Court Opinion

ID: 9753326
Source: CourtListenerOpinion
Date Created: 2023-08-28 19:08:01.157148+00
Date Added: 2024-06-11T07:27:34.109102
License: Public Domain

OPINION OF THE COURT

PAPADAKOS, Justice.
This appeal as of right arises from a declaratory judgment action filed by Appellant, American Casualty Company of Reading, PA (American Casualty) against PHICO Insurance Company (PHICO) and the Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund (the CAT Fund); Sharon DiRienzo, and David and Suzanne Richard, as parents and natural guardians of Christopher Richard, and in their own right, were joined as potentially interested parties. The action was filed initially in the Commonwealth Court of Pennsylvania, invoking that court’s original jurisdiction. It was decided by the court on four motions: PHICO’s motion for summary judgment, American Casualty’s cross-motion for summary judgment, the CAT Fund’s application for summary relief, and American Casualty’s cross-application for summary relief.
The Commonwealth Court on January 24, 1992, entered a summary judgment in favor of PHICO and denied American Casualty’s motion for summary judgment. They also granted the CAT Fund’s application for summary relief, in part, and *298denied American Casualty’s cross-application for summary relief.
The facts of this case are not in dispute. David and Suzanne Richard filed a suit for damages against Sharon DiRienzo and several other defendants in the Montgomery County Court of Common Pleas (the Richard action). That suit has been settled for an amount in excess of two million dollars. The Richards, in their own right and acting as parents and natural guardians of Christopher Richard, alleged that DiRienzo was negligent in providing nursing care and treatment at the time Suzanne Richard was about to give birth to Christopher on January 29 and 30, 1988. At that time, DiRienzo was acting in the course and scope of her employment by Bryn Mawr Hospital as a delivery room nurse. The Richards claimed that, as a result of DiRienzo’s conduct, severe and permanent brain damage was sustained by Christopher, and that pain and suffering and expenses were inflicted upon David and Suzanne Richard. The complaint further alleged that Bryn Mawr Hospital was liable to the Richards as the employer of DiRienzo and also because of its own negligence.
At the time of the alleged negligence, DiRienzo was covered by three policies of insurance which were applicable to the claims set forth in the Richard action. American Casualty had issued to DiRienzo a Professional Nurse’s Liability Policy, No. NS03807436 (American Casualty policy). That policy was subject to a limit of $1,000,000.00. The policy covered both DiRienzo’s professional and non-business activities. American Casualty contends that its policy specifically stated in its “other insurance” clause that, in effect, it provided excess insurance only. DiRienzo páid an annual premium of $58.00 for the policy.
PHICO issued two policies of insurance to Bryn Mawr Hospital which afforded coverage to DiRienzo by virtue of her status as an employee there. A Health Care Provider’s Comprehensive Liability Policy (No. HP2001), provided Institutional Professional Liability Coverage (Coverage C) for the hospital’s professional employees, other than physicians, for *299liability arising out of rendering or failure to render professional services (the PHICO Primary Policy). The “other insurance” clause in the PHICO Primary Policy stated that its coverage was primary. The limit of that policy was $200,-000.00, which covered DiRienzo as a professional employee of the hospital.
Coverages A, B, D and E in Phico’s Primary Policy do not apply to DiRienzo in this case and are not at issue. The premium for the PHICO Primary Policy was $121,563.00 for the period of two months and ten days for which PHICO has provided such information (November 20,1987 through February 1, 1988). During the same period, the portion of the premium attributable to Coverage C, “Institutional Professional Liability,” was $63,643.00..
PHICO also issued to Bryn Mawr Hospital a second policy (No. EP2001) (the PHICO Excess Policy) which provided for DiRienzo, as a professional employee of Bryn Mawr Hospital, excess “Professional Liability” coverage with a $10,000,000.00 limit. The PHICO Excess Policy consisted of two parts: Coverage A, titled “Professional Liability,” which was the only coverage applicable to DiRienzo in this case, and Coverage B, titled “Umbrella Liability.” Umbrella Liability coverage, however, is not at issue in this matter because that coverage expressly excluded insurance for liability arising from professional services. The premium for the Phico excess policy, for the period of two months and ten days (November 20, 1987 through February 1, 1988) was $120,188.00, of which amount $105,119.00 applied to Coverage A, “Professional Liability,” while $15,069.00 applied to Coverage B, “Umbrella Liability.”
The Health Care Services Malpractice Act, 40 P.S. § 1301.101, et seq. (the Act) covers up to $1,000,000.00 any “health care provider” as defined in the Act with respect to his or her professional liability.
In its petition for this declaratory judgment action, American Casualty asserted, at Count I, that its policy provided only excess insurance for DiRienzo; that PHICO’s Primary Policy provided for her primary coverage; and that PHICO’s Excess *300Policy applied concurrently—on a pro rata basis—with coverage of American Casualty and in excess of the amounts collectible by DiRienzo under the PHICO Primary Policy and from the CAT Fund.
