On appeal from the Superior Court, Appellate Division, whose opinion is reported at 292 N.J. Super. 349 (1996).
The opinion of the Court was delivered by Stein, J. O'Hern, J., Concurring. Handler, J., Dissenting. Justice Coleman joins in Dissent.
The opinion of the court was delivered by: Stein
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
Princeton Insurance Company v. Prasert Chunmuang, M.D. et al (A-133-96)
Argued April 28, 1997 -- Decided August 8, 1997
STEIN, J., writing for a majority Court.
The issue posed in this appeal is whether an exclusion from coverage in a medical malpractice insurance policy for "injury resulting from [the physician's] performance of a criminal act" insulates the insurer from liability for compensatory damages awarded to the insured's patient in an action based on a sexual assault by the insured physician in the course of a gynecological examination.
In 1994, June Davis filed suit seeking compensatory and punitive damages against Dr. Prasert Chunmuang for medical malpractice, negligent and intentional infliction of emotional distress, sexual assault, and assault and battery. Chunmuang failed to answer the complaint. By order of the Law Division, the complaint was also served on Princeton, who declined to answer or provide a defense for Chunmuang. The Law Division entered a default judgment against Chunmuang.
A proof hearing was held to determine the appropriate amount of damages. An attorney representing Princeton attended the hearing but did not participate. Davis testified that she made an appointment with Chunmuang in the fall of 1992 because she had been experiencing monthly cramping but had not yet menstruated. Davis was seventeen years old at the time. During the course of her examination, Davis was inappropriately touched by Chunmuang. Davis continued to experience cramping but was unable to seek medical assistance from another gynecologist because of the emotional distress resulting from Chunmuang's examination. Davis also presented a complaint against Chunmuang by the Attorney General's office on behalf of the Board of Medical Examiners dated March 4, 1993, an order of temporary suspension dated March 16, 1993, and an order revoking Chunmuang's license to practice medicine dated June 17, 1993. The complaint described similar claims brought by five other women who were patients of Chunmuang. The court took judicial notice of the criminal complaint filed by Davis and the other women and the subsequent indictment of Chunmuang. He pled guilty to several charges, although the charge relating to Davis was dismissed as part of a plea bargain.
The court found that Chunmuang's conduct not only deviated from accepted standards of medical care but also was clearly a criminal sexual assault. The court was satisfied that Davis had established a case of medical malpractice and awarded her $50,000 in compensatory damages and $50,000 in punitive damages. The court made no finding that any portion of the damages was attributable to acts of medical malpractice distinct and separate from the sexual assault.
Princeton instituted a declaratory judgment action against Chunmuang and Davis, seeking a determination pursuant to the policy language that it had no duty to either defend Chunmuang in Davis's civil action or satisfy any portion of the judgment against Chunmuang. The policy provides coverage for injuries caused by a "medical incident" arising out of the insured's supplying or failing to supply professional services. Medical incident is further defined as any act or failure to act in the furnishing of professional medical services by the insured. The policy excludes coverage for injury resulting from the insured's performance of a criminal act.
The court granted summary judgment on behalf of Princeton on the punitive damage obligation because that portion of the judgment was based solely on Chunmuang's criminal conduct. The court concluded that the compensatory portion of the judgment was based on both medical malpractice and criminal conduct and, therefore, granted summary judgment to Davis on Princeton's obligation to satisfy the compensatory portion of the judgment.
A majority of the Appellate Division affirmed the decision of the trial court that Princeton was liable for compensatory damages notwithstanding the criminal-act exclusion in its medical malpractice policy. Princeton appeals to the Supreme Court as of right based on the Dissent in the Appellate Division.
Claims based on injuries caused by a physician's criminal conduct are properly excluded from coverage under a policy that contains a criminal-act exclusion clause. Therefore, Princeton Insurance Company is not responsible to June Davis for the damages she suffered as a result of Dr. Chunmuang's sexual assault.
