ProSelect Insurance Company v. Levy ( 2010 )

ProSelect Ins. Co. v. Levy, No. S1292-08 CnC (Toor, J., June 14, 2010)
[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
accompanying data included in the Vermont trial court opinion database is not guaranteed.]
STATE OF VERMONT
CHITTENDEN COUNTY
│
PROSELECT INSURANCE COMPANY │
Plaintiff │
│ SUPERIOR COURT
v. │ Docket No. S1292-08 CnC
│
ROBYN LEVY, THE ESTATE OF │
PETER J. McKENNA and │
LINDA McKENNA │
Defendants │
│
RULING ON CROSS MOTIONS FOR PARTIAL SUMMARY JUDGMENT
The complaint in this case seeks a declaration that a professional liability
insurance policy issued by Plaintiff ProSelect Insurance Company (ProSelect) to Peter J.
McKenna, M.D. does not provide coverage for any of the claims asserted in an
underlying suit filed by Robyn Levy against the Estate of Peter J. McKenna (the
“Estate”) and Dr. McKenna’s widow, Linda McKenna (Mrs. McKenna). In the
underlying lawsuit, Levy v. Estate of Peter J. McKenna, No. S0922-07 CnC, Levy alleges
medical malpractice and sexual assault. ProSelect’s complaint also seeks a declaration
that it is not obligated to continue to provide the Estate or Mrs. McKenna with a defense
or to reimburse them for attorney’s fees. ProSelect asserts two counts in its complaint;
count I seeks declaratory judgment against the Estate, and count II seeks declaratory
judgment against Mrs. McKenna.
The Estate and Mrs. McKenna have filed an answer with defenses, and also a
counterclaim. The five counts of the counterclaim seek the following relief: (1) a
declaration that the policy covers count I of Levy’s complaint against the Estate; (2) a
declaration that the policy covers counts V and VI of Levy’s complaint against Linda L.
McKenna; (3) reimbursement of the Estate’s costs of defending a Medical Practice Board
proceeding; (4) reimbursement of the Estate’s costs of defending the underlying lawsuit;
and (5) identical reimbursement as in count 4, but based upon the Estate’s claim that
ProSelect improperly canceled Dr. McKenna’s policy. The latter three claims all relate to
a provision of the policy providing for reimbursement of up to $100,000 of the insured’s
defense expenses.
ProSelect moves for partial summary judgment on its claim against the Estate and
on counts I, IV, and V of the counterclaim with regard to the Estate only.1 The Estate
opposes ProSelect’s motion, and cross-moves for summary judgment on counts I, III, IV,
and V of the counterclaim. Levy has filed a separate opposition to ProSelect’s motion for
partial summary judgment, along with her own statement of facts, and joins the Estate’s
argument for summary judgment in its favor.
I. Background
The following facts are undisputed except where noted. ProSelect issued to Dr.
Peter J. McKenna a Medical Professional Liability “claims made” policy (the Policy),
effective March 6, 2005. The Policy states that ProSelect, subject to the Policy’s limits of
liability and other terms and conditions, will pay on behalf of the insured: “[T]hose sums
which YOU become legally obligated to pay as DAMAGES, up to the applicable Limits
of Liability stated in the DECLARATIONS, because of a CLAIM for an INCIDENT in
the performance of PROFESSIONAL SERVICES by YOU or someone for whom YOU
are legally responsible.” Policy § I. ProSelect has the “right and duty to defend” any suit
1
In its filings here, ProSelect represented that it was continuing to provide Mrs. McKenna with a defense
on the pending appeal of a ruling by Judge Katz granting her summary judgment in the underlying case.
As that appeal was recently concluded in her favor, it appears that all claims in this case relating to Mrs.
McKenna are now moot. Levy v. Estate of Peter J. McKenna, No. 2009-431 (Vt. May 21, 2010)
(unpublished mem.), available at http://www.vermontjudiciary.org/d-upeo/eo09-431.pdf.
2
against an insured seeking damages covered by the Policy. The Policy covers only
claims first made against the insured and reported to ProSelect during the policy period or
during any “extended reporting period.” The “policy period” is defined as March 6, 2005
to March 6, 2006 or until the Policy is canceled, whichever is earlier.
