Penn Psychiatric Center v. United States Liability ( 2021 )

J-A10032-21
2021 PA Super 125PENN PSYCHIATRIC CENTER, INC : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
UNITED STATED LIABILITY : No. 1462 EDA 2020
INSURANCE COMPANY :
Appeal from the Order Entered June 17, 2020
In the Court of Common Pleas of Montgomery County Civil Division at
No(s): No. 2019-28413
BEFORE: PANELLA, P.J., OLSON, J., and COLINS, J.*
OPINION BY COLINS, J.: FILED JUNE 17, 2021
This is an appeal from an order dismissing an insurance coverage action
brought by Penn Psychiatric Center, Inc. (Insured) against United States
Liability Insurance Company (Insurer) on preliminary objections. Insured
claimed that it was entitled to coverage under an employment practices
insurance policy for an action brought against Insured and one of its therapists
by Amanda Madonna and Adrienne Martorana, two former patients who had
no employment relationship with Insured (the Underlying Action). The Court
of Common Pleas of Montgomery County (trial court) sustained Insurer’s
preliminary objections in the nature of a demurrer on the ground that the
allegations in the Underlying Action do not fall within the definition of a
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
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“Wrongful Act” covered by Insurer’s policy. For the reasons set forth below,
we affirm.
Plaintiffs Madonna and Martorana filed the Underlying Action in
November 2018. The complaint in the Underlying Action alleges that the
therapist, under the guise of providing therapy for past sexual abuse, groped
and sexually assaulted plaintiff Madonna and sent her sexually charged
messages, and that after she complained about his conduct, the therapist
threatened her and gave information protected by the federal Health
Insurance Portability and Accountability Act of 1996 (HIPAA) to his girlfriend,
who then harassed and threatened her. Madonna/Martorana First Amended
Complaint (attached to Insured’s Amended Complaint as Ex. A) ¶¶63-72, 75-
79, 83-87, 93-106, 109-16, 122-24. This complaint also alleges that the same
therapist, under the guise of providing therapy for past sexual abuse, groped
plaintiff Martorana and sexually propositioned her. Id. ¶¶140-50. The
complaint in the Underlying Action asserts claims of negligent hiring, negligent
supervision, negligent undertaking to render services, violations of the Unfair
Trade Practices and Consumer Protection Law, and negligent
misrepresentation against Insured, alleging that Insured’s conduct caused the
plaintiffs to be treated by and assaulted by the therapist. Id. ¶¶158-212,
258-307. It also asserts claims of negligence per se, professional negligence,
and negligent infliction of emotional distress against the therapist and against
Insured on the ground that Insured is vicariously liable for the therapist’s acts.
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Id. ¶¶213-257. Plaintiff Madonna’s negligence per se count includes a claim
that the therapist’s sharing of her patient information with his girlfriend
violated HIPAA and that Insured is vicariously liable for his HIPAA violation.
Id. ¶¶215-17.
Insurer provided employment practices liability insurance coverage to
Insured under Medical Providers Employment Practices Protection Insurance
Policy No. MP1006654F (the Policy). Insured’s Amended Complaint ¶11;
Policy (attached to Insured’s Amended Complaint as Ex. B), Declarations &
Coverage A, Coverage Form at 1-6. The Policy is a claims-made policy
providing coverage to Insured for the period October 18, 2018 to October 18,
2019. Policy, Declarations.
The Policy provides indemnity and defense for actions and other
proceedings that seek to impose liability on Insured for a “Wrongful Act” as
that term is defined in the Policy. Policy, Coverage A § I, § III (B), Coverage
Form at 1. The Policy defines “Wrongful Act” as follows:
“Wrongful Act” means any actual or alleged act of:
(1) Discrimination; or
(2) Harassment; or
(3) Retaliation; or
(4) Wrongful Termination; or
(5) Workplace Tort; or
(6) negligent violation of the Uniform Services Employment &
Reemployment Rights Act; or
(7) negligent violation of the Family and Medical Leave Act of
1993; or
(8) negligent violation of state law having the same or
substantially similar purpose as the Acts in (6) or (7) above; or
(9) acts described in clauses (1) through (8) above arising from
the use of the Organization's Internet, e-mail, telecommunication
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or similar systems, including the failure to provide and enforce
adequate policies and procedures relating to such use of the
Organization's Internet, e-mail, telecommunication or similar
systems;
committed or allegedly committed by the Organization or by an
Individual Insured acting solely within his/her capacity as such
involving and brought by any Employee, former Employee,
or applicant for employment with the Organization or
asserted by any Employee, former Employee or applicant for
employment with the Organization against an Individual Insured
because of his/her status as such.
