On appeal from Superior Court of New Jersey, Law Division, Essex County, L-2062-01 (A-4508-02T1) and L-2061-01 (A-4504-02T1).
Before Judges Petrella, Wefing and Collester.
The opinion of the court was delivered by: Wefing, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted November 17, 2003
These two matters were calendared before us back-to-back. Because they present identical issues, we consolidate them for purposes of this opinion. In A-4504-02, Princeton Insurance Co. appeals pursuant to leave granted from a trial court order finding it has a duty to defend its insureds, Hampton Medical Group, P.A., Psychiatric Associates of New Jersey, P.A. and A.L. Carter Pottash, M.D. ("plaintiffs") in connection with a pending action, Blue Cross and Blue Shield of New Jersey, Inc. v. Hampton Medical Group, P.A., et al., docket no. ESX-L-289-95. In A-4508-02, we granted leave to appeal to MIIX Insurance Company, successor to Medical Inter-Insurance Exchange of New Jersey ("MIIX"), to appeal from the same order, which found it had a similar duty. After reviewing the record in light of the contentions advanced on appeal, we reverse.
Plaintiff Hampton Medical Group, P.A. had a contract to provide psychiatric physician services to Hampton Hospital, a one-hundred bed psychiatric facility located in Rancocas, New Jersey. Plaintiff Psychiatric Associates of New Jersey, P.A. had a contract to provide psychiatric physician services at Fair Oaks Hospital, located in Summit, New Jersey. Plaintiff Pottash is a licensed medical doctor and the president of both Hampton Medical and Psychiatric Associates. He was also a shareholder in both professional associations.
Defendant Princeton issued a professional liability insurance policy to plaintiffs for the period May 1985 through May 1991. Defendant MIIX issued a professional liability insurance policy to plaintiffs for the period March 1991 through April 1995.
Both policies provided coverage for claims asserting professional liability against the professional associations and individuals. Under Princeton's policy, in the case of a claim of individual liability, it agreed to
Pay all amounts... 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.
Princeton's policy contained similar language for claims asserted against the professional associations, specifying that the"injury must be caused by a'medical incident' arising out of the supplying of or failure to supply professional services by you or anyone for whose professional acts or whose failure to act you are legally responsible." Princeton's policy defined"medical incident" in the following manner:"medical incident" means any act or failure to act:
(a) Individual Professional Liability--(1) in the furnishing of the professional medical... services by you, any employee of yours....
(b) Partnership, Association or Corporation Professional Liability--in the furnishing of professional medical... services by (1) any member, partner, officer, director, stockholder, or employee of yours or (2) any person acting under your personal direction, control, or supervision.
Under MIIX's policy, it agreed to"pay... all sums which the insured shall become legally obligated to pay as damages because of... [i]njury arising out of the rendering of or failure to render... professional services." MIIX defined a medical incident as"a single act or omission or a series of related acts or omissions in the rendering of or failure to render professional services to any one person." It also defined professional services as"services requiring specialized knowledge and mental skill in the practice of the profession described in the declarations...." The declaration sheet stated the insured's principal practice to be psychiatry.
Each policy explicitly excluded coverage for criminal acts. Princeton's policy also excluded coverage for liability as a proprietor, officer or stockholder of any business. MIIX's policy contained a similar exclusion from coverage for liability as proprietor, superintendent or officer of a business enterprise as well as an exclusion for"willful, fraudulent or malicious acts."
In December 1994, Blue Cross/Blue Shield of New Jersey, Inc. filed a complaint against these plaintiffs and others in which it sought reimbursement for more than three million dollars in health insurance benefits which it alleged were improperly paid to these plaintiffs. Blue Cross/Blue Shield's complaint asserted claims based on fraud, violations of the Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30, intentional misrepresentation, negligent misrepresentation and unjust enrichment. Blue Cross/Blue Shield alleged that plaintiffs, over a number of years, would hospitalize patients inappropriately to trigger health insurance coverage, would treat patients for longer than was medically necessary or in ways not medically necessary in order to obtain payment under Blue Cross/Blue Shield health insurance policies and would bill Blue Cross/Blue Shield for services they did not render.
The policies issued by Princeton and MIIX were in effect during the time period covered by the Blue Cross/Blue Shield complaint. Plaintiffs forwarded a copy of this complaint to Princeton and MIIX, demanding they provide a defense and indemnification against these claims. When neither insurer ...