March 25, 2011
LISETTE VALENTIN-RIVERA, INDIVIDUALLY AND AS GUARDIAN AD LITEM FOR JEFFREY RIVERA, PLAINTIFF-APPELLANT,
NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTY ASSOCIATION, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-9350-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 30, 2010
Before Judges Graves and Messano.
Plaintiff Lisette Valentin-Rivera filed this declaratory judgment action against defendant, New Jersey Property-Liability Insurance Guaranty Association (PLIGA), seeking coverage under an insurance policy originally issued by MIIX Insurance Company (MIIX) to Dr. Manuel Vega (Vega) and his medical practice, Prospect Women's Medical Center, P.A. (Prospect). Pursuant to an order of liquidation, the obligations under the MIIX policy were assumed by PLIGA. The motion judge granted PLIGA summary judgment and plaintiff now appeals. We affirm.
The facts are undisputed for purposes of this appeal. In 2005, plaintiff filed a medical malpractice action individually and as guardian ad litem for her son, Jeffrey Rivera.*fn1 Plaintiff alleged negligence in the pre- and post-natal care preceding and following the birth of her son.*fn2 The allegation against Vega was that he failed to deliver Jeffrey sooner, resulting in brain injury to the child. Plaintiff sought to hold Prospect vicariously liable for Vega's negligence under the doctrine of respondeat superior.
Vega and Prospect were named insureds under a policy of insurance issued by MIIX that provided coverage under three "Coverage Agreements" as follows:
Coverage A - Individual Professional LiabilityInjury arising out of the rendering of or failure to render, . . . professional services by any individual insured, or by any person for whose acts or omissions such insured is legally responsible, except as a member of a partnership;
Coverage B - Corporate/Partnership Liability Injury arising out of the rendering of or failure to render, . . . professional services by any person for whose acts or omissions the corporation/partnership insured is legally responsible. [Emphasis in original.]*fn3
Coverage B was affected by an "Amendatory Endorsement" incorporated into the policy. The language of this exclusion, Section III(i), is central to the issues presented. The exclusion provided:
This insurance does not apply to liability of the insured:
(i) corporation/partnership under Coverage Agreement B with respect to injury arising solely out of the acts or omissions in the rendering or failure to render professional services by individual physicians or nurse anesthetists, or by any paramedical for whom a premium charge is shown on the declarations page.
[Emphasis in original.]
MIIX filed an answer on behalf of Vega and Prospect. It is undisputed that MIIX never served a reservation of rights notice upon Vega or Prospect. When MIIX was declared insolvent in 2008, PLIGA assumed responsibility pursuant to the Guaranty Association Act (the Act), N.J.S.A. 17:30A-1 to -20.
PLIGA settled plaintiff's claim against Vega for $300,000, the limit of liability under the Act. PLIGA disputed coverage for plaintiff's vicarious claim against Prospect under Coverage Agreement B, but agreed to litigate the issue in a declaratory judgment action. Pursuant to the settlement agreement, if plaintiff prevailed in the declaratory judgment action, "and the court f[ound] that Prospect . . . presented a 'covered claim' as defined in the . . . Act," then plaintiff would receive an additional $300,000.
Pursuant to the settlement agreement, Prospect assigned to plaintiff "any and all rights it may have against [PLIGA] for statutory benefits arising out of [the Policy] issued to it by [MIIX]." The trial court approved the settlement, and plaintiff commenced this declaratory judgment action.
PLIGA moved and plaintiff cross-moved for summary judgment. The motion judge issued a written opinion construing the policy to exclude coverage for a claim against Prospect based upon Vega's negligence. The court interpreted the exclusion as intending "to prevent claimants from recovering two policy limits for the same medical incident" simply by operation of respondeat superior, when the claimant had only alleged negligence against an insured physician named in the declarations page and not against "other employees, such as administrative staff, of [Prospect]." By order of November 20, 2009, the court granted summary judgment to PLIGA and dismissed plaintiff's complaint. This appeal followed.
When reviewing a grant of "summary judgment, we [employ] the same standard[s] . . . [used] by the motion judge." Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 230 (App. Div.) (citations omitted), certif. denied, 189 N.J. 104 (2006). We first determine whether the moving party has demonstrated there were no genuine disputes as to material facts. Ibid. In this case, the facts are essentially undisputed.
