Charleston Area Medical Center, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA, et al
Filing
130
MEMORANDUM OPINION AND ORDER denying defendant AIG's 75 MOTION for Summary Judgment; denying defendant National Union's 77 MOTION for Summary Judgment against CAMC; denying defendant National Union's 79 MOTION for Summary Judgment against the third-party defendant, Vandalia; granting plaintiff CAMC's 85 MOTION for Partial Summary Judgment against National Union. Signed by Judge Joseph R. Goodwin on 6/1/2011. (cc: attys; any unrepresented party) (tmh)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
CHARLESTON AREA MEDICAL CENTER, INC.,
Plaintiff,
v.
CIVIL ACTION NO. 2:09-cv-00573
NATIONAL UNION FIRE INSURANCE, et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
This multi-party insurance case involves a dispute over which insurance company, if any,
must provide coverage to Charleston Area Medical Center (“CAMC”) for a multi-million dollar
settlement agreement that CAMC entered into with two women who were molested by a CAMC
employee. During the relevant time, CAMC held several insurance policies, two of which are at
issue here. The first was a policy that CAMC purchased from National Union Fire Insurance
Company of Pittsburgh (“National Union”) to provide coverage from May 1, 2008 through May 1,
2009. CAMC purchased the second policy from Vandalia Insurance Company (“Vandalia”) for
coverage from May 1, 2008 to May 1, 2009.
By way of short summary, CAMC asserts that the National Union Policy provides coverage
for the settlement. National Union has denied coverage and has asserted a Third-Party Complaint
against Vandalia requesting a declaratory judgment that CAMC’s claims are covered by the Vandalia
Policy. In addition, CAMC has asserted claims against both National Union and AIG Domestic
Claims (“AIG”), the claims adjuster for the National Union Policy, under West Virginia Unfair
Trade Practices Act (“UTPA”).
Pending before the court are the following four cross-motions for summary judgment: (1) the
Motion by AIG for Summary Judgment against CAMC [Docket 75]; (2) the Motion by National
Union for Summary Judgment against CAMC [Docket 77]; (3) the Motion by National Union for
Summary Judgment against Vandalia [Docket 79], and; (4) the Motion by CAMC for Partial
Summary Judgment against National Union [Docket 85].1
For the reasons set forth below, AIG’s Motion for Summary Judgment is DENIED. National
Union’s Motions for Summary Judgment against CAMC and Vandalia are DENIED. CAMC’s
Motion for Partial Summary Judgment is GRANTED.
I.
Background
A.
Underlying Events
The underlying events giving rise to the present insurance coverage dispute arose from claims
made against CAMC by patients in 2008 and 2009. Two2 female patients alleged that they were
molested by a CAMC nursing assistant while being treated at CAMC.3 On December 16, 2008,4
1
CAMC’s Motion for Partial Summary Judgment was initially filed on February 18,
2011, and docketed as document number 73. The Court later gave the parties leave to substitute
the current redacted versions of the Motion and accompanying memorandum.
2
The underlying settlement only involved two patients, however, the papers reference
three victims.
3
To protect their privacy, I will not refer to the patients by name.
4
CAMC was informally notified of the patients’ allegations by the patients’ attorney
(continued...)
-2-
CAMC received notice of Patient One’s claim, alleging that she was molested by the employee on
June 17, 2008, and that as a result of the employee’s conduct and CAMC’s negligent supervision of
its employee, she had suffered “psychological injury, embarrassment, humiliation, trauma, anguish,
upset, worry, dread, and was otherwise injured in mind and body.” (CAMC’s Mot. Partial Summ.
J. Ex. 2 [Docket 85-2], at 2.). On January 21, 2009, CAMC received notice of Patient Two’s claim,
alleging that she was molested on October 3, 2008 and that as a result of this assault and CAMC’s
negligent supervision of its employee, she “suffered physical injury, pain, psychological injury,
embarrassment, humiliation, trauma, anguish, upset, worry, dread, and was otherwise injured in mind
and body.” (CAMC’s Mot. Partial Summ. J. Ex. 3 [Docket 85-3], at 3.) Patient Two further alleged
that she suffered “vaginal burning and irritation for days.” (Id. at 2.)
On February 3, 2009, the patients’ attorney sent CAMC a demand letter requesting an award
of $11 million for both patients. On February 17, 2009, CAMC entered into a settlement with both
of the patients for a total of $2.55 million. During this time, the instant dispute arose over which of
CAMC’s insurers, if any, must provide coverage to CAMC for the amount paid to the two patients
in the settlement. I will now briefly describe the insurance policies at issue.
B.