1. The majority rule in other jurisdictions is that claims based on sexual assaults on patients by health care providers other than mental health professionals fall outside the scope of coverage provided by policy language substantially similar to the policy in this case. These courts apply a narrow test for malpractice coverage that is based on a restrictive definition of the policy term "professional services," and emphasizes the lack of causal relationship between the treatment sought and the injury. (pp. 8-12)
2. Among jurisdictions that hold that sexual assault by a doctor on a patient is generally not covered by malpractice insurance, a minority of courts has adopted the exception found in Asbury for sexual assaults that are intertwined and inseparable from the services provided. In New Jersey, the Appellate Division has applied a "substantial nexus" approach, concluding that conduct that has a substantial nexus to an insured activity may be found to "arise out of" that activity even if it is unlawful. (pp. 12-19)
3. Exclusions in insurance policies are narrowly construed and the burden is on the insurer to bring the case within the exclusion. Exclusions are presumptively valid and will be given effect if clear, prominent and not against public policy. Proof of a criminal conviction is sufficient to bring the conduct within the exclusion. Courts in other jurisdictions have generally upheld criminal act, intentional act or sexual misconduct exclusions in medical malpractice policies. (pp. 19-22)
4. A fair reading of the Princeton policy language suggests that the coverage encompasses injuries caused by any act or failure to act by the doctor that occurs in the course of rendering professional services. Therefore, it is not necessary to rely on the reasoning of Asbury. The acts committed by Chunmuang in his office constituted a medical incident as defined in the Princeton malpractice policy. These acts, in addition to being criminal, constituted malpractice that would be covered by the policy was it not for the criminal-act exclusion. (pp. 22-23)
5. Criminal-act exclusions are valid and do not violate public policy. To invalidate the exclusion as applied to patients of gynecologists and not to those of other physicians would be inappropriate. Because Davis did not offer evidence of damages attributable solely to acts of malpractice that were independent of the criminal assault, she should be afforded on remand the opportunity to produce proof of damages caused by Chunmuang's malpractice that is separable from his criminal conduct. (pp. 23-28)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law Division for proceedings consistent with this opinion.
Justice O'HERN, Concurring, disagrees with the view of the Dissent that it is not realistic to require the finder of fact to determine the source and uniqueness of the injuries suffered by Davis; she should be compensated, to the extent possible, for the treatment of her condition that fell below generally accepted standards of medical care.
JUSTICE HANDLER, Dissenting, is of the view that the insured's sexual misconduct was so intertwined with his medical malpractice -- both the mishandling of the examination and the failure to properly treat Davis's medical condition -- that it is not realistically possible to identify, differentiate, and quantify the injuries occasioned by the malpractice apart from the injuries attributable to the sexual misconduct. The Court's interpretation is not required by the language or essential meaning of the insurance policy and its result is patently unfair to Davis.
CHIEF JUSTICE PORITZ and JUSTICES POLLOCK, and GARIBALDI join in JUSTICE STEIN'S opinion. JUSTICE O'HERN has filed a separate Concurring opinion. JUSTICE HANDLER has filed a separate Dissenting opinion, in which JUSTICE COLEMAN joins.
The opinion of the Court was delivered by
The critical issue posed by this appeal is whether an exclusion from coverage in a medical malpractice insurance policy for "injury resulting from [the physician's] performance of a criminal act" insulates the insurer from liability for compensatory damages awarded to the insured's patient in an action based on a sexual assault by the insured physician in the course of a gynecological examination. In a published opinion, 292 N.J. Super. 349 (1996), a divided panel of the Appellate Division affirmed the Law Division's determination that the insurer was liable for the compensatory damages award notwithstanding the criminal acts exclusion in its medical mal-practice policy. The insurer, Princeton Insurance Company (Princeton), appeals to this Court as of right. R. 2:2-1(a)(2).
This declaratory judgment action filed by Princeton to determine its liability under the medical malpractice policy at issue was preceded by a civil action instituted in 1994 by June Davis against Dr. Prasert Chunmuang, Princeton's insured. In that action Davis sought compensatory and punitive damages against Chunmuang for medical malpractice, negligent and intentional infliction of emotional distress, sexual assault, and assault and battery. Chunmuang failed to answer the complaint and Princeton, on whom the complaint was also served by order of the Law Division, declined to answer or provide a defense for Chunmuang. The Law Division entered a default judgment against Chunmuang.
