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Commercial Union Insurance Companies v. Chubb Group of Insurance Companies

Decided: April 25, 1984.


On appeal from Superior Court, Law Division, Bergen County.

Bischoff, Petrella and Brody. The opinion of the court was delivered by Petrella, J.A.D. Brody, J.A.D., dissenting.


[194 NJSuper Page 70] As a result of a dispute over insurance coverage which arose out of the defense of a malpractice action, plaintiff Commercial Union Insurance Companies (Commercial) brought a declaratory action against Chubb Group of Insurance Companies

(Chubb). Commercial sought a determination that Chubb's professional liability insurance policy provided coverage to a doctor who was an individual defendant*fn1 in the underlying malpractice case, which had been settled without prejudice to litigation of the policy question. The parties cross-moved for summary judgment. Commercial appeals from a ruling adverse to its position. We reverse.

The facts are essentially undisputed. Interpretation of the insurance policy provisions is essentially a question of law and construction of the policy provisions. Summary judgment was appropriate. However, the issue is whether the trial judge correctly applied applicable law and correctly interpreted the policy provisions.

Commercial claims that it is entitled to the benefit of various rules of construction in this law suit, including an interpretation of the policy based upon reasonable expectations of the insured, and a strict construction against Chubb as draftsman of what are alleged to be ambiguous provisions of Chubb's policy. Chubb argues to the contrary.

This dispute arose out of malpractice litigation instituted in a different action on behalf of a minor against Drs. Milton L. Fischgrund, Herbert Poch and Pediatric Medical Group, P.A. (Group). Both Fischgrund and Poch were individually listed on the declaration page*fn2 of the Chubb insurance policy which

named the Group as insured. The limits of policy coverage were $200,000/$600,000. Chubb's policy showed the Group as named insured and specifically listed the four individuals (including Fischgrund and Poch) who constituted all of its officers, directors and shareholders under a printed statement which says, "the Partnership or Professional Corporation is composed of the following individuals . . . ." That policy also provided coverage for four nurses and five medical technicians who are unnamed. At the time in question Chubb had also issued a separate insurance policy to Dr. Fischgrund providing him with individual professional liability insurance with coverage of $200,000/$600,000.

Commercial had an excess policy in effect covering the applicable time period and providing excess coverage to Fischgrund and the Group.

There is no dispute that the actions of Fischgrund which gave rise to the malpractice action were performed on behalf of the Group. Fischgrund was the doctor on call for the Group at the particular time that the medical treatment of the infant was required.

The medical malpractice litigation was ultimately settled for $450,000. Chubb paid $200,000 on behalf of Fischgrund under the policy it had issued covering him individually or personally. Chubb then took the position that its $200,000 policy issued to the Group provided coverage only after the excess policy issued by Commercial. When Commercial took the position that Chubb's policy issued to the Group applied before Commercial's excess policy, the insurers agreed to resolve the malpractice litigation by a settlement reserving the coverage issue for a declaratory judgment action. Commercial then contributed $250,000 to complete the settlement of the infant's malpractice claim. A warrant to satisfy judgment indicating satisfaction of the minor's claims was filed in due course. This litigation ensued.

Initially we observe that respondent's brief states that settlement in the underlying action "was tendered on behalf of Dr. Fischgrund alone and not on behalf of the Group." (Emphasis in brief.) We were not advised why the suit was dismissed against Dr. Poch and the Group under such circumstances. Chubb acknowledged in answers to interrogatories submitted during the course of the declaratory judgment litigation that its policy for the Group "does provide primary coverage for the Group." It also acknowledged that "that policy could conceivably come into play once Fischgrund's primary and excess policies are exhausted, if they are exhausted."

Commercial takes the position that Chubb's policy covering the Group provides primary coverage to Fischgrund. Chubb takes the position that the policy issued by it to the Group is excess to Fischgrund's individual policy and Commercial's excess policy.

Chubb's "Professional Liability and Professional Premises Liability Policy" issued to the Group provides in Part I for coverage for "all sums which the insured shall become legally obligated to pay as damages because of 'Corporate Liability'" under coverage C which the declaration page refers to as

"Professional Corporation Coverage." "Corporate Liability" ...

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