Wrongful Act shall also include any actual or alleged act of:
(1) Third Party Discrimination[.]
Id. § III(V), Coverage Form at 4 (emphasis added).1 The definitions of
“Discrimination,” “Harassment,” “Retaliation,” and “Wrongful Termination” all
limit coverage to claims arising out of an employment relationship or
application for employment. Id. §§ III(E), (H), (P), (W), Coverage Form at
1-4.
The Policy defines “Workplace Tort” and “Third Party Discrimination” as
follows:
“Third Party Discrimination” means discrimination by an
Insured in their capacity as such against a Third Party based
on such Third Party’s race, religion, age, sex, disability,
national origin, marital status, sexual orientation or other
protected class or characteristic established under applicable
federal, state or local statute or ordinance while the Insured is
performing duties related to the conduct of the Organization’s
business. This definition does not include any Claim which
in whole or part involves an allegation(s) of Patient
Molestation.
* * *
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1 The Policy Coverage Form also includes “Third Party Harassment” in the
definition of “Wrongful Act,” but that coverage was removed by endorsement.
Policy, Third Party Harassment Exclusion Endorsement.
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“Workplace Tort” means any actual or alleged
employment-related:
(1) misrepresentation; or
(2) negligent supervision, training or evaluation; or
(3) wrongful discipline; or
(4) wrongful deprivation of a career opportunity; or
(5) failure to enforce written policies and procedures relating to a
Wrongful Act.
Policy, Coverage A §§ III(S), (U), Coverage Form at 3-4 (emphasis added).
The Policy further provides that “Third Party Discrimination does not include
Third Party Harassment.” Policy, Third Party Harassment Exclusion
Endorsement (emphasis omitted).
The Policy’s employment practices liability coverage also contains the
following exclusion:
The Company shall not be liable to make payment for Loss or
Defense Costs (except where otherwise noted) in connection with
any Claim made against the Insured arising out of, directly or
indirectly resulting from or in consequence of, or in any way
involving:
* * *
(14) Any Claim arising or resulting directly or indirectly from
Patient Molestation.
Policy Coverage A § IV(A)(14), Coverage Form at 4-5 (emphasis omitted).
The Policy defines “Patient Molestation” as follows:
“Patient Molestation” means bodily injury, sickness, disease or
death, mental anguish, pain and suffering, emotional trauma, or
similar emotional injury arising out of improper physical contact
of a sexual nature with a patient of the Organization.
Policy, Definition of Patient Molestation Clarification Endorsement ¶1
(emphasis omitted).
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On February 27, 2019, Insured reported the Underlying Action to
Insurer. Insured’s Amended Complaint ¶13. On April 22, 2019, Insurer
notified Insured that “there is no coverage, either defense or indemnification,
under the Policy for the [Underlying Action]” because the plaintiffs in the
Underlying Action were not employees or former employees of Insured and
the Underlying Action did not assert a third-party discrimination claim and, in
addition, because any coverage would be excluded by the patient molestation
exclusion. Id. ¶21 & Ex. C at 1, 4-5.
On December 9, 2019, Insured filed the instant action against Insurer.
Insurer filed preliminary objections and Insured, in response, filed an
amended complaint. In its amended complaint, Insured asserted that it was
entitled to coverage for the Underlying Action on the ground that the
Underlying Action alleged negligent hiring, negligent supervision, and violation
of HIPAA and that these allegations fell within the Policy’s coverage of
“Workplace Tort” and “Third Party Discrimination” claims. Insured’s Amended
Complaint ¶¶15-18, 23-28, 32-34, 48-52. Insured asserted both claims for
declaratory judgments that Insurer was obligated to defend and indemnify it
in the Underlying Action and claims for bad faith denial of coverage and breach
of contract. Id. ¶¶19-71.
