Lexington Insurance v. Western Pennsylvania Hospital ( 2005 )

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
9-9-2005
Lexington Ins Co v. W PA Hosp
Precedential or Non-Precedential: Precedential
Docket No. 04-1642
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-1642
LEXINGTON INSURANCE COMPANY
v.
WESTERN PENNSYLVANIA HOSPITAL; ELIZABETH
LIEB; HARRY LIEB, h/w, Parents, and Natural Guardians of
KATHRYN LIEB, a Minor
Western Pennsylvania Hospital,
Appellant
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 03-cv-1675)
District Judge: Honorable Thomas M. Hardiman
Argued June 7, 2005
Before: FUENTES, VAN ANTWERPEN, and BECKER,
Circuit Judges.
(Filed: September 9, 2005)
OPINION OF THE COURT
THOMAS E. BIRSIC (ARGUED)
CHARLES E. McCHESNEY II
Kirkpatrick & Lockhart LLP
Henry W. Oliver Building
535 Smithfield Street
Pittsburgh, PA 15222
Attorneys for Appellant
EDWARD B. WOOD
Wood Group, P.C.
Two Chatham Center, Suite 1050
Pittsburgh, PA 15219
Attorney for Appellant
STEPHEN A. COZEN (ARGUED)
DEBORAH M. MINKOFF
NANCY STUART PORTNEY
Cozen O’Connor
1900 Market Street
Philadelphia, PA 19103
Attorneys for Appellee
BECKER, Circuit Judge.
Lexington Insurance Company (“Lexington”) sought a
declaratory judgment in the District Court that it is not liable for
payment of a medical malpractice claim against its insured,
Western Pennsylvania Hospital (“West Penn”), because West Penn
notified Lexington of the claim more than a year and a half after
the policy period ended. The District Court found for Lexington,
determining that the claim was governed by Lexington’s excess
coverage provision created by Endorsement #007 of the policy,
which provides follow-form, claims-made coverage; and that the
policy required West Penn to notify Lexington of any claims before
the close of the policy period, which it failed to do.
West Penn relies on Endorsement #001, which provided that
the Lexington policy would apply immediately over the coverage
limit of the Pennsylvania CAT Fund (described infra p.4). West
Penn contends that Endorsement #007 and Endorsement #001 are
mutually exclusive, such that, where, as here, the CAT Fund took
responsibility for paying the underlying claim, the notice provisions
2
contained in Lexington’s occurrence policy—which permits a more
flexible time limit for reporting claims than under Endorsement
#007—should apply instead of Endorsement #007’s notice
provisions. The District Court, however, rejected West Penn’s
argument that Endorsement #001 superseded Endorsement #007,
and held that West Penn’s failure to timely report the claim relieves
Lexington of liability under the terms of the policy. For the
reasons that follow, we agree with the District Court that the two
Endorsements are complementary and not exclusive, and that
Endorsement #007’s time bar applies.
In view of this conclusion, this appeal turns on whether
West Penn gave Lexington notice of the claim during the policy
period. West Penn’s General Counsel admitted that she did not
report the Lieb claim until February 12, 2003, well after the policy
period, and the first correspondence in the record between West
Penn and Lexington regarding the Lieb claim is a letter dated
February 12, 2003. Nevertheless, West Penn relies on an internal
Lexington document, called an “HPL Create Sheet,” which
contained a notation that arguably suggests that West Penn reported
the medical malpractice claim to Lexington during the policy
period. While we find this document to be (barely) admissible
evidence, notwithstanding strong objections to it on authentication
and hearsay grounds, we conclude that its probative value is too
slight to enable West Penn to survive summary judgment.
Neither is West Penn’s notice contention supported by the
speculative affidavit and deposition testimony of West Penn’s then-
Assistant General Counsel, Karen Barringer, who merely assumed
that Lexington had been made aware of the claim. This absence of
evidence, coupled with the concession of West Penn’s General
Counsel that West Penn did not provide notice during the policy
period, compels the conclusion that a reasonable jury could not find
compliance with the notice requirement. We will therefore affirm
the order of the District Court granting summary judgment in favor
of Lexington.
I. Factual and Procedural Background
On May 25, 2001, Elizabeth and Harry Lieb filed a medical
3
malpractice claim in state court against West Penn, alleging that,
eleven years earlier, the Lieb’s daughter, Kathryn, suffered long-
term brain damage as a result of West Penn’s negligent delay in
performing a caesarean section. West Penn submitted a “Notice of
Claim” to its primary professional liability insurer, PHICO
Insurance Company (“PHICO”), under the terms of its policy.
PHICO provided West Penn with institutional professional liability
coverage for medical incident claims made against West Penn and
reported to PHICO between January 1, 2001, and January 1, 2002
(“the PHICO policy”).
The PHICO policy was a “claims-made” policy, which
provided coverage for any claim actually reported during the policy
period, even if the incident occurred in prior years. See St. Paul
Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 535 n.3 (1978).
The PHICO policy states that it will pay for damages “caused by
a medical incident which occurs on or after the Initial Effective
Date . . . and for which claim is reported to Company during the
policy period.” (emphasis added).
PHICO, however, did not ultimately pay the Lieb claim
because it referred the matter to the Medical Professional Liability
Catastrophe Fund (“the CAT Fund”), which is governed by the
Pennsylvania Health Care Services Malpractice Act, 40 Pa. Stat.
Ann. § 1301.101 et. seq. When a claim is made against a health
care provider more than four years after the incident giving rise to
the claim, the CAT Fund takes responsibility, in the place of a
primary insurer, for defending the claim and for indemnifying the
health care provider for the first one million dollars. Such claims
are commonly referred to as “605 claims.” Because the Lieb claim
was asserted more than four years after the occurrence giving rise
to it, the CAT Fund assumed PHICO’s responsibility for defending
West Penn in the ensuing litigation. As it emerged, however, the
damages resulting from the Lieb claim exceeded the one million
dollars of CAT Fund coverage.
During this same period, Lexington provided two types of
4
coverage to West Penn.1 First, it provided liability coverage on an
occurrence basis as set forth in Lexington’s pre-printed policy
form (“Lexington’s occurrence policy”). In contrast to a claims-
made policy, an occurrence policy provides coverage if the
incident giving rise to the claim occurred during the policy period,
regardless of when the claim is ultimately brought against the
insured, provided the claim is reported to the insurer “as soon as
practicable.” See City of Harrisburg v. Int’l Surplus Lines Ins.