The Policy contains several exclusions from coverage. Exclusion 13 states as
follows:
This POLICY does not apply to any liability of an INSURED or to any
DAMAGES, INCIDENTS, CLAIMS or SUITS . . . [w]hich, in whole or
in part, arise out of or contain any allegations of any of the following by
any person:
(a) Sexual intimacy, abuse, molestation, harassment, exploitation, assault
or undue familiarity;
(b) Mishandling of transference or countertransference;
(c) The failure to terminate the healthcare provider-patient relationship
with any person with whom an INSURED has had an intimate or
sexual relationship;
(d) The abandonment of a patient with whom an INSURED has had an
intimate or sexual relationship, or the failure to refer such patient to an
appropriate healthcare provider; or
(e) The negligent or improper employment, retention, investigation,
supervision, training or reporting or failure to make report, of any
person whose conduct would be excluded by paragraphs (a)–(d)
above.
Policy § VIII(13). The Policy defines a “suit” as “a civil action filed in a court of law in
which DAMAGES to which this POLICY applies are alleged.”
The Policy also contains a section entitled “Defense and Claims Expenses.” That
section states, in pertinent part, that ProSelect will reimburse insureds for
reasonable expenses (but not DAMAGES, fines or penalties) up to a total
of $100,000 required for YOUR defense in a civil SUIT or governmental
regulatory proceeding first brought against YOU during the POLICY
PERIOD alleging the actual sexual abuse, sexual misconduct or any other
sexual activity by YOU or by anyone for whom YOU are legally
responsible while engaged in the performance of PROFESIONAL
SERVICES . . . .
3
Policy § VI(5). Section VI(5) also states that “[a]s a condition to such reimbursement,
YOU must notify US in writing of any such SUIT or [governmental regulatory]
proceeding within the POLICY PERIOD . . . .” Id. Exclusion 13, described above, does
not apply to § VI(5) of the Policy. See Policy § VIII(13) (“This exclusion [Exclusion 13]
shall not apply to reimbursement for those defense expenses, fees and costs described in
paragraph (5) of the definition of CLAIM EXPENSES set forth in Section VI. of this
POLICY.”).
On June 1, 2005, the Vermont Board of Medical Practice (the Board) notified Dr.
McKenna that it had received information that he had engaged in “an improper,
unprofessional and sexual relationship” with Levy. Investigators from the Vermont
Board of Medical Practice and the Vermont Medicaid Fraud Unit had interviewed Dr.
McKenna on May 31, 2005, and Dr. McKenna had admitted to the investigators that he
had engaged in a sexual relationship with his former patient, Robyn Levy, that lasted
approximately one year. The Board opened a complaint and began an inquiry into the
allegations. Also on June 1, the State of Vermont moved for and obtained a summary
suspension of Dr. McKenna’s medical license.
Dr. McKenna’s insurance agent notified ProSelect that Dr. McKenna was the
subject of a proceeding commenced by the Vermont Board of Medical Practice that
involved alleged sexual conduct with a patient and that Dr. McKenna’s license had been
suspended. By a letter dated June 7, 2005, ProSelect notified Dr. McKenna that it would
be canceling his policy effective July 22, 2005 due to the suspension of his license.
ProSelect asserts that, if the Policy had not been canceled in July 2005, ProSelect would
not have renewed the Policy when it came up for renewal in March 2006, because
4
ProSelect only writes coverage for licensed physicians and Dr. McKenna’s license had
been suspended, and because he had pled no contest in a criminal proceeding alleging
that he had sex with a patient. The Estate objects to that assertion, maintaining that it is
an expression of opinion rather than a statement of fact, and that it is unsupported by any
factual material relating to ProSelect’s underwriting policies. The Estate, however,
points to nothing demonstrating that ProSelect would have had any legal obligation to
renew the Policy in March 2006.
Dr. McKenna purchased a “Reporting Endorsement,” which states that it extends
indefinitely the time period for Dr. McKenna (and now his Estate) to report claims or
suits otherwise covered by the Policy that are first made after July 22, 2005 and that are
for incidents that occurred after March 6, 2003 and before July 22, 2005. The Reporting
Endorsement provides that “[t]he period for reporting CLAIMS or SUITS is not extended
for . . . [r]eimbursement for reasonable expenses . . . as set forth in [§ VI(5) of the
Policy].”
At the conclusion of the May 31, 2005 interview, Dr. McKenna was arrested. He
was arraigned on June 1, 2005. The information filed by the State alleged that between
September 2003 and February 2005, Dr. McKenna engaged in sexual activity with a
vulnerable adult, Patient A, while he was being paid by Medicaid to treat that adult. The
information asserted three charges against Dr. McKenna, each for violation of 33 V.S.A.
§§ 6902(1)(D) and 6913(d). The “Patient A” referred to in the information is Ms. Levy.
On or about July 26, 2005, Dr. McKenna pled nolo contendere to the first two charges of
the information and the State dismissed the third charge. Dr. McKenna received a
5
sentence that included probation, and was also required to pay Medicare and Medicaid
$6,000 in restitution toward fees paid by those agencies for Levy’s sessions.