Insurer filed preliminary objections in the nature of a demurrer to
Insured’s amended complaint, asserting that none of Insured’s claims stated
a cause of action because the Policy’s coverage for “Workplace Tort” is limited
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to claims brought by employees, former employees and applicants for
employment and there was no “Third Party Discrimination” claim in the
Underlying Action, and because coverage was excluded by the patient
molestation exclusion. On June 17, 2020, the trial court sustained Insurer’s
preliminary objections and dismissed the action in its entirety on the ground
that the Policy did not provide coverage for the Underlying Action since the
plaintiffs in the Underlying Action were not employees, former employees or
employment applicants and the Underlying Action asserted no discrimination
claim. Trial Court Opinion at 4-7.
Insured timely appealed. Insured raises three issues in this appeal: 1)
whether the trial court erred in holding that the Policy’s “Workplace Tort”
coverage was limited to claims by employees, former employees or
employment applicants; 2) whether the trial court erred in holding that the
Underlying Action’s HIPAA claim was not a “Third Party Discrimination” claim;
and 3) whether the trial court’s dismissal of the action can be sustained on
the alternative ground that the patient molestation exclusion excludes
coverage. We conclude that the trial court correctly held that the Policy’s
“Workplace Tort” or “Third Party Discrimination” provisions do not provide
coverage for any of the claims in the Underlying Action and therefore do not
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reach the issue of whether coverage is barred by the patient molestation
exclusion.2
On an appeal from an order sustaining preliminary objections in the
nature of a demurrer, our standard of review is de novo and our scope of
review is plenary. Hospital & Healthsystem Association of Pennsylvania
v. Department of Public Welfare, 888 A.2d 601, 607 n.12 (Pa. 2005);
Frank v. TeWinkle, 45 A.3d 434, 438 (Pa. Super. 2012). “Preliminary
objections in the nature of a demurrer test the legal sufficiency of the
complaint.” Estate of O'Connell v. Progressive Insurance Co., 79 A.3d
1134, 1137 (Pa. Super. 2013). In determining whether a demurrer was
properly sustained, this Court must accept as true all well-pleaded material
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2 Under the Pennsylvania Supreme Court’s decision in Vale Chemical Co. v.
Hartford Accident & Indemnity Co., 516 A.2d 684 (Pa. 1986), where a
declaratory judgment is sought concerning liability coverage for a tort action,
the plaintiffs in the tort action are indispensable parties and failure to join
them deprives the court of jurisdiction to issue a declaratory judgment.
Although Insured sought declaratory relief, neither plaintiff in the Underlying
Action was named as a party. We conclude, however, that this did not divest
the trial court of jurisdiction to issue the order that is before us. The
requirement that the tort plaintiffs be joined is a requirement for declaratory
relief only, as it is based on the fact that the Declaratory Judgment Act
requires that “all persons shall be made parties who have or claim any interest
which would be affected by the declaration, and no declaration shall prejudice
the rights of persons not parties to the proceeding.” 42 Pa.C.S. § 7540(a);
Vale Chemical Co., 516 A.2d at 686-88. Here, two of Insured’s claims, its
bad faith claim and its breach of contract claim, did not seek declaratory relief
and were not subject to the requirements of the Declaratory Judgment Act.
The absence of the tort plaintiffs therefore had no effect on the trial court’s
jurisdiction over those claims. Moreover, the trial court did not issue a
declaratory judgment in favor of any party; rather it sustained Insurer’s
demurrer and dismissed the action.
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averments of fact in the complaint and every inference that is reasonably
deducible from those facts. Hudson v. Pennsylvania Board of Probation
and Parole, 204 A.3d 392, 395 (Pa. 2019); O'Connell, 79 A.3d at 1137;
Frank, 45 A.3d at 438. The Court, however, is not required to accept as true
conclusions of law, unwarranted inferences, or argumentative allegations.