Co., 596 F. Supp. 954, 960-61 (M.D. Pa. 1984), aff’d w/o opinion
770 F.2d 1067 (3d Cir. 1985).
Second, Lexington provided excess coverage for medical
professional liability over and above the primary insurer’s policy
limits (“Lexington’s excess policy”). This expansion of coverage
was effected by Endorsement #007 which provided excess
coverage to West Penn on proof that it had purchased primary
medical liability coverage. This excess policy was, by its terms,
“follow-form, claims-made” coverage, meaning that the Lexington
policy incorporated the terms and conditions of the primary
PHICO policy for medical malpractice claims. As mentioned
above, the PHICO policy extended coverage to claims that were
both “made and reported” during the policy period, even if the
injury occurred prior to the policy period. Because the Lieb claim
exceeded the coverage limits under the CAT Fund and the PHICO
policy, Lexington’s excess policy was implicated.
Endorsement #007 of the Lexington Policy provided, in
relevant part:
Medical Professional Liability–Follow Form
PROVIDES CLAIMS-MADE COVERAGE—PLEASE
READ CAREFULLY
....
Insuring Agreement IA–Medical Professional Liability
Coverage
1
The Lexington policy consists of a Declarations page, a
Forms Schedule, a Schedule of Underlying Insurance, a pre-
printed policy form, and twelve endorsements.
5
Insofar as coverage is available to the Insured in
the underlying insurance as set forth in the Schedule of
Underlying Insurance, this policy applies to liability
arising out of medical incidents. All of the terms and
conditions of said underlying insurance shall apply to this
insuring agreement except as otherwise expressly stated
herein.
The dispute on appeal arises out terms of Endorsement #007 and
the interplay between Endorsement #007 and Endorsement #001,
described below.
The 2001 Lexington Policy expired on December 31, 2001.
On the last day of the PHICO and Lexington policy period, West
Penn advised Lexington of 23 claims, but Lexington contends that
the Lieb claim was not among those discussed. Lexington submits
that West Penn did not give notice of the Lieb claim until February
12, 2003, more than a year after the policy ended. As West Penn
failed to notify Lexington of the Lieb claim until after the policy
terminated, Lexington asserts it should not be required to cover the
claim.
Lexington filed suit against West Penn seeking a
declaratory judgment that it could deny coverage for the Lieb
claim. On cross-motions for summary judgment, the District Court
granted summary judgment for Lexington. The District Court held
that the Lexington insurance policy was unambiguous in requiring
West Penn to provide notice of medical malpractice claims during
the policy period, as required by Endorsement #007’s follow-form,
claims-made language. Because the Court found that West Penn
had conceded that it did not report the Lieb claim to Lexington
until February 12, 2003, it held as a matter of law that Lexington
was not required to cover the claim. West Penn timely moved for
reconsideration, which was denied.
West Penn appeals the District Court’s grant of summary
judgment, asserting that (1) the Lexington policy did not require
notice of the claim to be given during the life of the policy; and
alternatively, that (2) there was a genuine issue of material fact as
to whether West Penn gave Lexington notice prior to December
6
31, 2001. We describe the basis for jurisdiction and our standard
of review in the margin.2
II. Was West Penn Required to Give Notice During the
Policy Period?
A.
West Penn disputes that it was required to give notice to
Lexington during the policy period. As this is a diversity case, we
must apply Pennsylvania law to interpret the Lexington policy.
Under Pennsylvania law, the interpretation of an insurance
contract is a matter of law for the court. Madison Constr. Co. v.
Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999). “Where
a provision of a policy is ambiguous, the policy provision is to be
construed in favor of the insured and against the insurer, the
drafter of the agreement. Where, however, the language of the
contract is clear and unambiguous, a court is required to give effect
to that language.” Id. (quoting Gene & Harvey Builders, Inc. v.
Pennsylvania Mfrs.’ Ass’n, Ins. Co. 517 A.2d 910, 913 (1986)).
2
The District Court had diversity jurisdiction pursuant to 28
U.S.C. § 1332(a), as the amount in controversy exceeds $75,000
and the citizenship of the parties is diverse—Lexington is a
Delaware corporation with its principal place of business in
Massachusetts, and West Penn is a Pennsylvania corporation with
its principal place of business in Pennsylvania. We have appellate
jurisdiction pursuant to 28 U.S.C. § 1291.
Our review of a grant of a summary judgment motion is
plenary, and we apply the same standard as the District Court:
Summary judgment is appropriate only where, drawing all
reasonable inferences in favor of the nonmoving party, “there is no
genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The
moving party has the initial burden of “informing the district court
of the basis for its motion.” Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). Once the moving party has met this burden, however,
the nonmoving party must identify, by affidavits or otherwise,
specific facts showing that there is a genuine issue for trial. Id.7
“Contractual language is ambiguous ‘if it is reasonably susceptible
of different constructions and capable of being understood in more
than one sense.’” Id. (quoting Hutchison v. Sunbeam Coal Corp.,
519 A.2d 385, 390 (1986)).
West Penn’s primary argument is that Endorsement #007’s
follow-form provision does not apply to the Lieb claim because the
CAT Fund substituted for PHICO in this case. West Penn first
points to the portion of Endorsement #007 that provides, “[i]nsofar
as coverage is available to the Insured in the underlying
insurance,” to argue that Endorsement #007’s follow-form
provision only applies when the underlying medical malpractice
claim is actually paid by the primary policy. West Penn contends
that since the CAT Fund assumed responsibility for the Lieb claim,
coverage was not “available” under the PHICO policy, and thus
Endorsement #007 does not apply.
Additionally, West Penn points to Endorsement #001,
which it contends renders Endorsement #007, and thus terms of the
PHICO policy, inapplicable to “605 claims” like the Lieb claim.
Endorsement #001, entitled “Coverage Amendment—Section 605
Claims,” provides:
In the event underlying insurance shall not be
applicable to any claim for the reason that the [CAT]
Fund shall assume or be required to assume primary
responsibility for payment . . . ,coverage under this
policy as to such claim shall apply as excess
immediately over the limit of liability of the [CAT]
Fund.
All other terms and conditions remain unchanged.
West Penn argues that Endorsement #007 and Endorsement #001
are mutually exclusive provisions, such that, where the CAT Fund
assumes responsibility for payment, the notice provisions
contained in Lexington’s occurrence policy, rather than PHICO’s
notice requirements, should control.
Condition F of the pre-printed form, see supra note 1, sets
8
forth the notice provisions for Lexington’s occurrence policy.
Entitled “Duties In The Event Of An Occurrence, Claim Or Suit,”
Condition F states that West Penn must notify Lexington “as soon
as practicable of an Occurrence which may result in a claim under
this policy.” Relying on Condition F, West Penn contends that it
was required to report the Lieb claim “as soon as practicable,”
rather than during the policy period, as would have been required
under the PHICO policy.