Dr. McKenna died on March 21, 2006. On or about August 31, 2006, Levy filed
with the Vermont Probate Court, Chittenden District, a “Written Statement of Claim” in
which she alleged that she “has an unliquidated claim against the estate of Dr. Peter
McKenna related to Dr. McKenna’s malpractice during the provision of psychiatric
services to the claimant, from on or about August 2003 to on or about March 2005.” The
Estate promptly forwarded a copy of Levy’s statement of claim to ProSelect.
In August 2007, Levy filed her complaint in Levy v. Estate of Peter J. McKenna,
No. S0922-07 CnC. She amended her complaint to add claims against Linda McKenna,
Dr. McKenna’s widow. The amended complaint asserts the following seven counts: (1)
medical malpractice against Dr. McKenna; (2) punitive damages for medical malpractice;
(3) sexual assault; (4) punitive damages for sexual assault and battery; (5) breach of
contract against Linda McKenna; (6) medical malpractice against Linda McKenna; and
(7) premises liability. Count I (“Medical Malpractice of Dr. McKenna”) of Levy’s
amended complaint alleged that Dr. McKenna’s treatment was negligent in various ways,
including by failing to properly diagnose her psychological disorder, prescribing
medications that were harmful to her, encouraging her to pursue unhealthy “lifestyle
choices,” and failing to refer her to a community-based mental health program. ProSelect
has been defending the Estate in that suit under a reservation of rights, asserting that it
was not waiving “any rights it may have” to disclaim coverage or withdraw from the
defense.
6
I. Discussion
The two main issues presented in the parties’ overlapping cross motions are (1)
whether Exclusion 13 bars coverage on the claims brought against the Estate in the
underlying lawsuit; and (2) notwithstanding Exclusion 13, whether under § VI(5) of the
Policy, the Estate is entitled to receive reimbursement from ProSelect for the Estate’s
efforts to defend itself against the proceeding before the Vermont Medical Practice Board
or against Levy’s amended complaint in the underlying action. The court takes those
issues in turn.
A. Exclusion 13
ProSelect argues that there is no coverage for the underlying suit because
Exclusion 13 of the Policy bars coverage for all suits “[w]hich, in whole or in part, arise
out of or contain any allegations of . . . [s]exual intimacy, abuse, molestation, harassment,
exploitation, assault or undue familiarity,” and because it is undisputed that the
underlying suit contains such allegations and at least in part arises out of those
allegations. The Estate maintains that (1) Exclusion 13 is ambiguous and must be
construed in favor of coverage; (2) interpreting Exclusion 13 as ProSelect does would be
contrary to public policy; and (3) the doctrine of concurrent causation requires ProSelect
to provide coverage. In her opposition, Levy reiterates the Estate’s latter two arguments,
and further argues that there is a genuine issue of material fact regarding whether Dr.
McKenna’s alleged failures to properly treat Levy are independent of his sexual abuse.
That issue is important, argues Levy, because it rebuts Exclusion 13’s assumption that it
is almost always impossible to separate alleged professional malpractice cleanly from
sexual misconduct.
7
When interpreting an insurance contract, the court relies principally on the “plain,
ordinary, and popular meaning of the disputed terms.” Vt. Mut. Ins. Co. v. Parsons Hill
P’ship, 2010 VT 44, ¶ 21. “When a provision is ambiguous or may reasonably be
interpreted in more than one way, then [courts] will construe it according to the
reasonable expectations of the insured, based on the policy language.” Id.; see also State
Farm Mut. Auto. Ins. Co. v. Roberts, 166 Vt. 452, 461 (1997) (“[T]erms that are
ambiguous or unclear [must] be construed broadly in favor of coverage.”). However,
courts “will not deprive the insurer of unambiguous terms placed in the contract for its
benefit.” Parsons Hill P’ship, 2010 VT 44 at ¶ 21 (quoting Fireman’s Fund Ins. Co. v.
CNA Ins. Co., 2004 VT 93, ¶ 9, 177 Vt. 215). ProSelect has the burden of proving that
Exclusion 13 applies. See State v. CNA Ins. Co., 172 Vt. 318, 324 (2001) (“[T]he burden
is on the insurer to show that a third party’s claim against the insured is entirely excluded
from coverage.”).