We then consider "whether the motion judge's application of the law was correct." Id. at 231. In this regard, we "owe no deference" to the judge's legal conclusions. Ibid. (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
Under the Act, PLIGA is "deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent." N.J.S.A. 17:30A-8(a)(2). PLIGA becomes "obligated to the extent of the covered claims against an insolvent insurer," for "each covered claim which is less than $300,000." N.J.S.A. 17:30A-8(a)(1). A "'[c]overed claim' means an unpaid claim . . . which arises out of and is within the coverage" of the policy. N.J.S.A. 17:30A-5. The question therefore devolves to whether plaintiff's claim against Prospect was a "covered claim" under the MIIX policy.
The interpretation of a contract is a matter of law subject to de novo review. Sealed Air Corp. v. Royal Indem. Co., 404 N.J. Super. 363, 375 (App. Div.), certif. denied, 196 N.J. 601 (2008). In interpreting the meaning of an insurance policy, we begin by examining its plain language and, if the policy terms are clear, we construe them according to their "'plain, ordinary meaning'" and enforce the policy as written. Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 270 (2008) (quoting Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001)).
If the terms are not clear, the policy is generally construed to provide coverage and "'comport with the reasonable expectations of the insured.'" Villa v. Short, 195 N.J. 15, 23 (2008) (quoting Zacarias, supra, 168 N.J. at 595). This is true even if a "close reading" of the insurance policy "reveals a contrary meaning." Zacarias, supra, 168 N.J. at 595. Because insurance policies are "contracts of adhesion," reflecting "the substantial disparity in the sophistication of the parties, and . . . [a] highly technical nature," "we have long assume[d] a particularly vigilant role in ensuring their conformity to public policy and principles of fairness." Pizzullo, supra, 198 N.J. at 270 (alteration in original) (quotations omitted). Nevertheless, application of our traditional rules of construction should not result in the court writing a better policy for the insured than the one purchased. Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517, 529 (1989).
Exclusionary clauses are narrowly construed, while clauses that extend coverage are interpreted broadly. Villa, supra, 195 N.J. at 23-24. After the insurer demonstrates that an exclusion applies, the exclusion is presumed valid and will be enforced if it is "'specific, plain, clear, prominent, and not contrary to public policy.'" Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997) (quoting Doto v. Russo, 140 N.J. 544, 559 (1995)). An exclusion is construed against the insurer only if an ambiguity arises from a "fair interpretation" of its terms; a "far-fetched interpretation" is insufficient to overcome the presumption that the exclusion is valid and enforceable. Stafford v. T.H.E. Ins. Co., 309 N.J. Super. 97, 105 (App. Div. 1998).
Plaintiffs contend that the exclusion's prefatory phrase, "with respect to injury arising solely out of the acts or omissions in the rendering or failure to render professional services by individual physicians," should be strictly construed to deny coverage for a vicarious liability claim against Prospect only when the injury arose "solely out of the acts or omissions" of Vega. In this case, one of Vega's co-defendants, Dr. Chinne Offor, provided post-natal care to Jeffrey. Plaintiff alleged Offor committed malpractice in the manner in which she performed "meconium suctioning" after the child's birth. In answers to interrogatories, Vega acknowledged that he filed an "incident report" critical of Offor's care of the infant. Offor was insured by another company, and plaintiff ultimately settled her claim with Offor for $3,000,000. Thus, plaintiff contends the exclusion does not apply because her son's injuries did not arise "solely" from Vega's negligence.
Plaintiff argues that such an interpretation is necessary because if the exclusion were interpreted any other way, the insuring language of Coverage B becomes illusionary. Coverage B provided insurance to Prospect when "professional services [were rendered] by any person for whose acts or omissions the corporation/partnership insured is legally responsible." Plaintiff argues that only "medical professionals," a term not used in the policy, can perform "professional services." Therefore, plaintiff claims that other employees of Prospect, for example, administrative staff as referenced by the motion judge, are not covered under Coverage B.
Plaintiff contends that since only medical professionals, such as Vega, were covered under the insuring language of Coverage B, the exclusion, if read broadly to exclude coverage for vicarious liability based upon the negligence of "individual physicians," renders the coverage illusionary. In other words, plaintiff contends Prospect obtained no coverage under Coverage
PLIGA counters by contending that Coverage B, read in conjunction with the exclusion, provides coverage to Prospect when the claim relates to "an independent act of negligence (such as a claim for negligent supervision), or an allegation of negligence against an employee other than a scheduled physician, nurse anesthetist, or paramedic." The coverage, therefore, is not illusory. The motion judge accepted this argument, noting that this construction of the policy prevented a double recovery for the same "medical incident," a defined term under the policy.