At Count II, American Casualty asserted that DiRienzo was a “health care provider”; that therefore the CAT Fund must provide for her coverage as required by the Act up to $1,000,-000.00; that the American Casualty Policy was excess insurance -within the meaning of Section 705(a) of the Act; and that only in the event the coverage owed DiRienzo by PHICO under its primary policy and by the CAT Fund were inadequate, American Casualty and PHICO, under their excess policies, would be required to indemnify her as excess co-insurers on a pro-rata basis.
On April 19, 1991, PHICO moved for summary judgment contending that American Casualty’s policy provided primary coverage for DiRienzo, that PHICO’s Primary Policy was excess or co-primary insurance with American Casualty’s policy and that PHICO’s excess policy was excess over the other two policies.
American Casualty filed a cross-motion for summary judgment asserting that its coverage was in excess of coverage under PHICO’s primary policy and that the responsibility for the sums covered under both PHICO’s excess policy and the American Casualty policy should be prorated in accordance with the limits of those policies.
The CAT Fund filed an application for summary relief seeking a declaration that DiRienzo was not a “health care provider” and that the American Casualty policy was not excess insurance within the meaning of the Act. American Casualty filed a cross-application for summary relief seeking a declaration that DiRienzo qualified as a “health care provider” and that its policy was excess insurance under the Act and that therefore the CAT Fund’s $1,000,000.00 coverage must be exhausted before the American Casualty policy is triggered.
The Commonwealth Court granted PHICO’s motion for summary judgment and denied American Casualty’s cross-*301motion, ruling that the policy of American Casualty would be triggered as a residual primary policy upon exhaustion of the $200,000.00 limit of the PHICO primary policy; that the PHICO Excess Policy would apply as excess insurance over that provided by the PHICO Primary Policy and the American Casualty policy, and over coverage provided by the CAT Fund; that DiRienzo was not a “health care provider” within the meaning of the Act; that the American Casualty policy was not excess insurance within the meaning of Section 705(a) of the Act; and that, although not a “health care provider,” DiRienzo is entitled to $1,000,000.00 coverage by the CAT Fund because she was an employee of a hospital. This appeal followed.
The Commonwealth Court, in their opinion, first considers American Casualty’s “other insurance” clause and compares it to the “pro rata” other insurance clause in PHICO’s excess policy. American Casualty’s “other insurance” clause provides as follows:
If you have other insurance which applies to the loss, the other insurance must pay first. It is the intent of this policy to apply to the amount of loss which is more than the limit of liability of the other insurance. We will not pay more than our limit of liability.
(See, 145 Pa.Cmwlth. 184, 602 A.2d 904, at 907).
The Commonwealth Court agreed with PHICO’s argument that this clause did not convert American Casualty’s liability coverage from primary to excess and they relied on a superficial analogy to the case of Aetna Casualty, Ins. Co. v. United Services Automobile Assn., 676 F.Supp. 79 (E.D.Pa.1987), in drawing that conclusion. Next, the Commonwealth Court determined that the American Casualty policy and the PHICO prim,ary policy were concurrent primary policies and that, hence, the “other insurance” clauses in both policies were triggered. As a result of this triggering, the “other insurance” clause contained in the PHICO primary policy had to be interpreted, and it was concluded to be a “pro rata” clause which meant that the PHICO primary policy had to be treated as providing primary coverage to Nurse DiRienzo. *302Because the American Casualty policy contained “an unqualified excess clause” (145 Pa.Cmwlth. 184, at 195, 602 A.2d 904, at 909), the Commonwealth Court thought that it had to be interpreted as providing residual primary coverage. Hence, that Court ruled that PHICO’s primary policy paid the first $200,000.00 of indemnity expense and that when that limit was exhausted, that American Casualty’s primary policy as residual primary insurance had to kick in for the next $1,000,000.00.
Nurse DiRienzo was found not to be a health care provider under 40 P.S. § 1301.701(a) and hence ineligible to participate in the Medical Professional Liability Catastrophe Loss (CAT) Fund as such. She was, however, found to be entitled to coverage by the CAT Fund by virtue of being a hospital employee. Hence the CAT Fund was held to be responsible for providing coverage up to $1,000,000.00 for DiRienzo’s negligence (if any) as a hospital employee, but only after the exhaustion of the two policies found to be primary. Because DiRienzo was found not to be a health care provider, however, she was found not to be entitled to a separate, additional $1,000,000.00 of CAT Fund coverage in her individual capacity. Finally, the Commonwealth Court determined that American Casualty’s policy was not excess insurance coverage vis-a-vis the CAT Fund under 40 P.S. § 1301.705.
The net result of the Commonwealth Court decision was to rule that PHICO’s primary policy must pay the first $200,-000.00 herein; that American Casualty, as residual primary insurer, pays the next $1,000,000.00; the CAT Fund is obligated to pay the next $1,000,000.00; and if the judgment in the underlying action exceeds these limits, PHICO’s excess policy of $10,000,000.00 kicks in.