1. Ambiguity
The court finds nothing ambiguous in the terms of Exclusion 13. The exclusion
plainly states that the Policy “does not apply to any liability of an INSURED or to any
DAMAGES, INCIDENTS, CLAIMS or SUITS . . . [w]hich, in whole or in part, arise out
of or contain any allegations of . . . [s]exual intimacy, abuse, molestation, harassment,
exploitation, assault or undue familiarity.” The underlying action, Levy v. Estate of Peter
J. McKenna, No. S0922-07 CnC, is indisputably a “suit” under the Policy definition and
in the vernacular. The seven-count complaint in that suit explicitly includes an allegation
of sexual assault (count III). Even assuming that the “medical malpractice” count in the
underlying suit is totally unrelated to the sexual assault, Levy’s suit “contain[s]”
8
allegations of sexual assault, and therefore under the plain terms of Exclusion 13, the
Policy does not apply to the underlying suit (or any part of it, even if it is otherwise
covered under the Policy).
Other courts have interpreted similar provisions to mean that any sexual
misconduct bars the entire suit. In Franklin v. Professional Risk Management Services,
Inc., the court concluded that an exclusion for “any claim or damages based in whole or
in part on a claim of undue familiarity” “acknowledges, and circumvents, the difficulties
involved in determining whether the alleged malpractice is sufficiently intertwined with
the allegations of sexual misconduct” and that the exclusion “should alert a prospective
insured that any sexual misconduct precludes coverage.” 987 F. Supp. 71, 76–77 (D.
Mass. 1997). Levy argues that Franklin is distinguishable because the exclusion in that
case had to do with mishandling of the transference phenomenon, and because the
Franklin court relied on two cases that did not involve claims of malpractice independent
of the claims of sexual misconduct. In fact, the Franklin court did not need to decide the
question revolving around mishandling of the transference phenomenon, because it
concluded that the undue familiarity exclusion in that case clearly applied. Id. at 75.
Neither did the court rely on Govar v. Chicago Insurance Co., 879 F.2d 1581 (8th Cir.
1989) or Chicago Ins. Co. v. Griffin, 817 F. Supp. 861 (D. Haw. 1993)—to the contrary,
the Franklin court distinguished those cases on the grounds that the exclusionary
language was different. Id. at 76.
The Estate’s arguments that Exclusion 13 is ambiguous are unconvincing. The
Estate argues that count I of Levy’s amended complaint is in itself a “suit” as defined by
the Policy, and that since it does not mention anything about a sexual assault, Exclusion
9
13 cannot apply to that “suit.” The court disagrees. A single “civil action” can contain
numerous “claims.” See V.R.C.P. 2; Barkeij v. Don Lee, Inc., 34 F. Supp. 874, 876 (S.D.
Cal. 1940). If “suit” is defined as a “civil action”—as it is in the Policy at § IX(13)—
then defining an individual count among several as a “suit” is too narrow a definition. If
the exclusion only referred to “claims,” and if the Policy nowhere defined a “claim,” then
the court might be inclined to find ambiguity. See Legion Ins. Co. v. Vemuri, No. 96 C
2229, 1997 WL 757529, at *5–*6 (N.D. Ill. 1997) (interpreting an exclusion for “[a]ny
damages based in whole or in part on a claim of undue familiarity,” where the policy did
not define “claim,” and concluding that the term “claim” could mean either “suit” or
“count”). That is not the case here, since the Policy explicitly defines a “claim” as a
“suit,” Policy at § IX(2), and since Exclusion 13 speaks not only of claims but also, in the
disjunctive, of “suits.”
The Estate also argues that applying Exclusion 13 to bar coverage for an
otherwise covered claim of medical malpractice would be inconsistent with the
reasonable expectations of insured physicians, who would expect their policies to cover a
medical professional liability claim even if other claims were not covered. Very recently
the Supreme Court reaffirmed that the “‘reasonable expectations of the parties are
important in considering the scope of coverage,’ because of the adhesive nature of
[insurance] contracts.” Vt. Mut. Ins. Co. v. Parsons Hill P’ship, 2010 VT 44, ¶ 28
(quoting State Farm Mut. Auto Ins. Co. v. Roberts, 166 Vt. 452, 461 (1997)). But the
Supreme Court has also said that, “apart from circumstances where an agent of the
insurance carrier promises specific coverage, we have not held that the expectations of an
insured can control over unambiguous policy language.” Id.; see also Me. Mut. Fire Ins.
10
Co. v. Tinker, 2005 VT 35, ¶ 9, 178 Vt. 524 (mem.) (“[T]he insured’s coverage
expectations must be reasonable, otherwise a willfully ignorant policy holder might claim
coverage for all manner of explicitly excluded damages.”). Here, in the face of the
explicit and unambiguous language of Exclusion 13, any expectation that the Policy
would provide coverage on a claim containing allegations of sexual misconduct would
not be reasonable, and cannot control.
