The West Virginia Supreme Court of Appeals (“WVSCA”) recently rejected the argument that an insured intended to share in the limits of its former physician-employee’s tail coverage. Refusing to reform what it deemed to be a policy with plain and unambiguous language, the Court determined that the insured’s general aggregate limits were separate from the physician-employee’s limits. The case provides a primer as to claims-made policies versus occurrence policies.
West Virginia Mutual Insurance Company v. Adkins, et al. arose out of surgeries involving the implanting of transvaginal mesh performed by Mitchell E. Nutt, M.D. on his patients (“Respondents”) in 2006 and 2007. Respondents made medical malpractice claims and/or filed suit against Dr. Nutt in 2008, 2009, and 2010. In 2010, Respondents asserted vicarious liability claims against Dr. Nutt’s employer, United Health Professional, Inc. (“UHP”).
Dr. Nutt left his employment with UHP in 2008, at which time he was terminated from the 2008 claims-made policy issued to UHP by West Virginia Mutual Insurance Company, Inc. (“WVMIC”). At the time of his departure, UHP purchased from WVMIC an extended reporting endorsement (commonly known as “tail coverage”) providing Dr. Nutt with separate limits of $1 million per covered medical incident, with a $3 million annual aggregate. UHP also purchased a claims-made medical malpractice insurance policy issued by WVMIC for the calendar year 2010 (the “2010 Policy”).
In 2011, the annual aggregate limit of Dr. Nutt’s tail coverage was tendered to Respondents under a global settlement agreement. A declaratory judgment action was filed to determine the existence of any additional coverage available for the vicarious liability claims asserted against UHP. The trial court ruled that there was an additional $6 million in coverage available and an appeal ensued. The WVSCA reversed, determining that only $3 million in additional coverage existed.
The WVSCA rejected the argument that UHP only intended the 2010 Policy to have separate policy limits for medical incidents occurring after January 1, 2008 and intended to share in Dr. Nutt’s tail coverage purchased at the time of his departure. The Court reviewed UHP’s application for the 2010 Policy, where UHP requested “separate” policy limits in the amount of “1,000,000/$3,000,000” with a “retroactive date” of “01/01/02,” and determined that the terms of the 2010 Policy provided exactly that coverage which was requested by UHP in its application. The Court next reviewed Dr. Nutt’s tail coverage language and determined that nothing contained in the policy indicated that UHP intended to share in his separate limits of coverage. The Court emphasized the language which provided Dr. Nutt was the sole insured and did not name UHP.
In determining the amount of coverage under the 2010 Policy, the Court turned to the Policy Declarations which specified under the “General Conditions” section that WVMIC was “providing insurance under this policy…beginning at 12:01 A.M. and ending at 12:01 A.M. during the policy period stated in the policy declarations[.]” The declarations page clarified the policy applied only to claims “aris[ing] out of a medical incident which occurs on or after the retroactive date…and that are first made against an insured and reported to the Company by the insured during the policy period…” Despite Respondents’ argument emphasizing that claims occurred in both 2006 and 2007, the claims were first reported during the 2010 policy period. The Court determined that UHP’s aggregate of $3 million set forth in the Schedule of Insured applied to all claims and could not be multiplied. Consequently, the Court held that only $3 million was available in coverage under the 2010 policy beyond the $3 million already tendered under Dr. Nutt’s tail coverage.
Finally, the Court rejected WVMIC’s argument that a mutual mistake in formulating the 2010 Policy warranted equitable reform to provide separate limits of coverage only after January 1, 2008. The Court found that both UHP’s application for insurance and the terms of the 2010 policy, itself, were unambiguous such that the determination of intent through extrinsic evidence was not warranted.