Lexington responds that Endorsement #001 and #007 are
complementary, not exclusive, and that the policy must be read as
a whole so as to give effect to both Endorsements. In Lexington’s
submission, the purpose of Endorsement #007 was to provide
medical professional liability coverage to West Penn so long as
West Penn purchased primary coverage. Endorsement #001, it is
contended, served a different purpose: it recognized that § 605
claims, like the Lieb claim, are particularly susceptible to “drop
down” coverage disputes because the indemnity available from the
CAT Fund may be less than the underlying policy’s limits.3
Endorsement #001 avoids this problem by providing that
“coverage under this policy as to such claim” will apply “as excess
immediately over the limit of liability” of the CAT Fund; it does
not, however, negate the policy requirements applicable to medical
professional liability coverage.
The District Court found Lexington’s arguments persuasive,
holding:
Although the Court agrees that Endorsement #001 requires
3
A “drop down” coverage dispute arises when an excess
liability insurance carrier disputes its duty to “drop-down” in order
to provide coverage below the primary insurer’s policy limits.
Such disputes are common when the primary insurer becomes
insolvent, see, e.g., J. Kinderman & Sons, Inc. v. United Nat. Ins.
Co., 593 A.2d 857, 858 (Pa. Super. Ct. 1991), but also could occur
when the CAT Fund takes responsibility for a claim and provides
less coverage than the primary policy.
9
Lexington to provide umbrella coverage to West Penn for
liability over the CAT Fund’s limit, nothing in Endorsement
#001 suggests that Endorsement #007 is ineffective when
Endorsement #001 is implicated. Contrary to West Penn’s
claims, . . . these two endorsements are complementary.
Endorsement #007 requires Lexington to provide excess
claims-made professional liability coverage while
Endorsement #001 makes explicit that Lexington remains
liable for coverage even if the CAT Fund supplants PHICO
as underlying insurer.
In support of this conclusion, the District Court also reasoned that
of Condition F’s “‘occurrence’ language,” which permits reporting
a claim “as soon as practicable of an Occurrence which may result
in the claim under this policy,” would be “inconsistent with the
follow form, claims made language in Endorsement #007 and the
PHICO policy,” which would clearly require reporting during the
policy period.
B.
We agree with the District Court that the logical reading of
the Lexington policy is to find Endorsement #001 and #007 to be
complementary rather than mutually exclusive. First, we look to
the plain language of Endorsement #007. See Reliance Ins. Co. v.
Moessner, 121 F.3d 895, 901 (3d Cir. 1997) (“If . . . the terms of
the policy are clear and unambiguous, the general rule in
Pennsylvania is to give effect to the plain language of the
agreement.”). Endorsement #007 is titled “Medical Professional
Liability—Follow Form” and it states in all capital letters
“PROVIDES CLAIMS-MADE COVERAGE—PLEASE READ
CAREFULLY.” This provision makes clear that medical
malpractice coverage was provided in a follow-form, claims-made
fashion.
Moreover, Endorsement #007 states that any exceptions to
this follow-form coverage would need to be “expressly stated.”
Endorsement #001 does not appear to constitute such an express
exception to Endorsement #007, given that Endorsement #001
does not directly mention Endorsement #007 or its follow-form
10
notice requirement, nor does Endorsement #001 clearly implicate
the terms of Endorsement #007. Thus, the absence of an express
exception in Endorsement #001 bolsters reading Endorsement
#007 and #001 as complementary rather than mutually exclusive.
See Pa. Dept. of Transp. v. Manor Mines, Inc., 565 A.2d 428, 432
(Pa. 1989) (“[E]ffect must be given to all provisions in the
contract.”).
Second, it would strain both logic and insurance industry
practice to extend Condition F’s “as soon as practicable” notice
provision to § 605 claims like the Lieb claim. As the District
Court recognized, Condition F clearly speaks in terms of
occurrence-based, not claims-made, coverage. Lexington’s pre-
printed policy form provides only occurrence-based coverage,
which is clearly inapplicable to the Lieb claim, where the incident
giving rise to the claim occurred in 1989 or 1990, well before the
effective date of the Lexington policy. Thus, Lexington
persuasively argues, “West Penn’s proffered interpretation renders
Endorsement #001 nonsensical because the remaining ‘Lexington
Policy terms and conditions’ would not provide coverage for the
Lieb claim—or indeed any claim assumed by the CAT Fund.”
That is because, by its very nature, the CAT Fund only covers
claims that occur more than four years prior to the claim, while an
occurrence policy covers only those incidents that occur during the
policy period.
To extend Condition F’s occurrence-based notice
provisions to a claim that occurred eleven years prior to the policy
period would make little sense given the important differences in
the role played by claims-made and occurrence-based policies for
both the insurer and the insured. We have noted the importance of
these distinctions:
Notice provisions serve different purposes in
occurrence and claims-made policies. In an
occurrence policy, notice provisions are included to
help the insurer investigate, settle, and defend claims;
they do not define coverage . . . . “By contrast, the
event that invokes coverage under a ‘claims made’
policy is transmittal of notice of the claim to the
11
insurance carrier . . . . Thus, an extension of the
notice period in a ‘claims made’ policy constitutes an
unbargained-for expansion of coverage, gratis,
resulting in the insurance company’s exposure to a
risk substantially broader than that expressly insured
against in the policy.”
Claims-made policies are less expensive
because underwriters can calculate risks more
precisely since exposure ends at a fixed point.
Extension of time periods would significantly
increase both the risk to insurers and the cost to
insureds. If the potential exposure period is extended
. . . claims-made policies must necessarily become
more expensive.
American Cas. Co. v. Continisio, 17 F.3d 62, 68-69 (3d Cir. 1994)
(quoting Zuckerman v. National Union Fire Ins. Co., 495 A.2d
395, 406 (1985)) (internal citations omitted). By providing claims-
made coverage for medical professional liability, Endorsement
#007 establishes a category of coverage not available under
Lexington’s occurrence policy because occurrence-based policies
do not cover claims, like the Lieb claim, where the incident giving
rise to the claim occurred before the policy period.
Furthermore, under West Penn’s proposed interpretation of
the policy, Endorsement #001 would expand the coverage under
Lexington’s occurrence policy to claims that occurred more than
four years prior to the policy date and would allow West Penn to
report such claims after the policy period. Such an expansion of
coverage would give West Penn the best of both the occurrence
and claims-made worlds when it comes to “605 claims.” The
language of Endorsements #001 and #007 does not support this
result.
In contrast to West Penn’s strained reading of Endorsement
#001, we note Endorsement #001’s obvious and significant
purposes: (1) to ensure that the excess policy would still apply in
the event that the CAT Fund assumed liability, and (2) to prevent
a dispute in the event that the CAT Fund payment limits are lower
than PHICO’s policy limits. Indeed, West Penn does not address
12
what appears to be the operative portion of Endorsement #001,
which provides that “coverage under this policy as to such claim
shall apply as excess immediately over the limit of liability of the
[CAT] Fund.” Thus, the District Court’s interpretation is the most
logical reading of the policy: Endorsement #001’s purpose is
simply to make clear that the excess claims-made coverage will
apply in the event the CAT Fund takes responsibility for payment
of a claim.4
Notwithstanding this conclusion, we acknowledge the facial
appeal of West Penn’s argument that the introductory phrases of
Endorsements #007 and #001 render the Endorsements mutually
exclusive. Endorsement #007 states that it applies only “[i]nsofar
as coverage is available. . . in the underlying insurance.”