Hudson, 204 A.3d at 395; Conrad v. City of Pittsburgh, 218 A.2d 906, 907
n.3 (Pa. 1966). If a claim is based on a document, it is the document, not
averments in the plaintiff’s complaint characterizing it, that determine
whether the plaintiff has stated a cause of action, and averments that conflict
with the document need not be accepted as true. Jenkins v. County of
Schuylkill, 658 A.2d 380, 383 (Pa. Super. 1995); Framlau Corp. v.
Delaware County, 299 A.2d 335, 338 (Pa. Super. 1972).
The interpretation of an insurance policy is an issue of law over which
this Court exercises plenary, de novo review. Donegal Mutual Insurance
Co. v. Baumhammers, 938 A.2d 286, 290 (Pa. 2007); Kiely v.
Philadelphia Contributionship Insurance Co., 206 A.3d 1140, 1145 (Pa.
Super. 2019). In determining whether an insurance policy provides coverage
for a suit brought against the insured, a court must compare the terms of the
insurance policy to the allegations of the complaint filed against the insured.
American and Foreign Insurance Co. v. Jerry’s Sport Center, Inc., 2
A.3d 526, 541 (Pa. 2010); Pennsylvania Manufacturers Indemnity Co. v.
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Pottstown Industrial Complex LP, 215 A.3d 1010, 1014 (Pa. Super. 2019);
Kiely, 206 A.3d at 1146.
The burden is on the insured to show that the claim is within the policy’s
coverage. Erie Insurance Group v. Catania, 95 A.3d 320, 322 (Pa. Super.
2014); O'Connell, 79 A.3d at 1138. Where coverage is denied based on an
exclusion, however, the burden is on the insurer to prove the applicability of
the exclusion. Nationwide Mutual Insurance Co. v. Arnold, 214 A.3d 688,
695, 701-02 (Pa. Super. 2019); Catania, 95 A.3d at 322-23. If a complaint
against the insured pleads facts that are potentially within the scope of the
policy’s coverage, the insurer has a duty to defend the action until all covered
claims are removed from the action. Jerry’s Sport Center, 2 A.3d at 541-
42; Kiely, 206 A.3d at 1146.
In determining whether the complaint pleads facts potentially within a
policy’s coverage, we are guided by the following additional principles. Where
the policy provisions are clear and unambiguous, the courts must give effect
to the policy’s language. Baumhammers, 938 A.2d at 290; Pottstown
Industrial Complex, 215 A.3d at 1015; Allstate Fire and Casualty
Insurance Co. v. Hymes, 29 A.3d 1169, 1172 (Pa. Super. 2011). “[C]ourts
must construe the terms of an insurance policy as written and may not modify
the plain meaning of the words under the guise of ‘interpreting’ the policy.”
Swarner v. Mutual Benefit Group, 72 A.3d 641, 645 (Pa. Super. 2013)
(quoting Hymes). In determining the meaning of policy terms, the court must
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consider the language of the policy in its entirety. Kurach v. Truck
Insurance Exchange, 235 A.3d 1106, 1116 (Pa. 2020); State Farm Mutual
Automobile Insurance Co. v. Dooner, 189 A.3d 479, 482 (Pa. Super.
2018).
Policy provisions that are ambiguous must be construed in favor of the
insured. Baumhammers, 938 A.2d at 290; Pottstown Industrial
Complex, 215 A.3d at 1015; Swarner, 72 A.3d at 645. Policy provisions are
ambiguous, however, only if they are reasonably susceptible of more than one
construction. Swarner, 72 A.3d at 645; Tuscarora Wayne Mutual
Insurance Co. v. Kadlubosky, 889 A.2d 557, 561-62 (Pa. Super. 2005).
