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Monica Kumar, M.D v. Robert Wood Johnson University Hospital At Hamilton

August 10, 2012


On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2312-07.

Per curiam.


Submitted February 6, 2012

Before Judges Parrillo, Grall and Skillman.

Plaintiff Dr. Monica Kumar sued her employer Robert Wood Johnson University Hospital at Hamilton (RWJ) for breach of a provision of their employment contract requiring RWJ to provide primary and excess insurance for professional liability she might incur in the course of her employment. RWJ answered and filed third-party claims against the insurer that denied Dr. Kumar coverage under RWJ's policy, Lexington Insurance Company (Lexington), and Aon Risk Services Northeast, Inc. (Aon), which RWJ retained to advise, plan and secure insurance for RWJ and the doctors it employs. After RWJ settled with Dr. Kumar, the trial court entered a $1,153,148.92 judgment in favor of RWJ and against Lexington on cross-motions for summary judgment.*fn2

Lexington appeals from that judgment arguing, among other things, that the trial court erred in finding coverage. Because the material facts are in dispute, RWJ was not entitled to summary judgment as a matter of law. President v. Jenkins, 180 N.J. 550, 567 (2004); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Accordingly, we reverse.


Dr. Kumar accepted a contract of employment offered by RWJ in October 2002, and on December 12, 2002, she operated on Mary Ann Septak with the assistance of Dr. Antonio Sison, another employee of RWJ. During that operation, one of Septak's veins was unintentionally cut causing Septak to require additional surgery. Consequently, Septak filed a malpractice action to recover damages from the doctors and RWJ. Although Septak threatened to sue in December, she did not serve a written demand for compensation until January 13, 2003, when RWJ received her notice of tort claim. She filed the malpractice suit on April 30, 2003.

Lexington did not dispute that Septak's medical incident was covered by policies of primary and excess insurance it issued for the period from January 1, 2003 to January 1, 2004. The policies provided coverage for claims made during the policy period based on medical incidents occurring after the policies' retroactive date, and Septak's surgery was after the retroactive date of RWJ's coverage. In fact, Lexington defended and indemnified RWJ and Dr. Sison in Septak's malpractice case.

Dr. Kumar received a defense and indemnification in Septak's action under a policy issued by Professional Underwriters Liability Insurance Company (PULIC) that RWJ obtained, but that coverage was insufficient. When the magnitude of Septak's claim became apparent, her attorney inquired about excess coverage for Dr. Kumar under Lexington's excess policy. He made the first inquiry in January 2006.

Lexington did not disclaim coverage for Dr. Kumar until June 3, 2007. Lexington's disclaimer was based on a schedule of physicians, allegedly the schedule determinative of coverage for physicians employed by RWJ under the policy terms. That schedule stated that Dr. Kumar's coverage was effective and retroactive to January 6, 2003, twenty-five days after the Septak event.

Before Septak's December 12, 2002 surgery, RWJ retained Aon to develop and market an insurance plan that would meet its needs. Aon contacted Lexington to negotiate RWJ's coverage. At that time, RWJ had a liability policy with Princeton Insurance Company (Princeton) that was due to expire at the end of December 2002.

The Princeton policy and Lexington's standard policies had different coverage requirements. Under Princeton's policy compensable events that occurred during the period of Princeton's policy were not covered unless the claimant made a written demand for compensation within the policy period. Under Lexington's standard policy, "claims made" during the policy period were covered but only if the compensable medical event occurred during the policy period.

Those involved in the negotiation of RWJ's coverage with Lexington were aware that there would be a gap in coverage for compensable incidents that occurred during Princeton's policy period for which no demand was made until the Princeton policy expired. Consequently, representatives of Lexington, RWJ, and RWJ's expert, Aon, negotiated for a policy that would cover potentially compensable events (PCEs) identified by RWJ that would fall within the coverage gap. The solution they agreed upon was to give the policies a retroactive date that would cover the PCEs.

The negotiations continued past January 1, 2003, the date the policy period commenced. Lexington's regional manager, Jack Lewkowitz, did not quote a premium for coverage of the PCEs until he had a telephone conference to discuss the PCEs with Aon's account manager, Donna Vible, and RWJ's risk management director, Jan Stout. That conference was held in the first week of January 2003. The Septak surgery was one of the PCEs they discussed. Lewkowitz admittedly knew that the Septak surgery was to be covered, was aware of Dr. Kumar's involvement and fixed the premium for the PCEs on the assumption that all RWJ employees involved would be covered. On January 6, 2003, Lewkowitz quoted a premium of $375,675 for excess coverage of the PCEs, which RWJ accepted.

Deposition testimony given by Lewkowitz, of Lexington, and Vible, of Aon, demonstrates that they had a common understanding of the retroactive date for physicians - the doctor's date of employment. Vible understood that the date for a doctor is "the day the doctor starts working." Lewkowitz understood that "employed physicians were covered," subject to the language of the policy. Stout's testimony indicated she understood "retroactive date" to mean "[t]he date on which coverage was needed."

Lexington issued RWJ two policies that are pertinent here. Policy 5495630, "HEALTHCARE PROFESSIONAL LIABILITY [(HPL)] - CLAIMS MADE AND HEALTHCARE GENERAL LIABILITY - OCCURRENCE," and policy 5495631, "EXCESS HEALTHCARE PROFESSIONAL LIABILITY -CLAIMS MADE AND HEALTHCARE UMBRELLA LIABILITY - OCCURRENCE." The policy period for both is from January 1, 2003 to January 1, 2004.

The declarations page for 5495630 explains: "Claims made coverage is limited to liability for claims first made against an insured during the policy period or any extended reporting period, if applicable." It also indicates that the named insured is Children's Specialized Hospital and that ...

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