Court Opinion

ID: 7318780
Source: CourtListenerOpinion
Date Created: 2022-07-25 21:10:33.00266+00
Date Added: 2024-06-11T16:19:44.578771
License: Public Domain

BRODY, J.A.D.,
dissenting.
The dispute between these two carriers is over which must pay the excess loss after the doctor’s $200,000 malpractice policy has been exhausted. Chubb contends Commercial should pay on its excess policy that covers “the ultimate net loss” to the doctor. Commercial contends that recourse must first be had to the coverage afforded the doctor as an individual under Chubb’s corporation policy. The parties have presented us with a single issue to decide: does the coverage afforded an individual doctor in the corporation policy include coverage for his malpractice. In my view it does not and therefore I must dissent.
The corporation policy covers the corporation for its vicarious liability stemming from the malpractice of “any person for whose act or omission the corporation insured is legally respon*81sible.” The policy also affords coverage to the doctor individually as an “executive officer, director or shareholder [of the corporation] while acting within the scope of his duties as suck ____” (Emphasis added.) That provision covers the doctor for administrative negligence, not malpractice.1 Sherman v. Ambassador Ins. Co., 670 A.2d 251, 256-257 (D.C.Cir.1981).
Commercial contends that a clause that excludes “liability for his personal acts of a professional nature” from liability coverage for administrative negligence has the effect of providing the doctor malpractice coverage where none exists elsewhere in the policy. This contention is illogical and contrary to “the basic principle that exclusion clauses subtract from coverage rather than grant it.” Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247 (1979) (emphasis in original).
Even if we were free to interpret the exclusionary clause to grant malpractice coverage, the interpretation urged upon us and adopted by the majority is strained. “Personal acts of a professional nature” means “malpractice,” not “malpractice upon private patients” as distinguished from corporation patients. There is no evidence that this pediatrician treated patients privately outside the corporate practice. The policy in Sherman also had an exclusion for “personal acts or omissions of a professional nature” yet the court limited the corporation policy to cover the doctor for administrative negligence only. Acts are “personal” when they are not performed “while acting within the scope of his duties” as an executive officer, director or stockholder.
*82I see no material basis for distinguishing Sherman. The district court found in that case that the doctor negligently performed an abortion as an employee of the insured Columbia Family Planning Clinic, P.C., a corporation he headed. Id. at 253.
Chubb’s corporation policy turns out to be quite a bargain thanks to the majority opinion. The doctor paid Chubb an annual premium of $502 for $200,000/$600,000 malpractice insurance provided by his individual policy. The corporation policy now affords him virtually the same coverage together with coverage for administrative negligence and also covers the corporation in the amount of $200,000/$600,000 for its liability as a result of his malpractice — all for an annual premium attributed to the doctor of $31. This extraordinary departure from the reasonable expectation of the parties is a signal that something is very wrong with Commercial’s position which the majority has now embraced.
In their opinion, supra at pp. 76-77, the majority find the result below unjust on a mistaken view of the law of primary and secondary liability coverage. Where one liability policy covers an employee for his own negligence and another covers his employer for the same negligence, the employee’s policy must first be exhausted before the employer’s carrier may be called upon to pay. This reflects the common-law rule that a negligent employee must indemnify his employer whose liability is only vicarious. Maryland Cas. Co. v. N.J. Mfrs. &c., Ins. Co., 48 N.J.Super. 314, 327-328 (App.Div.1958), aff’d 28 N.J. 17 (1958). Here that indemnification is implemented by a clause in the corporation policy wherein Chubb is “subrogated to all the insured’s rights of recovery ... against any person____”
In my view if Chubb had paid the injured party in response to the corporation’s vicarious liability coverage, it would be entitled to indemnification from Commercial for so much of the payment as exceeded the doctor’s basic malpractice coverage *83under Chubb’s individual policy. To avoid a “circuity of action,” the Chubb policy covering the doctor individually for malpractice and Commercial’s excess policy which expands his individual malpractice coverage must pay the injured party before the Chubb corporation policy is called upon to pay for the corporation’s vicarious liability. See Maryland Cas. Co. v. N.J. Mfrs. &c., Ins. Co., supra, at 328. The majority’s strained reading of Chubb’s corporation policy unfairly shifts to Chubb the obligation Commercial undertook when it wrote the doctor’s excess liability policy.
I would affirm.

Administrative negligence is a recognized category of negligence distinct from vicarious liability and from liability for directly causing injury to another. See discussion of administrative negligence in Schultz v. The Roman Catholic Archdiocese of Newark, 95 N.J. 530 (1984), a case involving an employer's allegedly negligent hiring. The majority opinion creates confusion by using the mislabel "administrative malpractice,” supra at 75. I agree with the majority that the judge erred when he concluded that the individual coverage provided the doctor in the corporation policy is for vicarious liability.