company; denying 14 Motion for Summary Judgment filed by Catholic Medical Center Health Care System. The clerk shall enter judgment accordingly and close the case. So Ordered by Chief Judge Joseph N. Laplante.(jb)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Catholic Medical Center
v.

Civil No. 14-cv-180-JL
Opinion No. 2015 DNH 110

Fireman’s Fund
Insurance Company
OPINION AND ORDER
The possible contamination of surgical instruments after
exposure to a communicable neurological disease--and whether
those instruments constitute “premises” under the terms of an
insurance policy--led to a coverage dispute that culminated in
this litigation.

Plaintiff Catholic Medical Center (“CMC”) seeks

a declaratory judgment that defendant Fireman’s Fund Insurance
Company (“Fireman’s Fund”) wrongfully denied coverage for certain
losses after a CMC neurosurgical patient was diagnosed several
months after surgery, necessitating the destruction of the
potentially contaminated instruments and causing temporary
suspension of CMC’s neurosurgery program.
cross-motions for summary judgment.

The parties have filed

Having reviewed the

insurance policy at issue and the undisputed factual record, and
having held oral argument, the court finds that CMC’s claims are
not covered.
is denied.

Fireman’s Fund’s motion is therefore granted; CMC’s

I.

Summary Judgment
Summary judgment is properly granted when the movant shows

that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.
Civ. P. 56(a).

See Fed. R.

The court “views all facts and draws all

reasonable inferences in the light most favorable to the
non-moving” parties.
(1st Cir. 2010).

Estrada v. Rhode Island, 594 F.3d 56, 62

On cross-motions for summary judgment,

“the court must consider each motion separately, drawing
inferences against each movant in turn.”

Merchants Ins. Co. of

N.H., Inc. v. U.S. Fid. & Guar. Co., 143 F.3d 5, 7 (1st Cir.
1998) (quotation marks omitted).

This rule is largely academic

here since, as previously noted, the material facts are
undisputed.
II.

Factual Background
On May 24, 2013, CMC personnel performed neurosurgery on a

patient.

Several months after the surgery, CMC learned that the

patient was experiencing symptoms consistent with CruetzfeldtJakob Disease (“CJD”), a communicable, incurable and fatal
neurological disease.

A lab test in mid-August 2013 established

that the patient likely had CJD.

The patient died soon after and

post-mortem analysis confirmed the CJD diagnosis.

CMC also

determined that eight patients had undergone neurosurgery at CMC
2

since May 24, 2013.

CMC had two sets of neurosurgery

instruments, so it was possible that some, none, or all of these
eight patients underwent surgery with the same instruments used
on the CJD patient, potentially exposing them to the disease.
CMC reported the incident to the New Hampshire Department of
Health and Human Services (“New Hampshire HHS”), as required by
law because CJD is a communicable disease.

Representatives from

New Hampshire HHS met daily with CMC personnel to formulate a
response.

Since it could not be determined which of the two

surgical kits was used on the original patient, New Hampshire HHS
advised CMC that both kits had to be decontaminated, a process
that will result in the destruction of the instruments.1
Although DHHS had the authority to issue a formal order requiring
CMC to take steps in response to the CJD incident, it did not do
so because CMC had already taken the required steps or agreed to
do so without resistance.
Aside from quarantining the affected instruments and issuing
various notifications to the public and the eight post-incident
surgical patients, CMC undertook no other action, such as
additional decontamination, evacuation or operating room closure.
CMC was, however, forced to suspend its neurosurgery program from

1

CMC is maintaining the instruments in quarantine until all
potential legal claims resulting from the CJD incident are
resolved. The instruments will be incinerated thereafter.
3

August 16, 2013 until February 24, 2014, when it completed its
purchase of new instruments.
CMC notified Fireman’s Fund of a potential claim as soon as
it became aware of the CJD incident, and later filed a formal
claim for the loss of the surgical instruments and losses
occasioned by the suspension of CMC’s neurosurgery program.
Fireman’s Fund denied the claim as a non-covered loss, and also
denied CMC’s subsequent request to reconsider its position.

CMC

filed suit in New Hampshire Superior Court in March 2014.
Fireman’s Fund timely removed the case to this court.
III.

The Insurance Policy
During the relevant time period, Fireman’s Fund insured CMC

pursuant to a Commercial Property policy.
case, the policy includes two endorsements.

As pertinent to this
The first is a

Health Care Extension Endorsement, which, in turn, includes
Communicable Disease Coverage, which provides, in relevant part:
13. Communicable Disease Coverage
a. We will pay for the following under
Communicable Disease Coverage:
(1) Direct Physical loss or damage to
Property Insured caused by or resulting from a covered
communicable disease event at the premises described in
the Declarations.
(2) The necessary costs incurred to:

4

(a) Test, monitor, contain, treat,
detoxify, disinfect, and neutralize Property Insured;
(b) Cleanup, remove, and dispose of the
debris of Property Insured.
(c) Replace consumable goods at the
premises described in the Declarations which are
declared contaminated by the local public health
authority.
(3) If the Declarations show you have
Business Income with Extra Expense Coverage - 190004,
we will pay for the actual loss of business income,
rental value, or necessary extra expense or expediting
expense that you sustain due to the necessary full or
partial suspension of operations during the period of
restoration. The suspension must be caused by direct
physical loss or damage caused by or resulting from a
covered communicable disease event at the premises
described in the Declarations.
(Emphasis in original).
The policy also contains a Crisis Management Coverage
Extension Endorsement, which obligates Fireman’s Fund to cover
certain losses resulting from a “covered crisis event.”