The fact that the parties disagree on the proper construction of policy language
does not make it ambiguous. Dooner, 189 A.3d at 482; Brown v. Everett
Cash Mutual Insurance Co., 157 A.3d 958, 962 (Pa. Super. 2017);
Kadlubosky, 889 A.2d at 561. Courts should interpret insurance policy
provisions to avoid ambiguities, if possible. Dooner, 189 A.3d at 482-83;
Brown, 157 A.3d at 962; Kadlubosky, 889 A.2d at 562. “A court cannot
‘torture the [policy] language’ to create ambiguities where none exist.”
Swarner, 72 A.3d at 645 (quoting Ryan Homes, Inc. v. Home Indemnity
Co., 647 A.2d 939 (Pa. Super. 1994)) (brackets in original); see also
Kadlubosky, 889 A.2d at 562.
In its first issue, Insured argues that the claims in the Underlying Action
for negligent hiring and negligent supervision fall within the Policy’s definition
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of “Workplace Tort” and are therefore “Wrongful Acts” for which the Policy
provides coverage.3 The trial court correctly rejected this argument because
the Policy’s definitions of both “Workplace Tort” and “Wrongful Act”
unambiguously limit coverage to claims arising out of an employment or
prospective employment relationship.
Contrary to Insured’s contentions, the negligent hiring and negligent
supervision claims in the Underlying Action do not fall within the Policy’s
definition of “Workplace Tort.” The Policy does not include negligent hiring in
the definition of “Workplace Tort” or “Wrongful Act” at all. Policy, Coverage A
§§ III(U), (V), Coverage Form at 3-4. The Policy does include negligent
____________________________________________
3 Insured also argues in this appeal that the misrepresentation claims in the
Underlying Action are “Wrongful Acts” under the Policy. Insured did not allege
in its amended complaint or argue in the trial court that the misrepresentation
claims in the Underlying Action were covered by the Policy. This coverage
claim is therefore waived. It, however, does not raise any additional issues
concerning the Policy language beyond those concerning coverage for
negligent supervision, as both misrepresentation and negligent supervision
are under the definition of “Workplace Tort.” Accordingly, even if it were not
waived, it would fail for the same reasons that we hold that the negligent
supervision claim is not covered by the Policy. Insured does not contend that
the Policy provides coverage for the Underlying Action on the ground that it
asserts claims of harassment. Although the Policy’s definition of “Wrongful
Act” coverage includes harassment, Policy, Coverage A § III (V)(2), Coverage
Form at 4, the harassment claims in the Underlying Action are clearly not
covered because the Policy’s definition of harassment limits coverage to
employee claims. Id. § III(H), Coverage Form at 2 (defining “Harassment”
as sexual or other harassment that is “made a condition of employment, that
is “used as a basis for employment decisions,” or that “creates a work
environment that is hostile, intimidating or offensive or that otherwise
interferes with performance”).
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supervision in its definition of “Workplace Tort.” Policy, Coverage A § III(U)
(2), Coverage Form at 3. The definition of “Workplace Tort,” however,
expressly restricts coverage to “employment-related” claims. Id. § III(U),
Coverage Form at 3 (“‘Workplace Tort’ means any actual or alleged
employment-related: … (2) negligent supervision, training or evaluation …”)
(emphasis added).
Insured argues that all negligent supervision claims are employment-
related even if they are brought by non-employees. That contention cannot
be accepted because it would make the language “employment-related”
surplusage with respect to almost all of the items listed as “Workplace Torts.”
In interpreting an insurance policy, the courts are to give effect to all of the
policy’s language and not treat any provisions as mere surplusage. Clarke
v. MMG Ins. Co., 100 A.3d 271, 276 (Pa. Super. 2014); Millers Capital
Insurance Co. v. Gambone Brothers Development Co., 941 A.2d 706,
715 (Pa. Super. 2007). Insured also argues that negligent supervision claims
can only be third-party claims. That assertion is inaccurate. While negligent
supervision can be a theory on which liability to third parties is based, it could
also be the subject of a claim by an employee, as negligent supervision of
other employees could cause harm to an employee. In addition, the coverage
is for “negligent supervision, training or evaluation,” Policy, Coverage A §
III(U)(2), Coverage Form at 3, not negligent supervision and hiring, and
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providing inadequate or improper supervision, training, and evaluation to an
employee could harm that employee in his or her employment.