Endorsement #001, on the other hand applies “[i]n the event the
underlying insurance shall not be applicable to any claim for
reason that the [CAT] Fund shall assume or be required to assume
primary responsibility for payment . . . .” West Penn contends that,
where the CAT Fund assumes responsibility for payment,
Endorsement #007 must not apply, because if Endorsement #007
applied even when the primary insurer did not actually pay the
claim, the phrase “[i]nsofar as coverage is available” would be
stripped of meaning.
In response, Lexington notes that the language of the two
phrases differs: Endorsement #007 uses the word “available”
while Endorsement #001 uses the word “applicable.” Lexington
contends that the PHICO policy may be generally “available”
4
The dissent suggests that we have read in the claims-made
reporting requirement because § 605 claims “must be timely
reported the CAT fund.” Contrary to the dissent’s
characterization, our conclusion that the Lieb claim was governed
by Endorsement #007 was not driven by the fact that the CAT
Fund is itself based on a claims-made model, for the reporting
procedures for the CAT Fund have nothing to do with the
reporting requirements under the Lexington policy. Rather, our
opinion is driven by the language and structure of the Lexington
policy itself.
13
even in situations where such insurance is not “applicable” to a
specific claim because the CAT Fund took over responsibility for
paying that claim. Lexington provides several other examples of
when the PHICO policy would be available but not applicable to
a specific claim, such as where the medical liability arose out of a
criminal act or where PHICO did not have to pay because of its
exhaustion limits. This reading highlights the important principle
of Pennsylvania contract law, which requires courts to give effect
to all of the language of the agreement whenever possible. See
Manor Mines, Inc., 565 A.2d at 432. Particularly in light of the
foregoing discussion and the difficulties inherent in West Penn’s
approach, we accept Lexington’s distinction between the terms
“available” and “applicable,” and find Endorsement #007 to
govern the notice requirement for 605 claims.
Lastly, West Penn argues that even if the District Court’s
interpretation was reasonable, the agreement was ambiguous, and
under Pennsylvania law, ambiguities should be resolved in favor
of coverage. As we have explained, however, we do not believe
the policy is ambiguous as to the notice requirements under the
policy. See Bohler-Uddeholm America, Inc. v. Ellwood Group,
Inc., 247 F.3d 79, 93 (3d Cir. 2001) (“[A] contract is not rendered
ambiguous by the mere fact that the parties do not agree on the
proper construction.” (quoting Duquesne Light Co. v.
Westinghouse Elec. Corp., 66 F.3d 604, 614 (3d Cir.1995)).
Therefore, we hold that West Penn was required to abide by the
PHICO policy’s notice provisions, which required West Penn to
report the Lieb claim during the policy period.5
5
We also reject West Penn’s reliance on Brakeman v.
Potomac Ins. Co., 371 A.2d 193, 194 (Pa. 1977), which held that
an insurer must show prejudice before it can deny coverage based
on untimely notice, because we have determined that the Lieb
claim is governed by a claims-made rather than an occurrence
policy. While Pennsylvania courts have not directly addressed this
issue, the available precedent has consistently held that the
Brakeman rule is not applicable to claims-made policies. See, e.g.,
Pizzini v. Am. Int’l Specialty Lines Ins. Co., 210 F. Supp. 2d 658,
669 (E.D. Pa. 2002); Borish v. Britamco Underwriters, Inc., 869 F.
14III. Was Notice Given to Lexington During the
Policy Period?
West Penn argues that even if the Lexington policy required
notice of the Lieb claim to be given during the policy year, there is
a genuine issue of material fact whether West Penn gave Lexington
notice prior to December 31, 2001. The District Court did not
engage this argument, stating only that West Penn “concedes that
it did not report the Lieb claim to Lexington until February 12,
2003.”
There is certainly evidence to support the District Court’s
supposition that West Penn conceded its failure to report the Lieb
claim during the policy period. West Penn’s General Counsel,
Paula Hooper, admitted in her affidavit that she did not provide
notice until February 12, 2003. Moreover, the first written
communication in the record that mentions the Lieb claim is a
letter from the Hooper to Lexington dated February 12, 2003.
West Penn, however, points to two pieces of evidence
which it contends establish a genuine issue that the Lieb claim was
reported during the policy period: an internal Lexington document,
called an HPL Create Sheet, and the deposition testimony of West
Penn’s Assistant General Counsel, Karen A. Barringer.
A. The HPL Create Sheet
Supp. 316, 319 (E.D. Pa. 1994); City of Harrisburg, 596 F. Supp.
at 960-61. We are persuaded that the Pennsylvania Supreme Court
would not extend the Brakeman rule to claims-made policies
because such an extension of the notice period would defy the very
purpose of a claims-made policy—that the claim be reported
during the policy period. See Continisio, 17 F.3d at 69 (“[A]n
extension of the notice period in a ‘claims made’ policy constitutes
an unbargained-for expansion of coverage, gratis, resulting in the
insurance company’s exposure to a risk substantially broader than
that expressly insured against in the policy.” (quoting Zuckerman
v. National Union Fire Ins. Co., 495 A.2d 395, 406 (Pa. 1985)).
15
The “HPL Create Sheet” consists of a printed form, which
has been filled out with handwritten notations, providing
information such as the name of the insured, the claimant, the
policy number, and a space for description of the loss. The form
is dated August 20, 2003, and specifically refers to the Lieb claim.
The key portion of the form, for our purposes, is a entry which
originally read “Date of Loss.” That phrase has been crossed out
and “Date of RPT 12-31-01” is handwritten.
The only evidence in the record regarding the nature and
purpose of this document is the deposition testimony of Denzil R.
White, an employee of a Lexington affiliate, AIG Technical
Services (“AIGTS”), who had been responsible for assembling
documents produced in response to West Penn’s discovery
requests. White testified as follows:
Q. What is an “HPL Create Sheet”?
A. It’s used by the department to get information
about the claim and policy information to create the
claim on our system.
Q. This is the cover sheet that you use to give to your
data processing people so that they would open files
in Toolkit and LMS; isn’t that right?
....
A. Yes.
....
Q. Do you complete these?
A. No.
Q. These are completed by the director, to your
knowledge?
A. To my knowledge, yes.
Q. Can you identify this handwriting as the
handwriting of Mr. Ruane?