National Union Policy
The National Union Policy provided Directors and Officers and Not-For-Profit Organization
Liability Coverage and Employment Practices Liability Coverage to CAMC with a total aggregate
limit of liability of $10 million for the entire policy and a retention/deductible of $250,000.
4
(...continued)
before receiving the actual notices of the claims pursuant to West Virginia’s Medical
Professional Liability Act. The parties appear to agree, however, that the official notices serve as
the “claim documents” in this case, and accordingly I will rely on these documents. (See
CAMC’s Mot. Summ. J. Ex. 4 [Docket 85-4], at 1.)
-3-
(CAMC’s Mot. Partial Summ. J. Ex. 1 [Docket 85-1], at 2.) The policy, effective from May 1, 2008
through May 1, 2009, consists of three sections. The first section contains the general terms and
conditions of coverage for the entire policy. (Id. at 7-17.) The second section provides the terms of
Directors and Officers and Not-For-Profit Organization Liability Coverage (the “D&O Section”),
and defines covered wrongful acts and exclusions particular to the D&O Section. (Id. at 18-25.) The
third section provides the terms of Employment Practices Liability Coverage (the “EPL Section”),
and similarly defines wrongful acts and exclusions particular to the EPL Section. (Id. at 26-31.) The
National Union Policy also contains additional endorsements amending the general terms and
conditions of coverage. (Id. at 94-116.) A claim is only covered by the National Union Policy if
it falls within the coverage language of either the D&O Section or the EPL Section and the claim
does not fall within any relevant exclusion. Thus, all three sections of the National Union Policy are
relevant to the instant dispute.
First, with respect to coverage, CAMC and National Union dispute whether CAMC’s claims
are within the terms of either the D&O or the EPL Sections. The D&O Section provides several
categories of coverage for executives, individuals, and for CAMC as an organization. The relevant
portion of the D&O Section covers claims made for wrongful acts, which are defined as “any breach
of duty, neglect, error, misstatement, misleading statement, omission or act by or on behalf of the
Organization.” (Id. at 20.) Endorsement Number 9 operates to exclude coverage for claims
“alleging, arising out of, based upon or attributable to the Insureds performance or rendering of or
failure to perform or render medical or other professional services or treatments for others.” (Id. at
104-106.) The EPL Section provides coverage for an “Employment Practices Violation” and “NonEmployment Discrimination”, both of which are discussed in more detail below.
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Second, the General Terms and Conditions contain an exclusion for any claim “alleging,
arising out of, based upon, attributable to, or in any way involving, directly or indirectly, Bodily
Injury or Property Damage.” (Id. at 10.) This provision operates to exclude any such claim from
coverage under the National Union Policy, regardless of whether the claim involved acts otherwise
covered under the D&O or EPL Sections. As further discussed below, National Union and CAMC
dispute whether CAMC’s claims fall within this exclusion.
C.
Vandalia Hercules Policy
I have, on several prior occasions, been asked to interpret a version of the “Hercules Policy”
issued to CAMC by Vandalia and to determine the legal status of the relationship between CAMC,
Vandalia, and various third-parties. While the third-parties and other players change, the nature of
the Hercules Policy remains relatively constant throughout. Vandalia issued the “Hercules Policy”
to CAMC, providing the following three “Groups” of coverage effective from May 1, 2008 to May
1, 2009: (1) Health Care Professional Liability under Group I; (2) Directors and Officers Liability,
Employment Practices Liability, and Fiduciary Liability under Group II; and (3) “All coverages
provided under this policy which are not listed in Group I and Group II above” under Group III.
(Third-Party Pl. National Union’s Mot. Summ. J. Ex. 1 [Docket 79-1], at 3.) These Groups, which
are explained in more detail below, set out the terms of coverage for each category of loss.
National Union contends that Groups I and III of the Hercules Policy are relevant here.
Group I provides Health Care Professional Liability coverage up to $10,000,000 per loss event and
in the aggregate in excess of the continuing retained amount of $250,000 per loss event. (Id. at 27.)
Group III provides several categories of coverage, including “Commercial General Liability.” Group
III provides coverage in an amount up to $10,000,000 per loss event and in the aggregate and the
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Commercial General Liability under Group III has a continuing retained amount of $2,000,000 per
loss event. (Id.) Neither Group I nor Group III of the Hercules Policy lists any underlying insurance
policy. As discussed in more detail below, National Union contends that CAMC’s losses are
covered under Groups I and III of the Vandalia Policy while Vandalia denies that CAMC’s claims
are covered under either Group of the Vandalia Policy.
D.