What stands out most glaringly in the Commonwealth Court’s opinion is the fact that the American Casualty policy is treated as both a primary policy and as a residual or excess policy at one and the same time. In our judgment, it cannot be both. Moreover, under the crystal clear language of the American Casualty’s policy’s “other insurance” clause, quoted above, it is hard to see how that policy can be construed as *303anything but an excess policy. In Vrabel v. Scholler, 369 Pa. 235, 85 A.2d 858 (1952), we stated:
In the absence of contrary or modifying provisions in a statute, the liability of an insurer and the extent of the loss under a policy of automobile liability insurance must be determined, measured and limited by the terms of the contract. This means that under a policy containing a standard “other insurance” or “pro rata” clause, only the pro rata part of the insured loss which was sustained may be recovered by the insured from each insurer in accordance with the terms of the policy. Id., 242-243, 85 A.2d at 861-62.
The “terms of the contract” here are, as conceded, in “plain English.” They could not be clearer. “If you have other insurance which applies to the loss, the other insurance must pay first.” This is an excess insurance clause both in itself and under 40 P.S. § 1301.705. The Commonwealth Court conclusion on this point must be reversed.
The order of payment of the insurance proceeds in this case must also be resolved, in part, by reference to 40 P.S. § 1301.705(a) which provides:
(a) No insurer providing excess professional liability insurance to any health care provider eligible for coverage under the Medical Profession Liability Catastrophe Loss Fund shall be hable for payment of any claim against a health care provider for any loss or damages except those in excess of the limits of liability provided by the Medical Professional Liability Catastrophe Loss Fund.
Hence, in the instant case, the first $200,000.00 of liability must be borne by PHICO’s primary policy, and next the CAT Fund must kick in for its share. Only then do the excess policies of American Casualty and PHICO bear liability and that liability should be pro-rated in accordance with the pro-ration clause in PHICO’s excess policy.1
*304We find that the Commonwealth Court was correct in concluding that the CAT Fund was not liable instantly based upon its conclusion that Nurse DiRienzo is not a “health care provider” in her own right under the Health Care Service Malpractice Act. The definition of “health care provider” under the statute, at 40 P.S. § 1301.103 provides:
“Health care provider” means a primary health center or a person, corporation, facility, institution or other entity licensed or approved by the Commonwealth to provide health care or professional medical services as a physician, an osteopathic physician, or surgeon, a certified nurse midwife, a podiatrist, hospital, nursing home, birth center, and except as to section 701(a), an officer, employee or agent of any of them acting in the course and scope of his employment. (Emphasis added)
Section 701(a) reads as follows:
(a) Every health care provider as defined in this act, practicing medicine or podiatry or otherwise providing health care services in the Commonwealth shall insure his professional liability only with an insurer licensed or approved by the Commonwealth of Pennsylvania, or provide proof of self-insurance in accordance with this section.
(l)(i) A health care provider, other than hospitals, who conducts more than 50% of his health care business or practice within the Commonwealth of Pennsylvania shall insure or self-insure his professional liability in the amount of $100,000 per occurrence and $300,000 per annual aggregate, and hospitals located in the Commonwealth shall insure or self-insure their professional liability in the amount of $100,000 per occurrence, and $1,000,000 per annual aggregate, hereinafter known as “basic coverage insurance” and they shall be entitled to participate in the fund____ (emphasis added).
Stripped of its verbiage, the statute reads:
A health care provider:
1) shall insure; and
2) shall be entitled to participate in the fund.
*305This section imposes an insurance requirement and compels the fund to cover a health care provider. Section 1301.103 specifically excepts nurses, as hospital employees, from the definition of “health care provider” as used in § 1301.701(a). Not only are nurses excepted from the basic coverage insurance, but they are also not entitled to participate in the fund.2
For the reasons set forth above, the order of the Commonwealth Court is reversed and the matter remanded to that Court for such further proceedings as may be necessary.
LARSEN, J., did not participate in the decision of this case.
MONTEMURO, J., files a Joining and Concurring Opinion in which NIX, C.J., and FLAHERTY and CAPPY, JJ., join.
MONTEMURO, J., who was an appointed Justice of the Court at the time of argument, participated in the decision of this case in his capacity as a Senior Justice.

. The briefs in this appeal do not make it clear whether excess liability under the PHICO excess policy and the American Casualty policy should be pro-rated or not. If any of the parties wish to contest this issue, that is best done initially at the Commonwealth Court level, and the parties herein are free to do so upon remand.

. This analysis is borrowed from Mr. Justice Montemuro’s learned Concurring Opinion in which he analyzes in depth the reasons why Nurse DiRienzo is not a health care provider in her own right and entitled to separate coverage.