Furthermore, the Policy’s definition of “Wrongful Act” expressly limits
coverage of “Workplace Tort” claims, and all other claims except for “Third
Party Discrimination,” to claims for acts “committed or allegedly committed
by the Organization or by an Individual Insured acting solely within his/her
capacity as such involving and brought by any Employee, former
Employee, or applicant for employment with the Organization.” Policy,
Coverage A § III (V), Coverage Form at 4 (emphasis added). The claims in
the Underlying Action are not claims brought by an employee, former
employee, or job applicant.
Insured argues that because the language “involving and brought by
any Employee, former Employee, or applicant for employment” immediately
follows the words “Individual Insured acting solely within his/her capacity as
such” and because there is no comma before it, the requirement that the claim
be brought by an employee, former employee, or applicant applies only to
individual insureds and not to Insured itself or that it could reasonably be
interpreted as applying only to individual insureds.4 We do not agree.
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4 Insurer contends that this argument was waived because Insured did not
make any argument in the trial court based on the position or punctuation of
the language “involving and brought by any Employee, former Employee, or
applicant for employment.” While Insured did not make this grammatical
structure argument below, Insured did argue to the trial court that coverage
(Footnote Continued Next Page)
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Under the “last antecedent” rule of construction, qualifying words and
phrases generally are interpreted as referring only to the last word, phrase,
or clause that can be made an antecedent without impairing the meaning of
the sentence where no contrary intention appears. Commonwealth v.
Rosenbloom Finance Corp., 325 A.2d 907, 909 (Pa. 1974); Buntz v.
General American Life Insurance Co., 7 A.2d 93, 95 (Pa. Super. 1939);
Summit Township Industrial and Economic Development Authority v.
County of Erie, 980 A.2d 191, 208 (Pa. Cmwlth. 2009) (en banc). This rule,
however, does not limit a qualifying phrase to the last item or make the
document ambiguous, even where there is no comma before the qualifying
phrase, where it is clear from the document as a whole that the phrase in
question was intended to apply to all of the items that are listed before the
qualifying phrase. Rosenbloom Finance Corp., 325 A.2d at 909-10;
Summit Township Industrial and Economic Development Authority,
980 A.2d at 207-10. “When several words are followed by a modifying phrase
which is applicable as much to the first and other words as to the last, the
natural construction of the language demands that the modifying phrase be
read as applicable to all.” Rosenbloom Finance Corp., 325 A.2d at 909
____________________________________________
for “Workplace Tort” was not limited to claims by employees, former
employees, and employment applicants. Moreover, the fact that the trial court
did not evaluate the grammatical argument does not impair this Court’s review
as the interpretation of the Policy is a question of law that this Court reviews
de novo. We therefore do not find this argument barred by waiver.
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(quoting Porto Rico Railway, Light & Power Co. v. Mor, 253 U.S. 345(1920)) (parentheses omitted).
Here, applying the phrase “involving and brought by any Employee,
former Employee, or applicant for employment” to claims against both the
insured entity and individual insureds is a normal grammatical reading of the
Policy’s language. Moreover, the intent that the phrase apply to both the
insured entity and individual insureds is demonstrated by the language of the
Policy as a whole. The Policy repeatedly and consistently requires that covered
claims other than those bearing the label “Third Party” be employment related.
Policy, Coverage A §§ III(E), (H), (P), (U), (W), Coverage Form at 1-4. If the
intent was to cover claims against the insured entity regardless of whether
they were brought by an employee or former or prospective employee and
restrict only coverage of claims against individual insureds, there would be no
reason for a category of “Third Party Discrimination” separate from
“Discrimination” and the Policy could have simply restricted “Wrongful Act[s]”
committed by individual insureds, other than discrimination, to those involving
and brought by employees, former employees, or applicants. None of the
cases cited by Insured in support of its last antecedent argument involves
Pennsylvania law, insurance coverage, or language similar to that at issue
here.