Procedural History of the Instant Action
On October 15, 2008, CAMC notified all of its insurance carriers, including National Union,
of three potential claims, based on three patients’ allegations that they were molested by a CAMC
employee while being treated at CAMC. CAMC received a Notice of Claim under the West Virginia
Medical Professional Liability Act from Patient One on December 16, 2008, and another from
Patient Two on January 21, 2009. CAMC forwarded both of these notices to National Union, and
National Union “retained” AIG to determine whether coverage existed under the National Union
Policy. In a series of correspondence, AIG disclaimed coverage for a variety of reasons including:
(1) failure to allege a “wrongful act”; (2) exclusion under the “bodily injury” provision; and (3)
exclusion under the medical and professional services provision. During the course of the debate
between CAMC and AIG regarding coverage under the National Union Policy, CAMC, with the
consent of AIG,5 settled both patients’ claims for a total of $2.55 million.6
5
An email exchange between John Favilla, Assistant Vice President of AIG, and Dina
Mohler of CAMC’s Office of General Counsel indicates that CAMC notified AIG of mediation
scheduled for February 17, 2009 and that AIG stated it would not “raise lack of consent as a bar
to coverage.” (National Union’s Mot. Summ. J. Ex. 5 [Docket 77-5].)
6
While the claims have been consolidated for the purposes of this litigation, the patients
filed individual claims and the claims were treated distinctly by National Union and AIG.
Accordingly, should the court determine that there is coverage, the $250,000 self-insured
(continued...)
-6-
On April 23, 2009, CAMC filed suit against National Union and AIG in the Circuit Court
of Kanawha County, West Virginia. CAMC’s Complaint alleged claims for (1) breach of contract
against National Union; (2) breach of the implied covenant of good faith and fair dealing against
National Union; (3) violations of the West Virginia Unfair Trade Practices Act against National
Union and AIG; and (4) punitive damages against National Union and AIG. National Union and
AIG removed the action to this court on the basis of diversity jurisdiction.
On May 26, 2009, National Union and AIG filed an Answer to CAMC’s Complaint as well
as a Third-Party Complaint against Vandalia Insurance Company. The Third-Party Complaint
requests a declaratory judgment that the Vandalia Hercules Policy, rather than the National Union
Policy, provides coverage for CAMC’s claims. The parties have filed four cross-motions for
summary judgment, which, after oral argument, are ripe for review.
II.
Summary Judgment Standard
To obtain summary judgment, the moving party must show that there is no genuine issue as
to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(a). In considering a motion for summary judgment, the court will not “weigh the evidence and
determine the truth of the matter.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
Instead, the court will draw any permissible inference from the underlying facts in the light most
favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S.
574, 587-88 (1986).
6
(...continued)
retention should apply to each claim.
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Although the court will view all underlying facts and inferences in the light most favorable
to the nonmoving party, the nonmoving party nonetheless must offer some “concrete evidence from
which a reasonable juror could return a verdict in his [or her] favor.” Anderson, 477 U.S. at 256.
Summary judgment is appropriate when the nonmoving party has the burden of proof on an essential
element of his or her case and does not make, after adequate time for discovery, a showing sufficient
to establish that element. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). The nonmoving
party must satisfy this burden of proof by offering more than a mere “scintilla of evidence” in
support of his or her position. Anderson, 477 U.S. at 252. Likewise, conclusory allegations or
unsupported speculation, without more, are insufficient to preclude the granting of a summary
judgment motion. See Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1128 (4th Cir. 1987); Ross
v. Comm’ns Satellite Corp., 759 F.2d 355, 365 (4th Cir. 1985), abrogated on other grounds, 490
U.S. 228 (1989).
III.
Analysis
The four pending motions for summary judgment involve three distinct disputes. First, the
central dispute in this litigation, between CAMC and National Union, is whether the National Union
Policy provides coverage for the underlying settlement paid by CAMC, less any retained amounts.
Second, National Union and Vandalia dispute whether Vandalia’s Hercules Policy provides coverage
for CAMC’s claims, and, if so, whether this coverage is primary or excess coverage. Third, CAMC
and AIG dispute whether AIG violated the UTPA. I will address each of these disputes in turn.
The court begins its analysis of an insurance coverage dispute by giving the terms of the
insurance policy their plain, ordinary meaning. See Mylan Labs. Inc. v. Am. Motorists Ins. Co., 700
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S.E.2d 518, 524 (W. Va. 2010).7 When those terms are “clear and unambiguous, they are not subject
to judicial construction or interpretation.” Id. (internal quotation marks omitted). Where, however,
the language of an insurance policy provision “is reasonably susceptible of two different meanings
or is of such doubtful meaning that reasonable minds might be uncertain or disagree as its meaning,
it is ambiguous.” Id. (internal quotation marks omitted). Whether an insurance contract is
ambiguous is a question of law for the court to decide. Id. Moreover, it is “well-settled law in West
Virginia that ambiguous terms in insurance contracts are to be strictly construed against the
insurance company and in favor of the insured.” Id. (internal quotation marks omitted).
