Bodily Injury Exclusion Does Not Apply to Wrongful Death Action
Somerset Medical Center v. Executive Risk Indemnity Inc. (Sup. Ct. N.J., Mar. 22, 2010)
Defendant Executive Risk Indemnity Inc. (ERII) issued Somerset Medical Center a Directors, Officers & Trustee’s Liability Insurance Including Health Care Organization Reimbursement Policy. Somerset sought coverage under this policy for a series of underlying lawsuits in which nurse Charles Cullen pleaded guilty to committing 29 murders and 6 attempted murders at various health care facilities, including Somerset. The allegations in the “master complaint” resulting from the consolidated tort actions alleged that Somerset and its officers were guilty of negligent hiring, negligent supervision and entrustment, negligent reporting and negligent continuation of employment. ERII denied coverage based on the policy exclusion precluding coverage for claims “arising out of” bodily injury.
The court stated that the underlying plaintiffs sued Somerset and its officers for negligence, a claim that fell within the category of protection Somerset sought when purchasing the insurance. The court stated that it was reasonable to assume that there was an expectation by the insured of coverage for the underlying claim and that expectation of coverage was particularly reasonable here where the insured enterprise is a hospital, rather than some other institution that does not care for sick people and assumes the risks inherent in that responsibility. Accordingly, the court held that the bodily injury exclusion did not bar coverage for the underlying lawsuits.
Impact: The court relied heavily upon a previous decision wherein it held that coverage existed under similar circumstances. In short, the court appears to be applying a rationale by which the bodily injury exclusion does not apply where the alleged bodily injury and/or death is alleged to have resulted from the professional negligence of the policyholder (i.e. negligent supervision, etc.) One could argue that this serves as a reminder of courts’ reluctance to eliminate coverage for a policyholder based upon the clearly abhorrent acts of an employee.
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