Opinion ID: 63263
Heading Depth: 2
Heading Rank: 2

Heading: Temporal Stacking

Text: Thus, we turn to the stacking issues. Stacking refers to the concept of taking policy limits from multiple, but not overlapping, policies potentially covering the same lawsuit and adding those limits together. Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 854-55 (Tex. 1994). In Garcia, the Texas Supreme Court considered what coverage limit to apply when there are consecutive policies covering distinct policy periods and a claim occurrence extends throughout multiple policy periods. The court held that the coverage limits could not be `stacked' to multiply coverage for a single claim involving indivisible injury such that the coverage limit would be the sum of the limits provided by the applicable policies. [9] Id. at 853-54. Instead, when a single occurrence triggers more than one policy, covering different policy periods, ... the insured's indemnity limit should be whatever limit applied at the single point in time during the coverage periods of the triggered policies when the insured's limit was highest. Id. at 855. The parties in this case do not dispute the validity of Garcia' s anti-stacking rule. Rather, they disagree about whether the liability arising from Mrs. Carr's suit involved a single covered event or multiple discrete covered events. Under Garcia' s rule, if the negligence at the nursing home constituted a single covered event, it would trigger only one coverage limit. But if the negligence consisted of multiple, discrete covered events, each such event would trigger its own separate coverage limit. In answering this question, we begin with the policy language. The Royal policies cover medical incidents and define a medical incident as any act or omission: a. In the providing of or failure to provide professional health care services to your patients, including: (1) The providing or dispensing of food, beverages, medications or medical supplies or appliances in connection with such services; .... They further state that [a]ll related `medical incidents' arising out of the providing of or failure to provide professional health care services to any one person shall be considered one `medical incident.' The Evanston policy likewise provides that its Professional Liability coverage insures sums the Insured shall become legally obligated to pay as damages because of malpractice arising out of the rendering of, or failure to render, ... the following professional services in the Named Insured's ..., nursing home ...: medical ... or nursing treatment to a patient, including the furnishing of food or beverages in connection therewith. It further states that [t]wo or more claims arising out of a single act, error, omission or occurrence or a series of related acts, errors, omissions, or occurrence[s] shall be treated as a single claim. [10] The key word in both of these policies is the same: related. Under both policies, a series of multiple incidents becomes a single continuing incident or occurrence only if they are related. [11] Although the policies do not further clarify the meaning of related, a Texas appellate court has construed the term in a similar insurance contract to mean having a logical or causal connection. Columbia Cas. Co. v. CP Nat'l, Inc., 175 S.W.3d 339, 347 (Tex. App.Houston [1st Dist.] 2004, pet. denied). In this case, the district court considered summary judgment evidence consisting of the pleadings, trial transcript, and jury findings of the underlying suit, and concluded that the negligent acts at the nursing home were related. [12] Mrs. Carr's complaint alleged serious bodily injuries which were proximately caused by the continuing negligence of the insureds. 345 F.Supp.2d at 667-68. Elsewhere it referred to the nursing home's continuing course of repeated negligence. Id. at 668. The court summarized: [T]he plaintiff's theory in the underlying suit, a theory upon which she prevailed, was that Mr. Carr was injured by a series of acts and omissions that were related, having both causal connections ( i.e., the pattern of negligence was caused by management's focus on cutting costs) and logical connections ( i.e., all of the relevant acts/omissions are logically connected to the concept of professional nursing home care, to which Mr. Carr was entitled). Id. Thus, while one could argue that each day the nursing home committed an act of negligence in failing to properly feed or treat Mr. Carr, these events are all related. North American points out that Mr. Carr's problems began with poor nutritional care, followed by a shoulder injury, which led to mobility problems, which led to sores, skin ulcers and similar conditions. While North American contends these are discrete events, they all stemmed from a pattern of neglect and incompetence. Indeed, as noted above, the district court concluded that the Carrs' theory of the case in its complaint, continuing into its presentation of evidence at trial, was one of a continuing pattern of neglect, not a series of discrete events. [13] In this appeal, North American has not pointed to any specific evidence showing discrete, unrelated injuries leading to discrete damages with individualized, unrelated damages. Rule 56 does not impose upon the district court a duty to sift through the record in search of evidence to support a party's opposition to summary judgment. Nor is it our duty to do so on appeal. Stults v. Conoco, Inc., 76 F.3d 651, 657 (5th Cir. 1996) (citations omitted). We conclude that Garcia applies to prevent North American from temporally stacking the policies for indemnity purposes. Under Garcia, the insured (and North American as its equitable subrogee) is entitled to whatever limit applied at the single point in time during the coverage periods of the triggered policies when the insured's limit was highest. Garcia, 876 S.W.2d at 855. In this case, that is $1 million.
