Opinion ID: 221278
Heading Depth: 1
Heading Rank: 4

Heading: professional liability limitation

Text: This endorsement modifies insurance provided under the following: Commercial Catastrophe Liability Insurance (Big Shield Policy) With respect to Professional liability arising out of any Insured's activities as a(n) Nursing Facilit[y] this policy is limited to the coverage provided in the Underlying Insurance. If coverage is not provided by Underlying Insurance, coverage is excluded from this policy. . . . Lexington's first layer excess policy is the underlying insurance contemplated here. The gravamen of the Estate's claim is that Royal's policy followed form to the Lexington policy in all respects, and because Lexington had a broad duty to defend under its own policy and was obligated to pay all premiums on appeal bonds, that Royal likewise was obligated to defend and participate in bonding the jury's award on appeal. [4] This is mistaken. As the district court correctly observed, nothing in the Royal policy suggests that it follows form as to all terms and conditions in the Lexington policy. Rather, the Professional Liability Limitation endorsement is the only term that contains a follow form provision, and it specifies that the Royal policy will follow form to the Lexington policy [w]ith respect to `professional liability' arising out of Mariner's operations at the Indianola nursing home. A review of the Lexington policy's corresponding Medical Professional Liability Coverage endorsement reveals no reference to a defense obligation. Thus, in the absence of a duty to defend under the Lexington policy's relevant endorsement, Royal's defense obligation, if any, must be determined by reference to the default terms of the Big Shield policy. And, as that policy provided, Royal's duty to defend only arose after [t]he applicable limits of the `underlying insurance' and other insurance have been used up in the payment of judgments or settlements. . . . (emphasis added). Contrary to the Estate's claim, the mere entry of a judgment that exceeded the limits of the underlying insurance was insufficient to trigger Royal's defense duty. Instead, Royal's policy required actual payment that exhausted Mariner's self-insured retention and Lexington's policy limits. That condition never occurred prior to Mariner's settlement with the Bradley estate. As such, Royal did not have a duty to post an appellate bond or otherwise defend its insured in the underlying state lawsuit. 2 Unlike the duty to defend, which can be determined at the beginning of a lawsuit, an insurer's duty to indemnify generally cannot be ascertained until the completion of litigation, when liability is established, if at all. See Barden Miss. Gaming LLC v. Great N. Ins. Co., 576 F.3d 235, 239-40 (5th Cir.2009); see also VRV Dev. L.P. v. Mid-Continent Cas. Co., 630 F.3d 451, 459 (5th Cir.2011) ([A]n insurer's duty to indemnify typically can be resolved only after the conclusion of the underlying action.) (applying Texas law). This is because, unlike the duty to defend, which turns on the pleadings and the policy, the duty to indemnify turns on the actual facts giving rise to liability in the underlying suit, and whether any damages caused by the insured and later proven at trial are covered by the policy. See Columbia Cas. Co. v. Ga. & Fla. RailNet Inc., 542 F.3d 106, 111 (5th Cir.2008) (applying Texas law); see generally 14 COUCH ON INSURANCE § 200:3; 3 NEW APPLEMAN ON INSURANCE LAW LIBRARY EDITION § 17.01[1][b][ii]. Thus, in determining whether Royal or Lumbermens had any duty to indemnify Mariner, we look to the actual facts put forward at trial that established Mariner's liability in the state lawsuit. [5] At the outset, we note that there were two Royal policies in effect, and three Lexington policies in effect, at different times during Bradley's February 2000 to May 2002 stay at the Indianola nursing home. [6] The Estate sought summary judgment based on the Royal policy in effect from March 1999 to March 2000, and the Lumbermens policy in effect from March 1998 to March 2001. Obviously, a significant portion of Bradley's 27-month residency fell outside the coverage periods for these specific policies. The Estate argued below, as it does here, that Bradley's injuries were of a continuing nature and that under the terms of the Lexington policy's professional liability endorsement, the entire 27-month span of Bradley's stay was to be considered a single medical incident. The Estate elected, its argument goes, to submit its claim under that combination of policies that offered the greatest coverage limits at any single point during Bradley's residency. [7] Unsurprisingly, Royal and Lumbermens take issue with the claim that Bradley's injuries should be characterized as one continuous medical incident. Both excess insurers note that the injuries that immediately preceded Bradley's deathacute dehydration, a broken femur, and an untreated urinary tract infectionoccurred in April and May 2002, well outside either of Royal's or Lumbermens' policy periods. And, the insurers argue, the jury's compensatory and punitive damages awards were based on these three injuries specifically; not a finding of continuing negligence. The Lexington medical professional liability endorsement is indeed the correct benchmark for assessing Royal's duty to indemnify Mariner. This is because, as all parties agree, Royal's excess policy follows form to the Lexington policy with respect to professional liability. The Lexington policy provides: I. COVERAGEMEDICAL PROFESSIONAL LIABILITY 1. The Company [Lexington] will pay on behalf of the Insured [Mariner] that portion of ultimate net loss in excess of the Self-Insured Retention which the Insured shall become legally obligated to pay as Damages which occur during the policy period, resulting from a medical incident arising out of the following professional services provided by the Insured to any person at any pharmacy or facility owned, managed or operated by the Named Insured in Item # 1 of the Declarations: a) medical, surgical, dental or nursing treatment to a patient, including the furnishing of food or beverage in connection therewith; b) furnishing or dispensing of drugs or medical, dental or surgical supplies or appliances if the personal injury occurs after the Insured has relinquished possession thereof to others; . . . Any such rendering of or failure to render the above described professional services, together with all related acts or omissions in the furnishing of such services to any one patient resulting in a claim shall be considered as arising out of one medical incident. (emphasis in original). The Estate relies on this provision, coupled with its assertion that it put on evidence at trial demonstrating Mariner's negligence throughout Bradley's 27-month stay, for the proposition that the jury's verdict included the specific Royal and Lumbermens policy periods in issue. The record suggests otherwise. The state trial record shows that the claims submitted to the jury related exclusively to the injuries that Bradley suffered in the weeks before her death (i.e., dehydration, a broken femur, and a severe urinary tract infection). [8] The trial court restricted expert testimony to the April-May 2002 time frame, and the Estate's medical expert on causation, as well as Bradley's attending nurse practitioner, limited their testimony to this time frame accordingly. While the Estate did present some evidence of Mariner's general negligence that occurred throughout the term of Bradley's stay, in the form of insufficient staffing and charting irregularities, this evidence could not have supported the jury's liability findings or damages awards. This is because the trial court charged the jury with finding that for medical liability to attach, there had to be a causal relationship between Mariner's wrongful conduct and Bradley's injuries. And the only evidence providing a nexus between Mariner's wrongful conduct and actual harm to Bradley related to conduct that occurred in April and May 2002. Lexington's first layer excess policy unambiguously limits indemnity to those damages resulting from medical incidents which occur during the policy period. And because the Royal and Lumbermens policies follow form to the Lexington policy with respect to medical professional liability, Royal and Lumbermens only had a duty to indemnify Mariner for those damages that occurred within their respective policy periods. Here, those policy periods ran from March 1999 to March 2000, and March 1998 to March 2001, for Royal and Lumbermens, respectively. Because the actual facts giving rise to liability in the underlying suit occurred outside of Royal's and Lumbermens' policies, neither excess insurer had a duty to indemnify Mariner for the judgment or settlement in the underlying state suit. There being no duty to indemnify, there could no breach in denying coverage. See A & S Trucking Co. v. First General Ins. Co., 578 So.2d 1212, 1218 (Miss.1991). The Estate's bad faith action fails as a matter of law.