A: I am not sure.
....
Q. Do you have any reason to believe that “RPT”
does not signify report?
....
A. I don’t know what it means.
Q. Have you made any inquiry of anybody to
16
determine who wrote that and what it means?
A. No.
....
Q. Do you see the date at the top?
A. Yes.
Q. That is August 23, 2003, is it not?
A. Yes.
Q. Do you have any reason to believe that that is
anything other than the date that this document was
drafted and placed in your files?
A. I am not sure.
As a threshold matter, Lexington claims that the HPL
Create Sheet is inadmissible either because it cannot be properly
authenticated or because it is hearsay and not within any exception
to the hearsay rule. We find, however, that the document is likely
to be admissible. Nevertheless, the probative value of this
document is insufficient to withstand summary judgment.
1. Authentication
While the point is extremely close, we conclude that the
HPL Create Sheet meets the minimal requirements for
authentication under Federal Rule of Evidence 901(a). Rule
901(a) states: “The requirement of authentication or identification
as a condition precedent to admissibility is satisfied by evidence
sufficient to support a finding that the matter in question is what
its proponent claims.” We have repeatedly noted that “[t]he
burden of proof for authentication is slight.” McQueeny v.
Wilmington Trust Co., 779 F.2d 916, 928 (3d Cir. 1985); see also
Link v. Mercedes-Benz of North America, 788 F.2d 918, 927 (3d
Cir. 1986). In Link, we elaborated on the standard for
authentication of documents:
[T]he showing of authenticity is not on a par with
more technical evidentiary rules, such as hearsay
exceptions, governing admissibility. Rather, there
need be only a prima facie showing, to the court,
of authenticity, not a full argument on
17
admissibility. Once a prima facie case is made, the
evidence goes to the jury and it is the jury who
will ultimately determine the authenticity of the
evidence, not the court. The only requirement is
that there has been substantial evidence from
which they could infer that the document was
authentic.
788 F.2d at 928.6 Applying this standard, in United States v.
McGlory, 968 F.2d 309 (3d Cir. 1992), we held that handwritten
notes met Rule 901’s standard for authentication even though a
handwriting expert could not definitely determine that the notes
were in the defendant’s writing, finding that the circumstantial
evidence linking the notes to the defendant was sufficient. For
example, we relied on the fact that the notes were found in the
trash outside the defendant’s residence, some of the notes were on
paper from a notebook found in defendant’s home, and the
contents of the notes were consistent with defendant’s use of
initials and other code words. Id. at 330-31.
When we combine White’s testimony with the
circumstantial evidence of the authenticity of the document, in
particular the fact that it was produced by Lexington pursuant to
discovery requests, we believe that there is a sufficient foundation
for a jury to determine that this document is what it is purported to
be: a Lexington HPL Create Sheet. See McQueeney, 779 F.2d at
929 (“[T]he fact that the copies were produced by the plaintiff in
answer to an explicit discovery request for his Sea Service
Records, while not dispositive on the issue of authentication, is
surely probative.”); In re Japanese Elec. Prods. Antitrust Litig.,
723 F.2d 238, 286 (3d Cir. 1983), rev’d on other grounds, 475
U.S. 574 (1986) (“[The exhibits] have the appearance, content, and
substance typical of [board] minutes. They were produced by the
6
Our Court has not precluded reliance on unauthenticated
documents to oppose a motion for summary judgment, so long as
they are ultimately “reduc[ible] to admissible evidence.” Williams
v. Borough of West Chester, 891 F.2d 458, 466 n.12 (3d Cir. 1989)
(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986)).
18
defendants pursuant to a discovery order in this proceeding. They
come from a source where such minutes are likely to be kept . . .
. No more evidence was needed to establish a prima facie case of
authenticity than the record contains.”) (citations omitted); see also
Burgess v. Premier Corp., 727 F.2d 826, 835-36 (9th Cir. 1984)
(holding that evidence found in defendant’s warehouse was
adequately authenticated simply by its being found there).
While it is troubling to us that the author of the handwritten
notations remains unknown, and that White could not be sure of
correct date, there does not appear to be any genuine dispute that
the HPL Create Sheet was filled out by a Lexington employee for
the purpose for which this sheet is typically used, i.e., to search for
data on a claim.
The real controversy between the parties on this issue
relates to what the document purports to be (or more particularly,
what it tends to prove). In Lexington’s submission, the document
is “evidence only of the HPL Create Sheet itself, not at all proof
that West Penn reported the Lieb claim to Lexington during the
policy period.” But for authentication purposes, Rule 901(a) does
not require the document to be probative of a particular fact, but
requires only that there be sufficient evidence for a jury to
conclude that the document “is what its proponent claims it to be.”
See In re Japanese Elec. Prods. Antitrust Litig., 723 F.2d at 285(focusing “on the limited question of genuineness” to establish
authenticity under Rule 901). Because we agree that the HPL
Create Sheet is what it purports to be—a Lexington internal
document used to retrieve information regarding claims—we
conclude that the authentication requirement is satisfied.
2. Hearsay
Lexington submits that, even if the document can be
authenticated, it is hearsay and does not fall into any exception to
the hearsay rule under the Federal Rules of Evidence. Hearsay is
an out-of-court statement offered to prove the truth of the matter
asserted in the statement. Fed. R. Evid. 801(c). We have doubts,
however, that the declaration in question—the handwritten words
“Date of RPT: 12/31/01”—constitutes a “statement” under the
19
hearsay rule. A “statement” is defined as an “oral or written
assertion.” Fed. R. Evid. 801(a)(1). The Advisory Committee
Notes clarify that “nothing is an assertion unless intended to be
one.” Fed. R. Evid. 801(a) advisory committee’s note.
White stated that the purpose of the HPL Create Sheet is to
request information about a claim from the data processing
department. In this sense, the information on the HPL Create
Sheet is more in the nature of an inquiry than an assertion. Courts
have held that questions and inquiries are generally not hearsay
because the declarant does not have the requisite assertive intent,
even if the question “convey[s] an implicit message” or provides
information about the declarant’s assumptions or beliefs. Long v.
Mayfield, 905 F.2d 1572, 1579-80 (D.C. Cir. 1990); see also
United States v. Lewis, 902 F.2d 1176, 1179 (5th Cir. 1990)
(“While ‘assertion’ is not defined in the rule, the term has the
connotation of a positive declaration. The questions asked by the
unknown caller, like most questions and inquiries, are not hearsay
because they do not, and were not intended to, assert anything.”
(citation omitted)); see also 5 Weinstein’s Federal Evidence §
801.11[2] (2d ed. 2002).