We note initially that the exclusion was "specific, plain [and] clear." Princeton Ins. Co., supra, 151 N.J. at 95. Plaintiff has not argued that the exclusion is contrary to public policy. Ibid. We turn, therefore, to the language of the policy.
The MIIX policy limits were applicable to "each medical incident." (Emphasis in original). Under the policy:
Medical incident means all acts or omissions in the rendering of or failure to render professional services from which a claim arises or claims arise. All such acts or omissions together with all related acts or omissions in the rendering of such professional services to all persons involved therein or affected thereby shall be considered one medical incident. [(Emphasis in original).]
A "medical incident" was "deemed to take place at the time of the first act or omission by any person in the rendering or failure to render professional services to any one person . . . ."
The policy's liability limit was applied as follows:
1) separately to each individual named in the Schedule of Insureds; and
2) collectively, to the corporation or partnership named in the declarations as an insured and the employees (other than a physician, surgeon or an individual named on the Schedule of Insureds) of a corporation or partnership insured under coverage B.
The policy limit was $2,000,000; Vega was one of three physicians listed as "individual insureds" under Coverage A. The premium charged by MIIX for Coverage A was more than fifty times greater than the premium charged for the "Corporate/Partnership Liability" coverage provided by Coverage
In her reply brief, in trying to explain why Coverage B has a much lower premium than Coverage A, plaintiff states that "Coverage B, unlike Coverage A, is further limited by a specific exclusion which circumscribes the risk to MIIX when the negligence is 'solely' caused by the insured." That reasoning, however, is unpersuasive. MIIX was exposed to the limit of liability under Coverage A for Vega's negligence, whether it happened solely, or in conjunction with the negligence of some other doctor not covered by the policy. Under plaintiff's reasoning, MIIX assumed a greater liability, while charging a substantially lower premium, for Prospect's vicarious liability when Vega was negligent in conjunction with some other doctor, wholly-unrelated to Prospect's practice; and, under the facts of this case, when that wholly-unrelated physician's negligence occurred after the "medical incident" that gave rise to the claim against Vega. Such reasoning strains logic.
Plaintiff also contends that Coverage B did not provide coverage for other staff members at Prospect in the first instance. She claims that because no coverage was provided, the exclusion cannot be read to limit liability under Coverage B to other employees of Prospect. This reasoning, however, is unpersuasive because it rests upon plaintiff's crabbed interpretation of the coverage provided by Coverage B.
Under the policy terms, Coverage B provided insurance when an "[i]njury ar[ose] out of the rendering of or failure to render . . . professional services by any person for whose acts or omissions the corporation/partnership insured is legally responsible." (Emphasis in original). "Professional services" were defined under the policy as follows:
[S]ervices requiring specialized knowledge and mental skill in the practice of the profession described in the declarations page, and includes service by a person, while acting within the scope of his or her duties, as a member of:
(a) a board of directors of a hospital . . . with respect to board performance of any function described in (c), (d) or (e) below;
(b) a professional standards review organization . . . ;
(c) a duly constituted hospital . . . review committee;
(d) a duly constituted hospital medical staff committee for the evaluation and improvement of quality of care;
(e) a duly constituted hospital or medical society peer review committee . . . ; or
(f) any peer review program conducted by the Company [MIIX].
Plaintiff contends that "professional services" do not include services provided by the staff of Prospect. She cites the specific sub-paragraphs above as indicative of the types of services that can only be provided by "medical professionals."
However, the conjunctive phrase, "and includes," precedes the activities described in subsections (a) through (f), meaning that a person not engaged in those activities may still be rendering "professional services" if (1) he or she is rendering services "in the practice of the profession" and (2) the services require "specialized knowledge and mental skill."
The exclusion only disclaims coverage for claims made against three groups of individuals: physicians, nurse anesthetists and paramedics. Coverage B extends coverage to "any person" performing professional services for whom Prospect is legally responsible. Accordingly, the grant of coverage in Coverage B is broader than the exclusion since it provides coverage for the acts or omissions of, for example, a nurse or physician's assistant employed by Prospect.
Grants of coverage in an insurance policy are to be interpreted broadly. See Villa, supra, 195 N.J. at 23-24 (clauses granting coverage are interpreted broadly). We are convinced, therefore, that the coverage provided, when read in conjunction with the plain language of the exclusion and the policy as a whole, was not illusory.