As the Supreme Court of Appeals of West Virginia has stated, in “actions to determine
applicable coverages under a policy of insurance,” an insured plaintiff “must prove both the
existence of an applicable insurance contract and its material terms.” Camden-Clark Memorial
Hosp. Ass’n v. St. Paul Fire & Marine Ins. Co., 682 S.E.2d 566, 574 (W. Va. 2009). “It is only
when the plaintiffs have established a prima facie case of coverage that the burden of production
shifts to the defendants.” Id. Thus the defendant insurer “seeking to avoid liability through the
operation of an exclusion has the burden of proving the facts necessary to the operation of that
exclusion.” Id. (internal quotation marks omitted). Moreover, “[w]here the policy language
involved is exclusionary, it will be strictly construed against the insurer in order that the purpose of
providing indemnity not be defeated.” Id. (internal quotation marks omitted); see also Payne v.
Weston, 466 S.E.2d 161, 166 (W. Va. 1995) (observing that construing ambiguities against the
7
West Virginia’s substantive law applies to this diversity action. See Castillo v.
Emergency Med. Assocs., P.A., 372 F.3d 643, 646 (4th Cir. 2004) (citing Erie R.R. Co. v.
Tompkins, 304 U.S. 66 (1938)).
-9-
insurance company is particularly relevant when “dealing with exceptions and words of limitation”).
A.
Coverage Under the National Union Policy
The question of whether the National Union provides Policy provides coverage for CAMC’s
settlement of the underlying action is the central dispute of this lawsuit. CAMC seeks coverage
under two Sections of the National Union Policy—the Directors and Officers Liability Coverage
Section (the “D&O Section”) and the Employment Practices Liability Section (the “EPL Section”).
National Union denies that CAMC’s claims are covered under any section and relies on both the
coverage language of the Policy as well as several exclusions. National Union further contends that
CAMC’s claims are covered by the Vandalia Hercules Policy rather than the National Union Policy.
1.
Coverage Language of the National Union Policy
For clarity, my analysis of coverage under the National Union Policy consists of two steps.
First, I will consider whether CAMC’s claims fall under the coverage language of either the D&O
Section or the EPL Section (or both). Second, assuming CAMC’s claims constitute a covered
“wrongful act” under at least one of the Sections, I will determine which exclusions, if any, apply.
I turn first to the D&O Section, which provides coverage for “Organization Loss arising from
a Claim . . . for any actual or alleged Wrongful Act of the Organization.” (CAMC’s Mot. Summ.
J. Ex. 1 [Docket 85-1], at 18). “Wrongful Act” is defined, in pertinent part, as “any breach of duty,
neglect, error, misstatement, misleading statement, omission or act by or on behalf of the
Organization.” (Id. at 20.) CAMC asserts that the patients’ negligent supervision claims against
CAMC are a “wrongful act” under the D&O Section. In response, National Union does not
explicitly deny that negligent supervision claims are covered by the language of the D&O Policy.
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Rather, National Union relies on general principles of insurance law, arguing that D&O Policies are
not designed to provide general liability coverage and that negligent supervision claims cannot be
used to trigger insurance coverage that does not otherwise exist.
According to the patients, CAMC negligently breached its duty to its patients by failing to
adequately screen, train, and monitor its employee, and, as a result, that employee molested patients
on at least three occasions. Courts in West Virginia recognize negligent retention and supervision
of an employee as an independent cause of action. See, e.g., McCormick v. West Virginia Dep’t of
Public Safety, 503 S.E.2d 502, 506 (W. Va. 1998). Because CAMC settled the patients’ negligent
supervision claims, with AIG’s permission, before any judicial proceedings were initiated, it would
be inappropriate, if not impossible, for this court to unravel the patients’ underlying negligent
supervision claims against CAMC beyond the description of those claims in the notices provided to
National Union. By the plain language of the D&O Section, CAMC’s negligent supervision of its
employee constitutes “neglect” or a “breach of duty” by the insured organization.
National Union is correct that a party may not rely on an unsupported negligent supervision
claim in a “transparent attempt to trigger insurance coverage by characterizing allegations of
intentional tortious conduct under the guise of negligent activity.” Smith v. Animal Urgent Care,
Inc., 542 S.E.2d 827,834 (W. Va. 2000); see Evanston Ins. Co. v. Radcliff, 2006 WL 328147, at *3
(S.D. W. Va. 2006). Because the patients have identified a factual basis for their negligent
supervision claims, that principle is inapposite here.8 National Union’s reliance on the categorical
8
National Union also fails to acknowledge that much of its cited case law deals with the
interplay between a negligent supervision claim and an intentional act exclusion, which is an
exclusion of an entirely different nature than the bodily injury exclusion at issue here.