The

pertinent policy provision defines such an event as:
Necessary closure of your covered premises due to any
sudden, accidental and unintentional contamination or
impairment of the covered premises or other property on
the covered premises which results in clear,
identifiable, internal or external visible symptoms of
bodily injury, illness, or death of any person(s).
This includes covered premises contaminated, by
communicable disease, Legionnaires’ disease, but does
not include premises contaminated by other pollutants
or fungi.
(Emphasis in original).

5

As is often the case in insurance policies, the emphasized
terms have been assigned particular meanings.

“Premises” is

defined as “that part of the location you occupy.”

The

Endorsement defines “communicable disease” as “any disease caused
by a biological agent that may be transmitted directly or
indirectly from one human or animal to another” and defines
“communicable disease event” as an “event in which a public
health authority has ordered that the premises described in the
Declarations be evacuated, decontaminated, or disinfected due to
the outbreak of a communicable disease at such premises.”
(emphasis in original).

Finally, with respect to the Crisis

Management Endorsement, “covered premises” are defined as “that
part of the location you occupy which is covered by this policy,
including the area within 100 feet thereof.”
III.
A.

Analysis
Policy Interpretation
The parties agree that New Hampshire law controls this

dispute.

Therefore, the insurer, Fireman’s Fund, bears the

burden of proving that CMC’s claim is not covered.

See N.H. Rev.

Stat Ann. § 491:22-a (2010); Andrews v. Nationwide Mut. Ins. Co.,
124 N.H. 148, 150 (1983) (holding that provisions of New
Hampshire’s Declaratory Judgment Act relating to liability
insurance apply to first-party insurance claims).
6

The interpretation of insurance policy language is a
question of law for the court to determine.

Rivera v. Liberty

Mut. Fire Ins. Co., 163 N.H. 603, 606 (2012).

“Policy terms are

construed objectively; where the terms are clear and unambiguous,
[the court] accord[s] the language its natural and ordinary
meaning.”

Barking Dog, Ltd. v. Citizens Ins. Co. Of Am., 164

N.H. 80, 83 (2012).

Where disputed terms are not defined in the

policy, the court construes them “in context, and in the light of
what a more than casual reading of the policy would reveal to an
ordinarily intelligent insured.”

Great Am. Dining v.

Philadelphia Indem. Ins. Co., 164 NH 612, 625 (2013).

If policy

terms are clear and unambiguous, the “search for the parties’
intent is limited to the words of the policy.”
Ins. Co., 167 N.H. 153, 157 (2014).

White v. Vt. Mut.

“Ambiguity exists if

reasonable disagreement between contracting parties leads to at
least two interpretations of the language.”

Id. (quoting Colony

Ins. Co. v. Dover Indoor Climbing Gym, 158 N.H. 628, 630 (2009)).
“If one of the reasonable meanings of the language favors the
policyholder, the ambiguity will be construed against the
insurer.”

Colony, 158 N.H. at 630.

However, the court will not

“perform amazing feats of linguistic gymnastics to find a
purported ambiguity[,]” id. at 630-31, and will “enforce a policy
provision that limits the insurance company’s liability when the

7

policy language is clear and unambiguous.”

Merch. Mut. Ins. Co.

v. Laighton Homes, Inc., 153 N.H. 485, 487 (2006).2
1.

Communicable Disease Coverage
Fireman’s Fund makes several arguments in support of its

position that the policy’s Communicable Disease Coverage does not
apply to CMC’s claim.

Fireman’s Fund’s overall point, however,

is that the CJD incident did not constitute a “communicable
disease event,” as that term is defined in the policy.

The court

agrees.
As previously noted, the policy defines a “communicable
disease event” as “an event in which a public health authority
has ordered that the premises described in the Declarations be
evacuated, decontaminated, or disinfected due to the outbreak of
communicable disease at such premises” (emphasis in original).
Fireman’s Fund specifically contends that:

1) there was no

evacuation, decontamination or disinfection of “the premises”; 2)
there was no “outbreak” of a communicable disease; 3) no public
health authority “ordered” any action; and 4) there was no
“direct physical loss or damage to any insured property.”

The

first point carries the day.

2

While the parties agree as to the law governing policy
interpretation, the court is not aware of any case law regarding
the policy provisions at issue and the parties supply none.
8

CMC argues that no policy language would lead a reasonable
insured to conclude that coverage to the instruments would only
be triggered if the entire premises were disinfected,
decontaminated or evacuated.