Plaintiff's argument that such an interpretation of the policy defeats the reasonable expectations of the insured, Prospect, is without sufficient merit to warrant extensive discussion. R. 2:11-3(e)(1)(E). We add only the following.
In some circumstances, it may be appropriate to allow an insured's reasonable expectation to overcome an insurance policy's plain meaning. Pizzullo, supra, 196 N.J. at 271. Because insurance policies are not readily understood, the consent necessary to the formation of a contract cannot be presumed; it is inferred only when the policy language conforms to the parties' expectations. Werner Indus., Inc. v. First State Ins. Co., 112 N.J. 30, 36 (1988) (citing Sparks v. St. Paul Ins. Co., 100 N.J. 325, 336 (1985)).
We acknowledge plaintiff's argument that if Coverage B provided coverage only if Prospect were "independent[ly]" negligent, that might defeat Prospect's reasonable expectations. However, for the reasons expressed above, coverage was provided to the entity based upon its vicarious liability for the acts of omissions of its staff, others than those expressly excluded. In our opinion, the plain language of the policy compels this interpretation and provides coverage that met any reasonable expectation held by Prospect.
Plaintiff also contends that PLIGA is estopped from disclaiming coverage because MIIX never reserved its rights or disclaimed coverage under the policy. Plaintiff raised this argument before the motion judge who did not address it in his opinion.
In Griggs v. Bertram, 88 N.J. 347, 356 (1982), the Supreme Court noted that an insurance policy restricts the insured's right to defend itself until after the insurer has investigated a claim and disclaimed coverage. When the insurer has disclaimed coverage after an unreasonable delay, the insured has been prejudiced in its defense of the claim. Ibid. To remedy such prejudice, the Court recognized that generally the insurer's "[u]nreasonable delay in disclaiming coverage, or in giving notice of the possibility of such a disclaimer . . . can estop an insurer from later repudiating responsibility under the insurance policy." Id. at 357. Estoppel is appropriate only when the insured has suffered prejudice after justifiably relying on the "insurer's contractual right to control the defense under the policy." Id. at 356. The failure by the insurer to promptly notify its insured that coverage might be disclaimed violates a duty to deal fairly and in good faith with its customer. Id. at 360-61.
While we acknowledge the general principles enunciated in Griggs, plaintiff can point to no case in which estoppel has been asserted against PLIGA based upon an act or omission of an insolvent insurer whose responsibilities PLIGA has statutorily assumed. In our opinion, permitting the assertion of an estoppel argument runs afoul of the provisions and purposes of the Act.
"The Act was not designed to be a panacea for all problems caused by insurance company insolvencies or to require PLIGA to assume all the obligations of an insolvent insurer." Carpenter Tech. Corp. v. Admiral Ins. Co., 172 N.J. 504, 524 (2002). The Court "has recognized the legislative intent that conservation of PLIGA's resources is necessary to achieve the Act's stated goals." Id. at 516. "The Legislature signaled the need for restraint and caution in the payment of claims, and did so in a myriad of ways." Id. at 515-16. Recovery against PLIGA is generally limited to $300,000 per covered claim and "[i]n no event" is PLIGA obligated to pay "in excess of the limits of liability stated in the policy of the insolvent insurer" from which the claim arises. N.J.S.A. 17:30A-8(a)(1). As noted above, the policy in this case did not provide coverage for the claim against Prospect based upon Vega's negligence.
Further, N.J.S.A. 17:30A-17 provides:
There shall be no liability on the part of and no cause of action of any nature shall arise against . . . [PLIGA] . . . for any action taken by [it] in the performance of [its] powers and duties under this act.
The Law Division has noted that while "the immunity afford[ed] by section 17 applies only to liability in excess of the coverage itself[,] PLIGA is immune from claims of consequential damages, or other forms of relief, grounded on the allegation that it adjusted, processed or paid claims in bad faith." Hudson Envtl. Servs., Inc. v. N.J. Prop.-Liab. Ins. Guar. Assoc., 372 N.J. Super. 284, 313 (Law Div. 2004). "[T]he immunity -- particularly in the case of bad faith claims --shields PLIGA from consequential damages in excess of the express contractual amounts." Id. at 312. We find the rationale expressed in Hudson Envtl. Servs., supra, persuasive.
Under the Act, PLIGA is not estopped from asserting its rights under the policy even if it acted in bad faith in failing to reserve its rights. We therefore fail to see why the acts or omissions of an insolvent insurer should estop PLIGA from asserting its rights under the policy and the act.