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nature of coverage under Directors and Officers Liability Policies generally is similarly misplaced.
The issue is whether CAMC’s claims are covered by the specific language of the D&O Section of
the National Union Policy, not whether such claims fit within the abstract notion of what a “D&O
claim” entails. Moreover, CAMC’s claim appears to be precisely the type of claim covered by the
instant D&O Policy—a claim brought against the Organization based on its breach of an independent
duty. Accordingly, I FIND that the D&O Section provides coverage for CAMC’s claims. Because
I FIND that coverage exists under the D&O Section, I need not consider whether coverage exists
under the EPL Section.
2.
Exclusions Under the D&O Section of the National Union Policy
Having found that CAMC’s claims fall under the coverage language of the D&O Section of
the National Union Policy, I now must consider whether any exclusions apply. Because CAMC has
made a prima facie case for coverage under the D&O Section, the burden now shifts to National
Union to prove that any exclusion operates to deny coverage. National Union contends that two
exclusions apply to CAMC’s claims: (1) an exclusion for claims involving bodily injury and (2) an
exclusion for claims arising out of the performance of medical or professional services.
a.
Bodily Injury Exclusion
The General Terms of the National Union Policy contain several exclusions, including, the
“bodily injury exclusion” which provides that:
The Insurer shall not be liable to make any payment for Loss in connection with a
Claim made against an Insured . . . alleging, arising out of, based upon, attributable
to or in any way involving, directly or indirectly, Bodily Injury or Property Damage.
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(CAMC’s Mot. Summ. J. Ex. 1 [Docket 85-1], at 10.) Bodily Injury is further defined as “physical
injury, sickness or disease (other than emotional distress or mental anguish), including death
resulting therefrom.” (Id. at 7.) National Union argues that CAMC’s claims fall under this exclusion
because the patients alleged bodily injury in their claims against CAMC. CAMC disputes that the
claims in any way involve bodily injury. CAMC further argues that even if the patients’ claims
tangentially involve bodily injury, they are nevertheless covered because CAMC’s negligent
supervision was the “proximate cause” of its losses. CAMC asserts that the court should only
consider the proximate cause of CAMC’s losses, i.e., the alleged negligent supervision, and not any
exclusions that depend on “the nature of the resulting damage.” (Mem. Supp. CAMC’s Mot. Summ.
J. [Docket 86], at 10-13.)
Under West Virginia law, the concept of bodily injury—as opposed to personal injury—is
relatively narrow.9 See Smith, 542 S.E.2d at 831. “The term ‘personal injury’ is broader and
includes not only physical injury but also any affront or insult to the reputation or sensibilities of a
person.” Id. (internal quotation marks omitted). In the present case, it is undisputed that the patients
suffered personal injury. The relevant question is whether they suffered bodily injury as well. The
West Virginia Supreme Court of Appeals has not defined the precise contours of bodily injury, but
it has provided some useful guideposts. Of course, bodily injury is often evident from the face of
the record, such as in cases involving permanent and debilitating physical harm. In other cases, it
is clear that a claimant has suffered solely emotional, rather than bodily injuries. Between these two
9
While not directly relevant to the present case, the West Virginia Code defines “bodily
injury” in the context of criminal law as “substantial physical pain, illness or any impairment of
physical condition.” W. Va. Code § 61-2-9a(f)(1) (2001).
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clear cut examples, a broad spectrum of possible injuries exists, involving some combination of
physical and emotional injuries.
First, there are those injuries which result from physical contact. The West Virginia Supreme
Court has explicitly rejected the “contention that the allegation of ‘physical contact’ in the complaint
is sufficient to trigger the ‘bodily injury’ component of the liability policy.” Smith, 542 S.E.2d at
831, n. 12. Indeed, the Smith Court made clear that physical contact does not necessarily result in
bodily injury. Id. In determining whether a person suffered bodily injury, the inquiry must focus on
the nature of the injuries rather than on the act that resulted in such injuries. Accordingly, National
Union cannot rely solely on the physical contact in this case, but rather must establish that the
patients suffered some actual bodily injury from this contact.
Another type of bodily injury is physical symptoms or manifestations of emotional or mental
injury. West Virginia, like a majority of jurisdictions, has held that purely mental or emotional
injuries, absent some physical manifestation do not “fall within a definition of ‘bodily injury.’”
Smith, at 831. It does not appear from the record, however, that the patients’ alleged “bodily
injuries” were the physical manifestations of emotional injury. Moreover, the bodily injury
exclusion does not include emotional distress or mental anguish. Accordingly, I need not determine
what, if any, physical manifestations of emotional injuries would constitute “bodily injury” under
West Virginia law.