In addition, there is no apparent reason in the structure or purpose of
the Policy for limiting only individual insureds’ coverage. The language
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“Individual Insured acting solely within his/her capacity as such” restricts
coverage for individuals to their work-related acts; the language “involving
and brought by any Employee, former Employee, or applicant for
employment” restricts the type of suit that is covered by the Policy, not
whether the individual insured’s act was work-related. The inclusion, in the
definition of “Wrongful Act,” of coverage for assertions against individual
insureds based on their status in the insured entity, Policy, Coverage A §
III(V), Coverage Form at 4 (“or asserted by any Employee, former Employee
or applicant for employment with the Organization against an Individual
Insured because of his/her status as such”), does not indicate any intent to
provide coverage of non-employee claims against the insured entity. The
apparent reason for this additional clause for individual insureds would be to
provide coverage for claims that the individuals are liable based on their status
for acts they are not claimed to have committed; no equivalent language is
necessary for the insured entity because its agents’ acts are its acts.
Our conclusion that the Policy does not cover negligent supervision and
other “Workplace Tort” claims brought by plaintiffs with no present, past, or
prospective employment relationship with Insured is also supported by case
law throughout the country interpreting employment liability insurance
policies. While our courts have not previously addressed this issue, decisions
of other courts have repeatedly held that employment practices liability
insurance covers only claims of employees, former employees, and job
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applicants, except to the extent that the policy expressly provides third-party
or non-employment-related coverage for a particular type of claim. See, e.g.,
McCalla Corp. v. Certain Underwriters at Lloyd's, London, 2014 WL
1745647 at *4 (D. Kan. No. 13–1317–SAC filed May 1, 2014) (construing
employment practices liability (EPL) policy language covering “wrongful failure
or refusal to adopt or enforce adequate workplace or employment practices,
policies or procedures” to provide coverage for a claim filed by a party with no
employment relationship to the insured “would defeat the purpose of EPL
coverage, which is necessarily limited to enumerated acts claimed by
employees, former employees and prospective employees”); Carolina
Casualty Insurance Co. v. Red Coats, Inc., 2014 WL 11428185 at *3-*4
(N.D. Fla. No. 1:12-cv-00232-MP-GRJ filed Apr. 22, 2014) (employment
practices liability insurance policy’s coverage for “negligent retention,
negligent supervision, and negligent hiring” did not cover claim by non-
employee), aff’d on this issue, 624 Fed.Appx. 992, 994-95 (11th Cir. 2015);
101 Ocean Condominium Homeowners Association v. Century Surety
Co., 2009 WL 10698412 at *3-*4 (C.D. Cal. CV 09-01206 SVW (JCx) filed
July 29,2009), aff’d, 407 Fed.Appx. 129, 132 (9th Cir. 2010); General Star
Indemity Co. v. Virgin Islands Port Authority, 2007 WL 185122, at *3-
*4 (D.V.I. No. 2001–188 filed Jan. 5, 2007); Clarendon National
Insurance Co. v. City of York, 290 F. Supp. 2d 500, 506 (M.D. Pa. 2003),
aff’d, 121 Fed.Appx. 940 (3d Cir. 2005).
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Insured contends in its second issue that it is entitled to coverage for
the Underlying Action under the Policy’s coverage of “Third Party
Discrimination” claims. This argument likewise fails.
The Policy includes “Third Party Discrimination” in the definition of
“Wrongful Act” without the qualification “involving and brought by any
Employee, former Employee, or applicant for employment.” Policy, Coverage
A § III(V), Coverage Form at 4. The fact that neither plaintiff in the Underlying
Action had any employment relationship with Insured would therefore not
preclude coverage of such a claim.
The Underlying Action, however, does not assert any claim of “Third
Party Discrimination.” The Policy defines “Third Party Discrimination” as
“discrimination by an Insured in their capacity as such against a Third Party
based on such Third Party’s race, religion, age, sex, disability, national
origin, marital status, sexual orientation or other protected class or
characteristic established under applicable federal, state or local statute or
ordinance.” Policy, Coverage A § III(S), Coverage Form at 3 (emphasis
added). The complaint in the Underlying Action does not make any allegations
that Insured’s or the therapist’s actions toward the plaintiffs were based on
race, religion, age, gender, disability, national origin, marital status, sexual
orientation or any other group characteristic of any kind. Indeed, the
complaint in the Underlying Action does not contain the words “discriminate”
or “discrimination” at all.