To the contrary, the plain language

leads precisely to that conclusion.
Restating the relevant provision, the policy defines
“premises” as “that part of the location you occupy.”

Engrafting

that definition onto that of a “communicable disease event”
yields “an event in which a public health authority has ordered
that that part of the location that [CMC] occup[ies] be
evacuated, decontaminated or disinfected . . . .”

The parties do

not dispute that the only action taken was with respect to the
possibly contaminated surgical instruments and that there was no
evacuation, decontamination or disinfection of any other part of
the hospital.
Given this policy language, the existence of a “communicable
disease event” serves as an important gateway to coverage.

But

CMC essentially ignores this step and offers no reasonable
explanation as to how surgical instruments can be considered
“premises,” a term which connotes a location.

Instead, CMC

relies on the policy’s coverage for damage to insured property-such as surgical instruments--at the “premises.”
too much.

But this proves

Covered instruments at the premises are indeed

9

covered, but only, insofar as relevant here, if lost or damaged
as a result of a “communicable disease event,” which requires not
just a disease outbreak at the “premises,” but also that those
very same “premises,” i.e., “that part of the location that CMC
occupies” be, inter alia, decontaminated.

This phrase, much like

“premises” itself, also connotes a physical location.

Reading

the two references to “premises” consistently and in context, the
court finds that the term refers to the physical structure of the
hospital.

Cf. Brickley v. Progressive N. Ins. Co., 160 N.H. 625,

629 (2010) (finding ambiguity where terms were defined
inconsistently in different parts of insurance policy). Indeed,
it would make little sense to read the policy as covering
instruments at the premises and to consider the instruments also
to be premises.
Finally, CMC invites the court to find ambiguity by citing
internal Fireman’s Fund communications showing that there was, at
some point in the claims handling process, disagreement among
Fireman personnel as to the breadth of the definition of
“premises,” with two Fireman’s Fund employees seemingly favoring
CMC’s position.

The court declines the invitation as it is

improper to resort to such extrinsic evidence where, as here, the
policy provision is not facially ambiguous.

See In re Reid, 143

N.H. 246, 249 (1998) (noting, in context of lease interpretation,

10

“[w]e will reverse the determination of the fact finder where,
although the terms of the agreement are unambiguous, the fact
finder has improperly relied on extrinsic evidence in reaching a
determination contrary to the unambiguous language of the
agreement.”).3
Against this backdrop, the court finds that the Fireman’s
Fund’s Communicable Disease Coverage does not cover CMC’s claim.4
2.

Crisis Management Coverage
CMC argues that the Crisis Management Coverage Extension

Endorsement covers the losses it sustained when it had to suspend
its neurosurgery program in the absence of surgical instruments.
Once again, though, the policy language does not support such a
conclusion.

While CMC is correct that the policy covers various

losses caused by “suspension of operations,” such suspension must
be the result of a “covered crisis event,” which requires

3

The court also notes that while any such extrinsic evidence
is for the purpose of determining the parties intent in the
absence of clear policy language, CMC’s putative evidence does
not do that. The claims process, incepting long after the policy
was drafted, has little to do with the parties’ intent. Indeed,
under CMC’s novel theory, unless all of an insurer’s claimshandling personnel agreed with the ultimate decision from the
outset of the claim, insureds would be entitled to coverage based
on an “ambiguity.” There appears to be no authority for that
proposition.
4

The court need not rule on Fireman’s Fund’s other theories:
lack of an “outbreak”; lack of a public health authority order;
and lack of direct physical loss.
11

“closure of the covered premises.”

CMC argues that coverage of

“suspension” is internally inconsistent with the requirement of
“closure,” and that the provision is therefore ambiguous.
Relatedly, it argues that Fireman’s Fund’s position ignores the
“suspension” coverage.

The court finds both arguments wanting.

The policy is clear that only “a suspension . . . caused by or
result[ing] from a ‘covered crisis event’” is covered.

Here,

again, CMC’s argument ignores the threshold requirement of a
“covered crisis event”--defined as requiring closure of the
premises--and focuses solely on the resulting damage.

Similarly,

any inconsistency between coverage for “suspension of operations”
and “closure of premises” is irrelevant because only the latter
term in contained within the threshold definition of “covered
crisis event.”

Thus, CMC’s loss is not covered under the Crisis

Management Coverage Extension Endorsement.
IV.

Conclusion
Eschewing, as it must, “linguistic gymnastics,” the court

finds that, as relevant to CMC’s claims, the Fireman’s Fund
policy is not ambiguous and does not cover those claims.
Accordingly, Fireman’s Fund’s motion for summary judgment5 is

5

Document No. 15.
12

granted and CMC’s motion for summary judgment6 is denied.
clerk shall enter judgment accordingly and close the case.
SO ORDERED.

____________________________
Joseph N. Laplante
United States District Judge
Dated: June 1, 2015
cc:

Donald L. Smith, Esq.
Gregory P. Varga, Esq.
Raymond T. DeMeo, Esq.
Danielle Andrews Long, Esq.

6

Document No. 14.
13

The