In the present case, the patients were molested by a CAMC employee who touched these
women in a sexual manner and both women suffered emotional injuries as a result. It is less clear
to the court, however, whether either of these women suffered or alleged bodily injury in addition
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to their emotional injuries. Indeed, while the trauma of sexual assault and sexual abuse cannot be
understated, the injuries resulting from a sexual assault are often largely emotional. See Katharine
K. Baker, Gender and Emotion in Criminal Law, 28 Harv. J.L. & Gender 447, 453 (2005) (“It is true
that the harm of rape, unlike that of battery, can be primarily emotional and thus difficult to verify
with objective evidence, but this does not in any way negate its seriousness.”).10 As courts and
legislators in this country have long recognized, rape is “highly reprehensible, both in a moral sense
and in its almost total contempt for the personal integrity and autonomy of the female victim.”
Coker v. Georgia, 433 U.S. 584, 597 (1977). The Supreme Court has emphasized that, “[s]hort of
homicide, it is the ‘ultimate violation of self.’” Id. Clearly, sexual assault victims may suffer
physical injuries in addition to emotional ones, either during an assault or as physical symptoms of
emotional injuries. The patients’ claims against CAMC, however, consist largely of alleged
emotional injury. Since there is no evidence that the alleged “bodily injuries” in this case involve
physical manifestations of emotional injury, National Union must establish that the patients alleged
or suffered some actual bodily injury. As the patients each made distinct allegations, I will consider
National Union’s arguments with respect to each of the patients.
Patient One’s Notice of Claim does not contain any allegation of “bodily injury” aside from
the final phrase which states that she was “otherwise injured in mind and body.” (CAMC’s Mot.
Partial Summ. J. Ex. 2 [Docket 85-2], at 2.) In her deposition, Patient One stated that it “was
uncomfortable” when the employee touched her, but when asked if she had “any residual soreness,
10
As the United States Supreme Court has recognized, even in heinous instances of child
rape, “[r]ape has a permanent psychological, emotional, and sometimes physical impact on the
child.” Kennedy v. Louisiana, 554 U.S. 407, 435 (2008)(emphasis added).
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irritation, [or] discomfort after she left the hospital in her vaginal area,” Patient One explicitly
responded, “[n]o it wasn’t really sore it was just; I would say I could just feel it.” (National Union’s
Mot. Summ. J. Ex. 13 [Docket 77-13], at 5-6.) I FIND that Patient One’s generalized assertions in
her Notice of Claim and her description of her injuries in her deposition are insufficient to establish
that Patient One alleged or suffered “bodily injury”. It is clear from her Notice of Claim and
deposition that Patient One’s injuries were the mental and emotional trauma that she suffered as a
result of being molested. Bearing in mind that National Union, the insurer, has the burden of
demonstrating the applicability of a policy exclusion and that “[w]here the policy language involved
is exclusionary, it will be strictly construed against the insurer,” Camden-Clark Mem’l Hosp. Ass’n,
682 S.E.2d at 574, I FIND that National Union has failed to demonstrate that as a matter of law that
Patient One’s claim falls under the bodily injury exclusion.
Patient Two’s Notice of Claim contains the same general allegations that she was “otherwise
injured in mind and body” and that she suffered from “vaginal burning and irritation for days”.
(CAMC’s Mot. Partial Summ. J. Ex. 3 [Docket 85-3], at 2-3.) In her deposition, Patient Two states
that it “irritated her” and “began to smart” when the nursing assistant touched her. (National Union’s
Mot. Summ. J. Ex. 16 [Docket 77-16], at 6.) When asked if the touching caused pain, Patient Two
responded that it “caused dryness” and that she “grated (phonetic) for three or four days till it
gradually left.” (Id.) National Union also relies on the February 3, 2009 demand letter in which
Patient Two’s attorney states that, “[a]ccording to the nurse’s notes, she [Patient Two] told the nurse
that ‘a male attendant from ER massaged my genitalia, I’m on fire down there.’” (National Union’s
Mot. Summ. J. Ex. 3 [Docket 77-3], at 6.) As Smith made clear, allegations of physical contact do
not necessarily result in bodily injury. Patient Two complains of irritation and minor physical
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discomfort, and National Union has failed to provide sufficient evidence or argument that these
allegations relate to “bodily injury” under the policy. Accordingly, while Patient Two’s claims
present a closer case than Patient One’s, I nevertheless FIND that National Union has failed to carry
its burden of demonstrating that Patient Two’s claim falls under the bodily injury exclusion.
b.
