Why it matters
The West Virginia Supreme Court recently determined that a malpractice insurer must pay an additional $3 million toward pelvic mesh implants claims where the policy at issue did not provide that limits available to the insured surgeon must be shared with his former medical practice. In so holding, the court relied on policy language indicating that the limits available to the surgeon applied only to the surgeon, and that the medical practice had separate limits available under the policy. As demonstrated by this case, policyholders would be well-advised to review their policy language carefully (even the boilerplate) to ensure that it provides for the coverage they think they are purchasing.
Twenty-three former patients sued Dr. Mitchell E. Nutt, a surgeon who implanted transvaginal mesh devices in the plaintiffs in 2006 and 2007. They also asserted vicarious liability claims against United Health Professionals (UHP), the medical corporation where Dr. Nutt worked at the time the surgeries were performed.
The parties reached a global settlement in 2011 under which UHP’s insurer, West Virginia Mutual Insurance Company, paid $3 million pursuant to “tail” coverage in an extended reporting endorsement that UHP purchased when Dr. Nutt left UHP in 2008. The endorsement provided for $1 million per covered medical incident, with a $3 million annual aggregate limit.
Not resolved in the global settlement was plaintiffs’ assertion that separate coverage was available under the West Virginia Mutual policy for the claims against UHP. Plaintiffs filed a declaratory judgment action against West Virginia Mutual seeking additional proceeds under the policy. In defense, West Virginia Mutual asserted that UHP and Dr. Nutt shared the $3 million aggregate limit under the policy. And if the court found otherwise, West Virginia Mutual asserted, then a mutual mistake had occurred in the underwriting process that warranted an equitable reformation of the policy.
The West Virginia Supreme Court rejected both of West Virginia Mutual’s arguments. As to the single-limit argument, the court looked to “plain and unambiguous” policy language providing that “[t]he limit of insurance specified in the policy declarations for each insured as the ‘annual aggregate’ is the total limit of the Company’s liability for damages for that insured resulting from all covered medical incident(s) during the policy period” (emphasis added). Moreover, the court noted, UHP had requested “separate” policy limits in the amount of “$1,000,000/$3,000,000.” Thus, the court opined, “there is nothing in Dr. Nutt’s tail coverage to indicate that UHP would share in his separate limits of coverage.”
In addition, the court recognized, “Dr. Nutt’s extended reporting endorsement provides that he will be covered for ‘any medical incident which occurred on or after the retroactive date’ and during his employment with UHP. . . . The extended reporting endorsement further reflects that Dr. Nutt is the sole insured thereunder, providing as follows: ‘Name: Mitchell E. Nutt, MD; Retroactive Date: 10/28/2002; Each Medical Incident: $1,000,000; Aggregate: $3,000,000.’”
“Indisputably, no other insured is listed on this extended reporting endorsement as sharing in Dr. Nutt’s limits, or otherwise,” the court opined, noting that prior policies issued by West Virginia Mutual for UHP included both separate limits and shared limits for various insureds. “Critically, there is no such sharing designation in Dr. Nutt’s tail coverage and no sharing designation for UHP in the 2010 Policy.”
As to the claim for reformation, the court held that if mistakes were made in the underwriting process, they were attributable to West Virginia Mutual, not UHP. Because clear policy language must be enforced as written, and because West Virginia Mutual clearly was a “sophisticated party” as to insurance matters, there was no legitimate basis for rewriting the policy.
Thus, the court held, the policy was subject to two separate $3 million aggregate limits – one for Dr. Nutt and another for UHP.
To read the opinion in West Virginia Mutual Insurance Co. v. Adkins, click here.