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Visiting Nurse Ass'n of Greater Philadelphia v. St. Paul Fire and Marine Ins. Co.

September 15, 1995

VISITING NURSE ASSOCIATION OF GREATER PHILADELPHIA

v.

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, APPELLANT VISITING NURSE ASSOCIATION OF GREATER PHILADELPHIA

v.

ST. PAUL FIRE AND MARINE INSURANCE COMPANY VISITING NURSE ASSOCIATION OF GREATER PHILADELPHIA ("VNA"), APPELLANT



On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 94-cv-01378)

Before: SLOVITER, Chief Judge, SCIRICA, Circuit Judge, and AMBROSE, District Judge *fn*

SLOVITER, Chief Judge.

Argued July 17, 1995

Filed September 15, l995)

OPINION OF THE COURT

St. Paul Fire and Marine Insurance Company appeals from an order of the district court declaring that it has a duty to defend its insured, Visiting Nurse Association of Greater Philadelphia (VNA), in a case brought against VNA by American Health Systems, Inc. (AHS), a competitor of VNA in the provision of home health care services, under the professional liability coverage it sold to VNA. VNA cross appeals, preserving its contention that St. Paul's obligation to defend is also based on the comprehensive general liability coverage it purchased from St. Paul.

I.

Facts and Procedural History

VNA is a non-profit corporation engaged in the business of providing home health care and related services throughout the Delaware Valley. Agencies such as VNA typically provide home health care to patients who are discharged from hospitals and require follow-up care. Such agencies receive referrals from hospitals, which are required as a condition of participating in the Medicare and Medicaid programs to transfer or refer their patients to appropriate facilities, agencies, or outpatient services as needed for follow-up or ancillary care. See 42 U.S.C. Section(s) 1395x(ee); 42 CFR Section(s) 482.43(d). The hospitals employ discharge planners to plan the appropriate transfer or referral of discharged patients.

St. Paul began providing insurance to VNA in 1988. That policy contains coverage for both professional liability and comprehensive general liability. In February 1993 VNA was sued by AHS, another home health agency. AHS's complaint contains claims against VNA under the antitrust laws, RICO and state law. Its antitrust claim count alleges that VNA violated sections 1 and 2 of the Sherman Antitrust Act in that it "conspired with various area hospitals in an attempt to monopolize the home health care market and destroy competition." App. at 45. Essentially it alleges that VNA paid the salaries of the hospitals' discharge planners, who held themselves out as employees of their respective hospitals, and that this caused the hospitals to refer virtually all of their home care patients to VNA. Two counts of AHS's complaint charge that VNA violated provisions of the Racketeer Influenced and Corrupt Organization Act (RICO), 18 U.S.C. Section(s) 1962(c) and (d), through a pattern of mail and insurance fraud, including disguise of the salaries of discharge planners as allowable costs in its annual cost reports and regular monthly claims. Another count alleges that VNA intentionally interfered with AHS's prospective contractual relations with home care patients.

After receiving the AHS complaint, VNA twice asked St. Paul to defend it in the AHS lawsuit, and St. Paul twice declined. VNA then commenced the present diversity action in the district court, seeking a declaratory judgment that St. Paul was required to defend VNA in the lawsuit brought by AHS and a judgment for all monies expended by VNA and all liabilities incurred but not yet paid by VNA with respect to the defense of the AHS suit. VNA also sought prejudgment interest, punitive damages, and attorneys' fees and costs.

VNA filed a motion for partial summary judgment on the duty to defend issue, and St. Paul moved for summary judgment on all issues. On September 21, 1994, the district court entered an order denying St. Paul's motion for summary judgment and granting partial summary judgment to VNA, declaring that St. Paul has a duty to defend VNA in the AHS lawsuit. The district court held that VNA is not entitled to coverage under the commercial general liability portion of the policy, but that St. Paul has a duty to defend under the professional liability provisions because AHS's claims arise out of the profession named in the policy. The district court denied St. Paul's motion for reconsideration, and St. Paul timely filed a notice of appeal. VNA timely filed a cross-appeal.

After the notices of appeal were filed, the district court, pursuant to agreement of counsel, dismissed VNA's claims for indemnification. We have jurisdiction under 28 U.S.C. Section(s) 1291. In re Emerson Radio Corp., 52 F.3d 50, 53 (3d Cir. 1995); Cape May Greene, Inc. v. Warren, 698 F.2d 179, 184-85 (3d Cir. 1983). Our review of the district court's grant and denial of the summary judgment motions is plenary. Pennsylvania Power Co. v. Local Union No. 272, 886 F.2d 46, 48 (3d Cir. 1989). The parties agree that Pennsylvania law controls the coverage issues. Because the material facts are not in dispute, the only issue ...


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