The Medical and Professional Services Exclusion
National Union also argues that CAMC’s claims fall under the “medical and professional
services exclusion” found in Endorsement Number 9, which operates to exclude coverage for claims
“alleging, arising out of, based upon or attributable to the Insureds performance or rendering of or
failure to perform or render medical or other professional services or treatments for others.”
(CAMC’s Mot. Partial Summ. J. Ex. 1 [Docket 85-1], at 104-106.) Under National Union’s theory,
CAMC’s claims are excluded because CAMC’s employee molested the patients while providing
professional services, including placing electrodes on a patient and attending to the “toileting” of
another patient. (National Union’s Mem. Supp. Mot. Summ. J. [Docket 78], at 13.) National Union
further argues that CAMC’s claims fall under this exclusion because the claims were brought and
settled under the West Virginia Medical Professional Liability Act. In response, CAMC argues that
the patients’ claims, which were “premised entirely on allegations of a non-medical nature in the
hiring, employing, and retention of the nursing assistant,” did not involve the “performance or
rendering of a medical or professional service” to the patients. (CAMC’s Mem. Opp. National
Union’s Mot. Summ. J. [Docket 87], at 11-12.) CAMC contends that this exclusion applies only to
claims asserting some breach of a standard of medical care in the performance of a medical act and
notes that the patients “expressly disavowed that they were making any claim for the breach of a
standard in the performance of medical care.” (Id.)
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In this case, it is clear that CAMC’s claims do not allege, arise out of, or rely on CAMC’s
performance or rendering of or failure to perform or render medical or other professional services.
Clearly, the patients received medical treatment while at CAMC and CAMC’s employee
undoubtedly provided some of this treatment. The claims here, however, do not involve any
treatment of the patients (or lack thereof). Rather, these claims are based on the employee’s
intentional and offensive acts, independent of any treatment or medical service that he may have
been providing. CAMC’s employee was not providing any type of medical or professional service
when he molested these women and the claim documents explicitly disclaim any medical negligence
or other claim relating to the performance of medical or professional services. Furthermore, the fact
that the patients filed notices of their claims under the West Virginia Medical Professional Liability
Act is not dispositive. Each patient explicitly disclaimed that her claim fell under the Act and
provided CAMC with notice only as a precautionary measure. Indeed, it appears that the patients’
claims would not fall under the Act, which “recognizes a health care provider’s legal responsibility
for damages, in tort or in contract, to a person who has sustained injuries or death as a result of such
provider’s provision of, or failure to provide, health care services to a patient.” Osborne v. U.S.,
567 S.E.2d 677, 682 (W. Va. 2002) (emphasis added). I FIND that National Union has failed to
demonstrate that CAMC’s claims fall under the “medical and professional services” exclusion.
Having found that the D&O Section of the National Union Policy provides coverage for
CAMC’s claims and having further found that National Union has failed to persuade the court that
any exclusions operate to deny coverage, I FIND that CAMC’s claims are covered by the National
Union Policy. Accordingly, CAMC’s Motion for Partial Summary Judgment against National Union
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[Docket 85] is GRANTED. National Union’s Motion for Summary Judgment against CAMC
[Docket 77] is DENIED.
B.
Coverage Under the Vandalia Hercules Policy
I now turn to National Union’s Motion for Summary Judgment on its Third-Party Complaint
declaratory judgment claim against Vandalia. National Union asserts that the Vandalia Hercules
Policy, rather than the National Union Policy, provides coverage for CAMC’s claims. Vandalia
contends that CAMC’s claims are not covered by the Hercules Policy.
I first note that it is far from clear to this court what, if any, actual controversy actually exists
between National Union and Vandalia. The coverage dispute between National Union and CAMC
is clear, just as any coverage dispute between CAMC and Vandalia over whether coverage existed
under the Hercules Policy would be. These are contract disputes between respective parties to the
contracts. There is, however, no contractual relationship between National Union and Vandalia.
National Union seeks to defend itself against CAMC by pointing the finger elsewhere for coverage.
Even if the Hercules Policy provided primary coverage for CAMC’s claims, National Union has
provided no legal support for the proposition that the possibility of coverage under another policy
held by CAMC with another insurance company creates a live and justiciable controversy between
the two respective insurance carriers.
My observations on this point, are, however, moot, as I have already determined that the
National Union Policy provides coverage for CAMC’s claims. As previously discussed, the
Hercules Policy provides three “Groups” of coverage. National Union contends that CAMC’s claims
fall under Group I and Group III of the Hercules Policy, which provide primary coverage. Group II
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of the Hercules Policy, provides coverage for “Directors and Officers Liability, Employment
Practices Liability and Fiduciary Liability,” in excess of the underlying insurance policies which
provide coverage for the same categories of losses. As explained above, I have determined that the
D&O Section of the National Union Policy does in fact cover CAMC’s claim. See supra Part III.A.