For example, in Long, the D.C. Circuit held that an
unidentified caller’s inquiry into whether “Keith ‘still had any
stuff’” was not hearsay despite the clear inference from this
statement that Keith in fact had “stuff” or that, more generally,
Keith was involved in drug distribution. 905 F.3d at 1579-80. In
United States v. Jackson, 88 F.3d 845 (10th Cir. 1996), the panel
determined that the question “Is this Kenny?” was not hearsay
under Rule 801(a)(1) and (c). The Court held that, even though “it
might be possible to imply that the declarant believed [Kenny] was
in possession of the pager and therefore he was the person
responding . . . to the declarant’s message . . . [t]he mere fact . . .
that the declarant conveyed a message with her question does not
make the question hearsay.” Id. at 848.
In this case, White’s deposition suggests that the HPL
Create Sheet is an inquiry into whether the data processing
department can find information on a claim based on certain
criteria. Notwithstanding the fact that this inquiry could reveal
20
assumptions the declarant might have made about the Lieb
claim—in particular that the date of report was December 31,
2001—we can infer from the HPL Create Sheet’s purpose that the
declarant was not making an assertion, but rather was asking a
question, which does not constitute hearsay under Rule 801(a)(1)
and (c).7 Therefore, because we find that the HPL Create Sheet
ultimately could be rendered admissible under the Federal Rules
of Evidence, it can be used to oppose Lexington’s summary
judgment motion.8 Cf. note 5, supra.
3. Genuine Issue of Material Fact
7
Even if this document constituted an assertion, it would
likely be admissible as an admission by a party opponent under
Federal Rule of Evidence 801(d)(2)(D). Rule 801(d)(2)(D)
provides: “A statement is not hearsay if . . . [t]he statement is
offered against a party and is . . . a statement by the party’s agent
or servant concerning a matter within the scope of the agency or
employment, made during the existence of the relationship.” It is
not disputed that a Lexington employee was responsible for filling
out the HPL Create Sheet. As such, the writing is an admission by
a party-opponent within the meaning of Rule 801(d)(2)(D), and
thus would fall outside the proscription against hearsay.
Although we do not know how this employee gathered the
information reflected on the HPL Create Sheet, or whether he or
she had personal knowledge supporting the information, see Fed.
R. Evid. 602, these are not requirements for admissibility under
Rule 801(d)(2)(D). See United States v. Ammar, 714 F.2d 238, 254
(3d Cir. 1983); Mahlandt v. Wild Canid Survival & Research
Center, Inc., 588 F.2d 626, 630-31 (8th Cir.1978) (holding that the
personal knowledge requirement does not apply to Fed. R. Evid.
801(d)(2)(D)). Rather, it is sufficient under the Rule for the
declarant to be a party’s employee and to have made the declaration
within the scope of the employment.
8
We need not reach Lexington’s contention that the HPL
Create Sheet fails to satisfy the business record exception to the
hearsay rule because this document is either not hearsay or would
likely qualify as an admission of a party opponent, see supra note
6.
21
Notwithstanding the HPL Create Sheet’s likely
admissibility, this document can not preclude summary judgment
because it has such minimal probative value that it could not be a
basis on which a jury could find that West Penn had in fact
reported the Lieb claim on or before December 31, 2001. White,
who provides the only evidence in the record dealing with this
document, could not discern the meaning of the notations on the
HPL Create Sheet, identify the person who filled out the form, or
even verify that the report was created on the date listed at the top
of the form. Without further information about this form and the
notations, a factfinder could not reasonably draw any inference
from this document.
More specifically, White testified that the purpose of the
document is to retrieve information about a claim from the data
processing department. The purpose is not, for example, to record
the date of report or other information about the claim—it is
merely a search tool. As noted above, while the fact that the HPL
Create Sheet is in the nature of an inquiry, rather than assertion,
renders it admissible as not hearsay, this same fact also diminishes
the probative value of the information on the sheet because,
viewing the notation as an inquiry, it cannot be used to prove that
the date of report was in fact December 31, 2001. See United
States v. Oguns, 921 F.2d 442, 449 (2d Cir. 1990) (“[A] question
cannot be used to show the truth of the matter asserted . . . .”);
Headley v. Tilghman, 53 F.3d 472 (2d Cir. 1995) (viewing a
question as providing circumstantial evidence of the assumptions
underlying the question, but not as probative of the truth of the
items inquired about).
There is no evidence of why this unknown employee used
December 31, 2001, as the inquiry date, or whether this employee
had any basis for using such date other than the fact that this was
the last day of the policy period. Additionally, the HPL Create
Sheet is dated August 23, 2003, long after the end of the policy
period. Thus, we agree with Lexington that, even viewing this
document and White’s testimony in the light most favorable to
West Penn, the evidence shows at most that, more than a year and
a half after the policy period, an unknown Lexington employee
filled out the HPL Create Sheet to search for information about the
22
Lieb claim using December 31, 2001, as the report date.
While we may not weigh evidence at the summary
judgment stage, we further note that, pitted against this cryptic
document, is the affidavit of West Penn’s General Counsel
conceding that she notified Lexington of the Lieb claim on
February 12, 2003—more than a year and a half after the policy
period ended. Her February 12, 2003, letter makes no reference to
prior communications between West Penn and Lexington, and
simply provides a report of the claim. In light of this admission,
and without any other information about this document, we do not
believe a jury could reasonably rely on the HPL Create Sheet to
find that West Penn in fact reported the claim prior to December
31, 2001. We therefore conclude that this document is not
sufficient to create a genuine issue of material fact as to when
West Penn reported the Lieb claim.
B. Deposition and Affidavit of Karen A. Barringer
West Penn next points to the deposition testimony and
affidavit of Karen A. Barringer, who served as West Penn’s
Assistant General Counsel during the relevant period. West Penn
asserts that her testimony could establish that West Penn provided
Lexington with notice of the Lieb claim at the 2001 year-end
claims meeting.
Barringer’s deposition testimony was as follows:
A. I know that Lexington had the loss runs. I know that the
loss runs—or the claim was reported to PHICO and then to
the CAT Fund in mid-year of ‘01. And I would find it hard
to believe that it didn’t make it to the loss runs, and I have to
make the assumption that they had information about that
claim from at least that source, and potentially others that I
don’t remember
....
Q. Other than the PHICO loss runs that were presented, was
there any other information that was presented to Lexington
with respect to claims made to PHICO . . . [a]t the claims
conference, at any other point during the policy period?
23
A. I am very comfortable that we touched on it at the claims
conference. I would assume there are or were
correspondence keeping Lexington apprised of cases as they
were developing. But I don’t specifically recall any piece of
correspondence or any snippet of a conversation that I may
have had.
Barringer’s affidavit stated,
While I have no specific recollection of a discussion
of the Lieb Claims at the 2001 Lexington claim
review meeting, there were no questions for which
responses were outstanding on December 31, 2001.