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Insured argues that plaintiff Madonna’s negligence per se claim of
sharing of confidential patient information in violation of HIPAA falls within the
definition of “Third Party Discrimination” because HIPAA is an applicable
federal statute that creates a protected class or characteristic. The Underlying
Action, however, alleges only a violation of plaintiff Madonna’s rights under
HIPAA, not that she was harassed or treated differently because she was a
patient or had rights protected by HIPAA. Madonna/Martorana First Amended
Complaint ¶¶215-16.
Insured also argues that there is “Third Party Discrimination” coverage
because the Underlying Action plaintiffs are members of a protected class,
women, and were discriminated against by the HIPAA violation. This
argument too is without merit. The Underlying Action does not allege that
any plaintiff’s HIPAA rights were violated because they were female or that
their status as women had any connection to the HIPAA violation.
Insured does not argue and did not allege in its complaint that any claim
in the Underlying Action, other than the HIPAA violation, falls within the
Policy’s “Third Party Discrimination” coverage. Appellant’s Br. at 14, 21-22;
Insured’s Amended Complaint ¶¶33-34, 51-52. Moreover, even if the
allegations of the Underlying Action were characterized as involving sex
discrimination because the therapist assaulted only women (an allegation that
is absent from the complaint in the Underlying Action), that could not
constitute a claim of “Third Party Discrimination” under the Policy because the
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definition of “Third Party Discrimination” specifically excludes such claims. The
Policy’s definition of “Third Party Discrimination” provides both that it “does
not include any Claim which in whole or part involves an allegation(s) of
Patient Molestation” and that “Third Party Discrimination does not include
Third Party Harassment.” Policy, Coverage A § III(S), Coverage Form at 3 &
Third Party Harassment Exclusion Endorsement (emphasis omitted). The
Policy defines “Third Party Harassment” as including “[s]exual harassment
including any unwelcome sexual advances, requests for sexual favors or other
verbal or physical conduct of a sexual nature against a Third Party.” Policy,
Coverage A § III(T)(2), Coverage Form at 3. The Policy does not cover “Third
Party Harassment.” Policy, Third Party Harassment Exclusion Endorsement.
Because the trial court correctly held that none of the claims in the
Underlying Action are “Wrongful Acts” covered by the Policy, we affirm its
order sustaining Insurer’s demurrer.5
____________________________________________
5 Insured argues in its third issue that there is a factual dispute as to whether
Insured had coverage for patient molestation claims under Coverage B in the
Coverage Form that is part of the Policy. Coverage B of the Coverage Form
sets forth a coverage for “Defense Costs … that the Insured shall become
legally obligated to pay because of Claims … for Patient Molestation or Claims
which in whole or part involve an allegation(s) of Patient Molestation,” but
provides no coverage for indemnity. Policy, Coverage Form at 6 (emphasis
omitted). The Policy’s declarations page, however, states under the Coverage
B heading: “NOT COVERED.” Policy, Declarations. Insured asserts its third
issue only as an argument that the trial court’s decision cannot be sustained
on an alternative ground, not as a ground for reversal. We note, moreover,
that any issues of fact concerning whether Coverage B was part of the Policy
cannot constitute a ground for reversal of the trial court’s dismissal of
(Footnote Continued Next Page)
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Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/17/2021
____________________________________________
Insured’s action and are irrelevant to this appeal because Insured did not
assert any claim under Coverage B in its complaint. Rather, Insured’s
complaint asserted coverage for the Underlying Action solely under Coverage
A and its coverage for “Workplace Tort” and “Third Party Discrimination”
claims and specifically alleged that the claims against Insured in the
Underlying Action “are not claims arising or resulting directly or indirectly from
Patient Molestation.” Insured’s Amended Complaint ¶¶23-28, 31, 33-34, 48-
52. We therefore need not address Insured’s third issue.
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