In light of this ruling and the terms of the Hercules Policy, CAMC’s losses would fall under Group
II rather than Group I or Group III of the Hercules Policy. Group II, however, provides excess
coverage, and nothing in the record suggests that CAMC has exhausted the underlying insurance
policies or triggered coverage under Group II of the Hercules Policy. (Third-Party Pl. National
Union’s Mot. Summ. J. Ex. 1 [Docket 79-1], at 25.) Accordingly, National Union’s Motion for
Summary Judgment on its Third-Party Complaint against Vandalia is DENIED.
C.
West Virginia Unfair Trade Practices Act Claims Against AIG
Finally, having determined that coverage exists for CAMC’s claims under the National Union
Policy, I now turn to the third dispute involving CAMC’s UTPA claims against AIG. In its
Complaint, CAMC asserted that National Union and AIG violated various provisions of the UTPA.
CAMC relies on correspondence in the record and deposition testimony in support of its allegations.
AIG has moved for summary judgment on these claims and asserts that there are no genuine issues
of material fact with respect to AIG’s liability for any of these alleged violations.11
11
I note that National Union has not moved for summary judgment on CAMC’s UTPA
claims. AIG’s unsupported assertion in a footnote that “[o]bviously CAMC cannot assert that
both AIG Domestic Claims and National Union are liable under the UTPA for AIG Domestic
Claims’ claim processing,” is inaccurate. (AIG’s Mem. Supp. Mot. Summ. J. [Docket 76], at
11.) CAMC may not “double recover” by asserting claims against both AIG and National Union
for the same action, however it is possible that, in the processing of CAMC’s claims, National
Union and AIG each independently violated the UTPA. Accordingly, CAMC’s UTPA claims
(continued...)
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With respect to the specific UTPA claims against AIG at issue here, CAMC asserts that AIG
violated West Virginia Code subsections 33-11-4(9)(a), (b), (d), (e), (f), (g), and (h) of the UTPA,
which provide as follows:
No person shall commit or perform with such frequency as to indicate a general
business practice any of the following:
(a) Misrepresenting pertinent facts or insurance policy provisions relating to
coverages at issue;
(b) Failing to acknowledge and act reasonably promptly upon communications
with respect to claims arising under insurance policies; . . .
(d) Refusing to pay claims without conducting a reasonable investigation
based upon all available information;
(e) Failing to affirm or deny coverage of claims within a reasonable time after
proof of loss statements have been completed;
(f) Not attempting in good faith to effectuate prompt, fair and equitable
settlements of claims in which liability has become reasonably clear;
(g) Compelling insureds to institute litigation to recover amounts due under
an insurance policy by offering substantially less than the amounts ultimately
recovered in actions brought by the insureds, when the insureds have made
claims for amounts reasonably similar to the amounts ultimately recovered;
(h) Attempting to settle a claim for less than the amount to which a reasonable
man would have believed he was entitled by reference to written or printed
advertising material accompanying or made part of an application;
W. Va. Code §§33-11-4(9)(a)-(h). Under West Virginia law, determinations of whether an insurer
has violated certain subsections of the UTPA are normally left to the jury. See, e.g., Hicks v. Jones,
617 S.E.2d 457, 465 (W. Va. 2005) (stating that the determination of a “fair and equitable”
settlement under W. Va. Code § 33-11-4(9)(f) is “ordinarily one of fact for the jury.”); Jackson v.
State Farm Mut. Auto Ins. Co. , 600 S.E.2d 346, 354 (W. Va. 2004) (stating that a determination of
11
(...continued)
against National Union remain pending.
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whether an insurer refused to pay a claim without conducting reasonable investigation under W. Va.
Code § 33-11-4(9)(d) is ordinarily for the jury.). Moreover, CAMC has identified factual support
in the record, including correspondence between AIG and CAMC employees and deposition
testimony, in support of its claims that AIG misrepresented insurance policy provisions relating to
coverage, failed to affirm or deny coverage within a reasonable time after CAMC submitted proof
of loss, and offered substantially less than the amount ultimately recovered in the present action.
Accordingly, I FIND that CAMC’s UTPA claims present genuine issues of material fact that require
resolution by a jury. Accordingly, AIG’s Motion for Summary Judgment is DENIED.
V.
Conclusions
For the foregoing reasons, AIG’s Motion for Summary Judgment [Docket 75] is DENIED.
National Union’s Motion for Summary Judgment against CAMC [Docket 77] is DENIED. National
Union’s Motion for Summary Judgment against the third-party defendant, Vandalia [Docket 79] is
DENIED. CAMC’s Motion for Partial Summary Judgment against National Union [Docket 85] is
GRANTED.
The court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER:
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June 1, 2011
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