I provided Lexington with all claim information that
its claims staff requested at the meeting, including
any information that Lexington may have requested
regarding the Lieb Claims.
We disagree with West Penn that this evidence creates a
genuine issue of material fact. Barringer admitted in both her
deposition and her affidavit that she had no specific recollection of
reporting or discussing the Lieb claim. Her belief that the claim
was reported was predicated on her assumption that the claim was
included in the loss runs which she provided to Lexington at the
claims meeting.
While Barringer’s deposition testimony that she “touched
on” the Lieb claim at a claims conference appears at first blush to
make this a close issue, and while juries often do resolve such
conflicts in testimony, we agree with Lexington that this testimony
is too speculative to defeat Lexington’s motion for summary
judgment. See Hedberg v. Indiana Bell Tel. Co., Inc., 47 F.3d 928,
932 (7th Cir. 1995) (“Speculation does not create a genuine issue
of fact; instead, it creates a false issue, the demolition of which is
a primary goal of summary judgment.”); see also Adler v.
Wal-Mart Stores, Inc., 144 F.3d 664, 674 (10th Cir. 1998) (finding
no genuine issue of material fact as to whether employer had
knowledge of a sexual harassment incident where plaintiff could
not “remember when or exactly what was said” in her discussion
24
with her supervisor).9
For the foregoing reasons, we conclude that West Penn has
failed to establish a genuine issue of material fact as to the date of
notice; hence, the District Court appropriately determined as a
matter of law that notice was not given during the claims period.
IV. Conclusion
As we have determined that West Penn was required to give
notice during the policy period, and as there is no genuine issue of
material fact that timely notice was given, we will affirm the order
of the District Court granting summary judgment in favor of
Lexington.
9
Courts are particularly wary of forcing the opposing party
to prove a negative at the summary judgment stage. See Parker v.
Sony Pictures Etm't Inc., 260 F.3d 100, 111 (2d Cir. 2001). If a
document existed which could establish that notice was given,
West Penn should have produced it, or explained through
affidavits or other evidence why they could not do so. For
example, the loss runs or the ongoing correspondence that
Barringer mentioned in her deposition would affirmatively show
notice was given during the claims period. West Penn, however,
has thus far produced no evidence other than Barringer’s
speculation and the HPL Create Sheet that they contend shows that
the Lieb claim was reported along with the other 2001 claims.
25
Fuentes, Circuit Judge, dissenting.
Contrary to the majority view, I believe that Endorsement
# 007 of the Lexington Insurance Company (“Lexington”) policy
is inapplicable in this matter and that Western Pennsylvania
Hospital (“West Penn”) is entitled to excess coverage under the
terms of that policy. Under those terms, where a claim, such as
the Lieb claim, is not covered by West Penn’s primary insurer
(PHICO), but is instead covered by the Medicial Professional
Liability Catastrophe Fund (the “CAT Fund”), the default notice
provisions of the Lexington policy apply. Under those notice
provisions, West Penn gave timely notice. Alternatively, even
assuming that the majority’s construction of the contract is
correct, I believe West Penn has created a genuine dispute as to
whether notice was timely given. I therefore respectfully
dissent.
A.
The central question here is whether West Penn was
required to give Lexington notice of the Lieb claim by December
31, 2001, pursuant to Endorsement # 007, or within a
“reasonable” time, pursuant to Endorsement # 001 and
Lexington’s default notice requirements. If West Penn is right
that Endorsement # 007 does not apply, then under
Pennsylvania’s “notice-prejudice rule,” Lexington may not
refuse coverage unless it was prejudiced by late notice. See
Brakeman v. Potomac Ins. Co., 371 A.2d 193, 195-96
(Pa. 1977). As Lexington concedes it was not prejudiced, West
Penn would be entitled to coverage.
The interplay between Endorsement # 001, Endorsement
# 007, and § 605 (the CAT Fund) is critical to the notice issue.
As the majority explains, if West Penn failed to notify Lexington
of the Lieb claim within the policy period (January 1, 2001 to
26
January 2, 2002),10 Lexington may refuse coverage if and only if
Endorsements # 007 and # 001 are co-extensive with respect to §
605 claims like the Lieb claim. Lexington may not refuse
coverage if those endorsements are alternatives to one another,
i.e., if Endorsement # 007 applies only to PHICO claims and not
to § 605 claims.
The plain language of the two endorsements at issue here
clearly favors West Penn. Endorsement # 007 applies where
“coverage is available to the Insured in the underlying insurance
as set forth in the Schedule of Underlying Insurance.” In other
words, Endorsement # 007 would apply if the PHICO policy
were available to West Penn. Endorsement # 001 applies “[i]n
the event underlying insurance shall not be applicable to any
claims for the reason that the Medical Professional Liability
Catastrophe Fund [CAT Fund] shall assume or be required to
assume primary responsibility for payment.” That is, if the CAT
Fund assumes responsibility for a claim, as it does here for the
Lieb claim, then Endorsement # 001, not Endorsement # 007,
applies.11 Endorsement # 001 goes on to provide that the terms
of the Lexington policy are otherwise unchanged. On its face,
the Lexington policy in no way invokes the reporting
requirements of the PHICO policy with respect to § 605 claims.
As such, the Pennsylvania notice-prejudice rule applies, and
since Lexington concedes it cannot show prejudice, it must
provide West Penn with coverage.
The majority asserts that Endorsements # 007 and # 001
101
As I discuss below, I believe West Penn has created a
genuine dispute as to this fact.
112
The majority points out that Endorsement # 007 refers to
the “availab[ility]” of PHICO coverage while Endorsement # 001
refers to the “applicab[ility]” of PHICO coverage. Lexington’s
theory that a policy may be “generally” available for claims that the
policy does not in fact cover is novel, but implausible. While a
policy may be unavailable for any number of reasons, it is neither
available nor applicable to claims for which coverage is explicitly
excluded by the terms of the policy.
27
are complementary, largely on the grounds that both PHICO and
§ 605 claims are claims-based, rather than occurrence-based. As
such, the majority reasons that it would be illogical to apply the
default notice provisions of the Lexington policy to § 605 claims
because those provisions are intended to apply to the otherwise
occurrence-based coverage of the Lexington policy.
The majority is right in its assumption that the CAT fund
operates on a claims-made model. Pennsylvania law provides
that “[i]n the event that any claim is made against a [qualified]
health care provider . . . more than four years after the breach of
contract or tort occurred which is filed within the statute of
limitations, such claims shall be defended and paid by the fund.”
40 Pa. Stat. Ann. Tit. 40 § 1301.605.12 In 1996, the statute was
amended to trigger coverage only “if the fund has received a
written request for indemnity and defense within 180 days of the
date on which notice of the claim is given to the health care
provider or his insurer.” Id. This reporting requirement,
consistent with traditional claims-made policies, is not subject to
the Brakeman notice-prejudice rule. See Pa. Med. Soc. Liab.
