This case has a complicated factual history. West Virginia Mutual Insurance Company (“WVMIC”) appeals the circuit court of Kanawha County’s May 30, 2013 order granting summary judgment in favor of 23 medical malpractice victims in a declaratory judgment action. Specifically, the circuit court determined there was $6 million in liability coverage under an insurance policy issued by WVMIC in 2010.
The medical malpractice victims are all former patients of a doctor who surgically implanted trans-vaginal mesh in 2006 and 2007 to treat pelvic organ prolapse. The plaintiffs filed medical malpractice claims against the doctor and vicarious liability claims against his employer, United Health Professionals, Inc. (“UHP”). Both the doctor and UHP were insured under the policy issued by WVMIC. The incidents occurred during two separate policy periods for which insurance coverage had been purchased.
For many years, United Health Professionals, Inc. (“UHP”), carried insurance coverage with shared limits under a claims-made policy. In 2008, UHP changed its coverage (1) to provide separate coverage limits for itself distinct from the coverage limits applicable to its individual physicians; (2) to render such coverage retroactive to 2002; and (3) to markedly alter the wording of the operative policy language providing coverage for the claims of the mesh plaintiffs. Prior to the 2008 change, the operative language of UHP’s insurance policy stated that “[t]he Limit of Insurance specified in the Policy Declarations for each insured as the ‘annual aggregate’ is the total limit of our liability for damages for that insured resulting from any and all medical incident(s) which are first reported during the policy period.” When the terms of UHP’s insurance policy were altered in 2008, the pertinent portion of the policy also was changed to provide that “[t]he limit of insurance specified in the policy declarations for each insured as the ‘annual aggregate’ is the total limit of the Company’s liability for damages for that insured resulting from all covered medical incident(s) during the policy period.” In short, while the prior version of the subject policy language required medical incidents to have been reported during the policy period in order to be covered, the 2010 version of the policy provided coverage for “all covered medical incident(s) during the policy period.
The plaintiffs, the doctor, UHP and WVMIC reached a global settlement agreement to end the malpractice litigation against the doctor and UHP. Under their agreement, the dispute regarding the insurance limits of the WVMIC policy would be resolved through a declaratory judgment action. The plaintiffs instituted a declaratory judgment action in Kanawha County on December 20, 2010. Following discovery, the plaintiffs filed a motion for summary judgment seeking a declaration that there was additional insurance coverage in the amount of $6 million for their claims against UHP. WVMIC opposed the motion and asserted a cross-motion for summary judgment, seeking a ruling that there were no separate insurance limits available to UHP under the 2010 Policy. In the alternative, WVMIC argued that if the circuit court were to find that separate insurance limits were available to UHP for the subject claims under the 2010 Policy, then there was a mutual mistake that warranted reformation of the policy. In this regard, WVMIC argued that although the policy declarations reflected that UHP had separate limits of coverage with a retroactive date of January 1, 2002, UHP actually intended the retroactive date to be January 1, 2008 for its separate limits and the retroactive date of January 1, 2002 to be for its shared limits, which would apply to the mesh plaintiffs’ claims.
Because WVMIC paid the $3 million aggregate limit under the doctor’s tail coverage, WVMIC maintained that UHP shared in that limit and there was no further insurance coverage available under the policy for these claims. Relying on the parties’ stipulation that the policy provisions were clear and unambiguous and on prior precedent of the Supreme Court of Appeals, the circuit court concluded the policy terms were not subject to judicial construction, interpretation, or reformation, and that full effect would be given their plain meaning. The circuit court found that under the plain meaning of the policy language, coverage existed for multiple policy periods. Accordingly, the circuit court granted the plaintiffs’ motion for summary judgment determining there was $6 million in coverage for UHP under the 2010 Policy issued by WVMIC, in addition to the $3 million previously paid. WVMIC challenged the circuit court's finding.
Is the aggregate limit of a claims-made medical professional liability policy calculated by the year in which the claim is filed or when the covered medical incident occurs?
What is the limit of insurance coverage available for the medical practice entity for trans-vaginal mesh claimants that settled their claims with a former, employed physician of the practice entity?
The Supreme Court first found that the circuit court erred in concluding that coverage existed for multiple policy periods under the plain language of the 2010 Policy. In doing so, the Supreme Court took notice that the claims against UHP were first reported during the 2010 policy period. The Court reasoned that, because the claims were reported during the 2010 policy period, only the 2010 Policy applied. The Court relied upon the plain language of the 2010 Policy, which defined the policy period as being from January 1, 2010 to January 1, 2011. The Supreme Court went on to find that there was nothing in the 2010 Policy that would support the circuit court’s conclusion that “policy period” referred to anything other than the 2010 policy period. The Court held that there was nothing in the 2010 Policy that would allow the circuit court to resurrect prior policy periods, which had previously expired under their very terms.
The Court also rejected WVMIC’s argument that notwithstanding the 2010 Policy’s plain and unambiguous terms, UHP only intended to have separate policy limits for medical incidents occurring after January 1, 2008, and shared limits for medical incidents occurring before January 1, 2008, but after January 1, 2002. The Court noted that in its application for the 2010 Policy, UHP requested separate policy limits with a retroactive date of January 1, 2002. The 2010 Policy expressly stated that WVMIC relied upon the statements made in the application in issuing the policy, which provides UHP with the limits it expressly requested. The Court also took note that the amendatory endorsement to the 2008 policy that first provided UHP with separate policy limits did not alter the policy’s retroactive date of 2002, which is used to determine whether a medical incident would be covered under the policy. The Court also found nothing the doctor’s tail coverage to indicate that UHP would share in the doctor’s separate limits of coverage.
Finally, the Court rejected WVMIC’s argument that the 2010 Policy should be reformed because UHP intended to have shared policy limits for medical incidents occurring prior to January 1, 2008. The Court found nothing in the 2008 policy to indicate any change to the policy’s retroactive date. The Court went on to note that “retroactive date” is a term of art that has been legislatively defined in a manner separate from the term “effective date” and that the terms could not be used interchangeably as WVMIC was doing to make its argument. Ultimately, then, the Court held that UHP was a named insured with a separate annual aggregate limit of $3 million for the claims asserted by the Plaintiffs.
This case gives interesting insight into the issue of ambiguity in an insurance policy. Although both the majority and dissenting opinions cite longstanding law providing that only ambiguous policy provisions may be interpreted, the Justices differed on whether these particular Policy provisions were ambiguous. In this instance, the majority found no ambiguity in the 2010 Policy and, accordingly, simply applied it as written. However, Justice Davis, in a dissenting opinion, found that the 2010 Policy was ambiguous because the language was capable of three different interpretations. Justice Davis then relied on well-settled West Virginia law stating that ambiguous policy provisions must be construed liberally in favor of the insured. Justice Davis believed the majority should have appreciated the inherent ambiguity in the 2008 policy amendments and, therefore, should have adopted the construction most favorable to the insured—finding, like the circuit court, that the full $6 million in coverage for both policy periods was available to compensate the plaintiffs.