At the proof hearing, attended by an attorney for Princeton who did not participate, Davis testified that she had made an appointment to see Chunmuang in the fall of 1992 because she was experiencing monthly cramping but had not yet menstruated. Davis was seventeen years old at the time. Davis stated that the first thing that had made her feel uncomfortable was that when Chunmuang arrived in the examination room he told her to undress, but he did not immediately leave the room. She waited until he left to undress and then closed the door after him when he left it ajar.
In the course of the examination, during which Davis was in the stirrups, Chunmuang twisted his hand inside of her in a way that she perceived to be wrong. She tried to move away and he repeatedly moved her back down on the table and told her "Don't worry about it." This went on for five or ten minutes. During that time he asked her whether she was sexually active, and then why not. Afterwards, he examined her breasts. Again, Davis perceived that his actions were not appropriate to a breast exam, which she had read about in pamphlets. She became very upset. When Davis was ready to leave the office, Chunmuang prescribed some pills and told her to come back in ten days.
Davis did not go back because Chunmuang made her "feel dirty." At the time of the proof hearing, although she continued to experience cramping and had not yet menstruated, Davis had not been able to seek medical assistance from another gynecologist because of the emotional distress that resulted from her examination by Chunmuang. She did not present any expert medical testimony at the proof hearing.
Davis did present, however, an administrative complaint against Chunmuang by the Attorney General's office on behalf of the Board of Medical Examiners dated March 4, 1993, an order of temporary suspension dated March 16, 1993, and an order revoking Chunmuang's license dated June 17, 1993. The complaint outlined charges of misconduct under similar circumstances brought independently by five women, including Davis. Davis was the only minor. The other four women were longterm patients of Chunmuang's.
Davis's attorney also informed the court, and the court took judicial notice, that Davis and several other women had made criminal complaints against Chunmuang, who was subsequently indicted. Chunmuang pled guilty to several charges, although apparently the charge concerning Davis was dismissed as part of the plea bargain.
The court found that Davis's "testimony reflects activity and actions on the part of the doctor, which were not only a deviation from accepted standards but clearly a criminal act in the sense of amounting to a sexual assault." The court indicated that it found confirmation of the sexual assault in the Attorney General's complaint and the indictments of Chunmuang. Overall, the court was satisfied "that the doctor has departed from accepted standards and that the plaintiff has established a case of medical malpractice." The court noted that the plaintiff was caught in a "catch-22" situation regarding the proof of compensatory damages because part of her injury was her continuing inability to visit a gynecologist for further diagnosis and treatment. Confessing that it was "at a loss a little bit as to what the compensatory damages should be," the court nevertheless awarded $50,000 in compensatory damages as well as $50,000 in punitive damages to Davis. The Court made no finding that any portion of the compensatory damages was attributable to acts of medical malpractice distinct and separate from the sexual assault, nor did Davis offer any evidence that would support such a finding.
Prior to the final Disposition of Davis's suit against Chunmuang, Princeton instituted this declaratory judgment action against Chunmuang and Davis seeking a determination that it had no duty either to defend Chunmuang in Davis's civil action or to satisfy any portion of the judgment against Chunmuang. In support of its motion for summary judgment, Princeton submitted the complaint in Davis's action against Chunmuang, the transcript of the proof hearing, the final judgment in favor of Davis, and a copy of the medical malpractice policy issued to Chunmuang.
The policy declaration page states that it provides professional liability coverage. Under "Coverage," the policy states in relevant part:
We will pay all amounts up to the limit of liability which you become legally obligated to pay as a result of injury to which this insurance applies. The injury must be caused by a "medical incident" arising out of your supplying or failure to supply professional services.
"Medical Incident" is further defined, in relevant part, as: "any act or failure to act . . . in the furnishing of the professional medical . . . services by you . . . ."
Under "Exclusions," the policy states in ...