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American Legion Tri-County Memorial Hospital v. St. Paul Fire and Marine Insurance Co.

Decided: July 15, 1969.

AMERICAN LEGION TRI-COUNTY MEMORIAL HOSPITAL, A CORPORATION, PLAINTIFF-RESPONDENT,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY, A CORPORATION, DEFENDANT-APPELLANT



Sullivan, Foley and Lewis. The opinion of the court was delivered by Foley, J.A.D.

Foley

Defendant appeals from a judgment in plaintiff's favor in the amount of $6,535 plus interest.

This is an action on a "Comprehensive Hospital Liability Policy" issued by defendant to plaintiff in September 1963; it remained in full force and effect during all of the critical dates mentioned herein. The claim is for recovery of counsel fees and costs of defending against a suit by members of plaintiff's medical staff. The liability aspect of the case was submitted to the trial court on stipulated facts. The trial court in a letter opinion found liability. In a subsequent proceeding on the issue of damages plaintiff was awarded the amount aforesaid.

The case arose from a dispute between the hospital and certain members of its medical staff Their complaint was in two counts. The first count sought an injunction against the trustees' interference with the doctors' use of the hospital facilities; the second count sought compensatory and punitive damages. On October 22, 1963 a meeting took place

between the hospital's board of trustees and the dissident doctors. At that time the doctors made known their intention to attempt to oust the board of trustees and stated that counsel had been retained for that purpose. On the same day the board of trustees met in private and voted to suspend the doctors. The advisability of retaining an attorney was discussed and two of the trustees were authorized to engage counsel in the event of litigation with the doctors. A suspension notice was posted in the hospital on October 23, 1963. On October 25 the administrator of the hospital was served with a complaint in a suit by the doctors after he had refused the request of their attorney that the suspension notice be removed.

On the day the complaint was served, Woodruff English, Esq., of the firm of McCarter & English, was retained to represent the hospital and its board of trustees in defense of the pending action. The board confirmed the retention on November 2, 1963; the summons and complaint had already been turned over to English.

On November 6, 1963 the hospital notified defendant St. Paul of the doctors' suit and requested that it provide a defense in accordance with the insurance policy. Thereafter St. Paul agreed to defend the second count only. The entire action was eventually settled by a consent final judgment without the payment of any damages.

Subsequently the hospital brought the present action against St. Paul seeking reimbursement for counsel fees and costs incurred by it in defense of the doctors' suit, maintaining that the carrier was obligated to defend the entire law suit and that as a result of its failure to do so the hospital was compelled to defend at its own cost and expense.

The central, and we think determinative, question presented is whether the cause of action alleged in the doctors' complaint was within the coverage granted by the policy. The insuring clause of the policy provided that the insuror was obligated:

"To pay all loss by reason of the liability imposed by law or contract upon the Insured * * * for damages (including counterclaims in suits brought by the Insured to collect fees or other charges) on account of injury, sickness or disease , including death at any time resulting therefrom, including damages allowed for loss of services and expenses suffered by any person or persons.

As respects insurance afforded by this Policy the Company shall (a) defend in his name and behalf any suit against the Insured alleging such damages, even if such suit is ...


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