Ins. Co. v. Commonwealth of Pa. Med. Prof’l Liab. Catastrophe
Loss Fund, 842 A.2d 379, 385-86 (Pa. 2004).
The majority is also right that claims-made policies
almost always predicate coverage on reporting of a claim by the
insured to the insurer within the policy period. “[A] ‘claims-
made’ insurance policy represents a distinct bargained-for
exchange between insurer and insured.” See Pizzini v. Am. Int’l
Speciality Lines Ins. Co., 210 F. Supp. 2d 658, 668 (E.D. Pa.
2002). “An insurer obtains the benefits of a clear and certain
cut-off date for coverage. In return, the insured typically pays a
lower premium.” Id.Nevertheless, the usual reporting requirements for claims-
123
Section 605 of the Health Care Act was later repealed by
the Pennsylvania legislature when it reconstituted the CAT Fund as
the Medical Care Availability and Reduction of Error Fund. See
Act of March 20, 2002, P.L. 154, No. 13, § 5104(a)(2).
28
made policies cannot be read into an insurance policy to make it
more economically sensible where those reporting requirements
are not actually set forth in the policy. See Harleysville Ins. Co.
v. Aetna Casualty & Surety Ins. Co., 795 A.2d 383, 386-87 (Pa.
2002) (“[T]he standard for interpreting insurance policies does
not allow us to focus solely on the nature of the policy and
ignore the plain meaning of the policy terms.”). Section 605
claims are ‘claims-made’ because the CAT fund operates on a
claims-made model, not because they are covered by
Endorsement # 007. The mere fact that § 605 claims are claims-
based and that they must be timely reported to the CAT fund
does not imply that, vis-a-vis Lexington, they are governed by
Endorsement # 007 and PHICO reporting requirements. On its
face Endorsement # 007’s coverage is defined and limited to
PHICO claims.
Moreover, Endorsement # 001, which indisputably does
cover § 605 claims, does not provide that the reporting
requirements of the CAT fund apply to Lexington’s excessive
coverage for § 605 claims (in the way that Endorsement # 007
provides that the reporting requirements of the PHICO policy
apply to Lexington’s excessive coverage for PHICO claims).
Instead, Endorsement # 001 leaves the general notice
requirements of the Lexington policy in place with respect to §
605 claims.13
134
Endorsement # 001 leaves all the general terms of the
Lexington policy in place except insofar as they are contravened by
the terms of the endorsement. The notice provisions of
Lexington’s general policy apply to claims covered by
Endorsement # 001 because that endorsement does not set forth
alternative notice requirements. By contrast, Lexington’s general
requirement that covered claims relate to incidents that occurred
during the policy period does not apply because Endorsement # 001
explicitly provides excess coverage for § 605 claims, all of which
arise more than four years after the underlying occurrences.
Because Lexington’s general policy requirements apply to § 605
claims except insofar as they contradict the terms of Endorsement
# 001, the majority’s worry that Endorsement # 001 is rendered
29
Lexington Insurance is correct that if it appears that
Endorsement # 007 governs § 605 claims, its reporting
requirements trump those of the general policy. See St. Paul &
Marine Ins. Co. v. U.S. Fire Ins. Co., 655 F.2d 521, 524 (3d Cir.
1981) (“If there is a conflict between the terms of the
endorsement and those in the body of the main policy, then the
endorsement prevails, particularly when it favors the insured.”).
“[W]hen a specific form of insurance is provided by an
endorsement tailored to meet the particular needs of the insured
and the company, that language must be followed to carry out
the intentions of the parties.” Id. at 524. However, in this case,
the language of Endorsement # 007 gives no indication that it
was tailored to § 605 claims. Endorsement # 007 appears on its
face to have been intended to apply only to PHICO claims.
Accordingly, the Lieb claim is governed by Endorsement # 001
alone, and Lexington’s general notice requirements apply.
Under Brakeman, Lexington may not deny coverage under those
provisions because it was not prejudiced by any delay in notice.
At the very least, the fact that Endorsement # 007 was not
written to capture § 605 claims renders the scope of its notice
requirements ambiguous. If Lexington wanted to require that it
be notified of § 605 claims by the close of the policy period,
such a requirement would have been easy to articulate. Indeed,
West Penn’s Lexington excess coverage policy for the 2002
calendar year included Endorsement # 006, which expressly
provided that excess coverage was available only if claims were
made and reported to Lexington within the policy period.
Lexington’s “failure to utilize more distinct language” in the
2001 calendar year policy even though it was available
“reinforces a conclusion of ambiguity under Pennsylvania law.”
Med. Protective Co. v. Watkins, 198 F.3d 100, 105 (3d Cir.
1999) (quotations omitted). If the insurance policy is
ambiguous, we must construe it in favor of the insured and West
Penn prevails. See Contrans, Inc. v. Ryder Truck Rental, Inc.,
nonsensical under a literal reading because Lexington’s
occurrence-based requirements would exclude all § 605 claims, is
unfounded.
30
836 F.2d 163, 168 (3d Cir. 1988); Reliance Ins. Co. v.
Moessner, 121 F.3d 895, 905 (3d Cir. 1997). For the foregoing
reasons, I would vacate the District Court’s order of summary
judgment and direct it to enter summary judgment in favor of
West Penn.
B.
Even assuming that the majority’s construction of the
policy is correct, I would still vacate the order of summary
judgment in favor of Lexington because West Penn has raised a
genuine issue as to material fact that barred summary judgment.
There is no doubt that if West Penn gave Lexington notice of the
Lieb claim within the policy period, i.e., January 1, 2001 to
December 31, 2001, the Lexington policy would have to provide
excess coverage for Lieb’s malpractice action. In the District
Court, Lexington denied receipt of proper notice. West Penn,
however, offered evidence from Lexington’s own records that
casts doubt on this denial of notice. Specifically, West Penn
introduced a document entitled the “HPL Create Sheet.” The
document pertains to the Lieb claim and contains the following
notation: “Date of Rpt: 12-31-01.” In the HPL Create Sheet,
Lexington appears to admit that the Lieb claim was reported to it
within the policy period.
Moreover, while I agree with the majority that the
testimony of Karen A. Barringer, West Penn’s Assistant General
Counsel during the relevant period, standing alone, may be
insufficient to establish a timely report date, the existence of a
file in Lexington’s records consistent with her account (i.e., that
West Penn notified Lexington of the Lieb in the very last days of
the policy period) bolsters its reliability. Together with the HPL
Create Sheet, her testimony meaningfully contests Lexington’s
claim that West Penn failed to give notice within the policy
period. For this alternative reason, I would vacate the order
granting summary judgment to Lexington and remand for
resolution of the disputed issue as to the timing of notice.
31