The policies in question are eroding policies. Liability insurance policies often have two components: defense and indemnity. In many liability policies, the policy limits refer only to the indemnity obligation (i.e., the duty to pay covered claims), and the obligation to defend a liability suit is not capped by the policy limits. In an eroding policy, by contrast, the insurer's payments to defense counsel to defend the liability suit count against the policy limits. Westchester Fire Ins. Co. v. Admiral Ins. Co., 152 S.W.3d 172, 192 (Tex.App.Fort Worth 2004, pet. denied). For example, if the eroding policy limits are $10,000, and the insurer pays $10,000 in reasonable defense fees, the policy limits for that occurrence are exhausted. Thus, in the Garcia case, the focus of the inquiry was the indemnity obligation, because the duty to defend did not have a policy limit. Here, the three policies do have a limit on defense costs because those costs, including attorneys' fees, are included in the per medical incident limits. North American argues that even if the Garcia anti-stacking rule applies to prevent stacking for indemnity purposes, it should allow stacking for defense purposes. North American cited no cases for this proposition and acknowledges that there are few cases nationwide addressing eroding policies at all, much less in the context of stacking. It suggests, then, that even if Garcia requires the insured to select one policy under which obligations would be measured, we should allow the insured to select one policy for indemnity and another for defense, because of the eroding nature of the policies. North American makes two arguments in support of this contention, unsupported by any precedent. First, North American argues that fairness dictates that the insured should get the benefit of having paid multiple premiums over the years. This argument would make sense if the Carr family were the only potential claimant in any of those years. But insurance is purchased to cover unintended, unexpected events, few or many, year after year. An insured who buys car insurance every year for twenty-five years and never has an accident is not entitled to a refund of premiums. He received what he bargained for  insurance for each year. Here, we have no information about other claimants, but it matters not whether they were few or many. The nursing home bargained for insurance year after year, and it received that insurance. If what it wanted was more coverage each year, it could obtain that by paying more  as it did by buying the excess policies for two of the three years. If it wanted higher primary policy limits, it could obtain that by paying more for increased coverage. What it did instead was insure itself temporally under policies providing that related incidents involving one injured person constitute one claim, whether year after year or within one year. Even more importantly, if the insured wanted a policy that had an unlimited defense obligation, rather than an eroding one, it should have contracted for such a policy. North American's argument would actually give the nursing home the benefit of an additional $1 million in defense costs coverage, despite its failure to contract for that coverage. Thus, the fairness argument is unpersuasive. [14] North American makes a second argument directed only at the Royal policies, citing the following policy language: The limits of this Coverage Part apply separately to each consecutive annual period and to any remaining period of less than 12 months, starting with the beginning of the policy period shown in the Declarations, unless the policy period is extended after Issuance for an additional period of less than 12 months. In that case, the additional period will be deemed part of the last preceding period for purposes of determining the Limits of Insurance. North American argues that this language permits the limits to restart each year on a continuing medical incident, despite specific policy language to the contrary. Interpretation of insurance contracts in Texas is governed by the same rules as interpretation of other contracts. ... [W]hen a contract provision makes a general statement of coverage, and another provision specifically states the time limit for such coverage, the more specific provision will control. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133-34 (Tex. 1994). Here, the policy specifically provides that all related medical incidents constitute one incident. The more general language quoted above does not purport to change this specific limitation; instead, it explains what generally happens to policy limits, including aggregate limits, if a policy is renewed or extended for an additional year or subset thereof. Thus, this language does not start a new limit of liability running in favor of the insured on the same medical incident.