Finally, the Estate argues that Exclusion 13 is ambiguous because the use of the
words “in whole or in part” makes the exclusion confusing. The Estate maintains that an
insured physician could reasonably interpret that phrase as meaning that suits in which
only inappropriate sexual contact is alleged are excluded “in whole,” whereas suits which
allege both medical malpractice and inappropriate sexual contact are excluded “in part”
(i.e., the part that alleges the inappropriate sexual contact). The court disagrees. The
words “in whole or in part” modify the words in the series ending in “claims or suits”; the
Estate’s interpretation seeks to add ambiguity where there is none. Other courts have
similarly found no ambiguity in exclusions using the same phrase in similar medical
professional liability policies. E.g., Franklin v. Prof’l Risk Mgmt. Services, Inc., 987
F. Supp. 71, 75 (D. Mass. 1997); S.J.A.J. v. First Things First, 2000 WI App 116, ¶ 10,
235 Wis. 2d 275, 616 N.W.2d 524, 2000 WL 463309 (per curiam) (unpublished opinion).2
2. Public Policy
The Estate argues that excluding coverage for Levy’s medical malpractice claim
just because Levy also alleges inappropriate sexual contact would discourage patients
from making complaints against medical professionals for such conduct, and therefore
2
The Estate’s argument that ProSelect could have written Exclusion 19 differently does not prove that
Exclusion 19 is ambiguous. It is entirely possible to say something unambiguously in more than one way.
11
run contrary to public policy favoring safeguarding the public from misconduct by those
professionals. In support, the Estate cites American Home Assurance Co. v. Cohen, 881
P.2d 1001 (Wash. 1994). ProSelect responds that, since Cohen was decided, numerous
other courts have addressed the public policy issue in the context of similar policy
provisions and each of them has refused to void those provisions on public policy
grounds. ProSelect maintains that exclusions like Exclusion 13 will not deter reporting of
sexual misconduct, and, for various reasons, it actually advances public interests.
“Vermont law has long held that courts have the power to void written contract
provisions that violate public policy in either their terms or contemplated performance.”
LoPresti v. Rutland Reg’l Health Services, Inc., 2004 VT 105, ¶ 19, 177 Vt. 316. “Such
contract terms can be voided as against public policy only when ‘it could be said that they
were injurious to the interests of the public or contravened some established interest of
society.’” Id. (quoting State v. Barnett, 110 Vt. 221, 232 (1939)). Undoubtedly the
interests of the public include safeguarding the public from misconduct—and sexual
abuse, in particular—perpetrated by medical professionals upon their patients. That
policy is reflected in a variety of statutory provisions. See 26 V.S.A. § 1354
(“unprofessional conduct”); 33 V.S.A. § 6902(1)(D) (defining as “abuse” “[a]ny sexual
activity with a vulnerable adult by a caregiver who volunteers for or is paid by a
caregiving facility or program”); 33 V.S.A. § 6913(d) (penalties for abuse). The issue,
then, is whether Exclusion 13 is injurious to that interest.
In Cohen, the Washington Supreme Court held that it was against the public
policy of that state “for an insurer to provide lesser coverage for a psychologist’s
nonsexual misconduct, where sexual misconduct is also alleged as having occurred in the
12
same or related course of professional treatment, than the coverage that is provided where
only nonsexual misconduct is claimed.” Am. Home Assurance Co. v. Cohen, 881 P.2d
1001, 1009 (Wash. 1994). The court noted that the effect of the exclusion in that case
was “to limit all recovery of clients who are injured by the sexual misconduct of their
psychologists. . . . even if a client does not include a claim of sexual misconduct as part
of a malpractice action against the psychologist.” Id. The court reasoned:
There is a clear disincentive for reporting the unethical and harmful
conduct of an insured psychologist, even though such reporting would
benefit the public by helping to prevent future acts of sexual misconduct in
other therapeutic relationships. . . .
The Legislature has clearly expressed its intent to halt and to punish
unethical and unprofessional sexual misconduct by psychologists through
administrative disciplinary proceedings, injunctive actions, and criminal
prosecutions.
The insurance provision at issue here, by penalizing those clients who
report the sexual misconduct of their psychologists, impedes an important
legislative goal and thus violates the public policy of this state.
Id. at 1009–10.
At least one other court, after reviewing authorities holding to the contrary, has
adopted the Cohen court’s reasoning. Am. Home Assurance Co. v. McDonald, 698
N.Y.S.2d 436, 444 (N.Y. Sup. Ct. 1999) (“[E]xpansion of the coverage limits placed on
claims involving sexual misconduct on the part of an insured social worker to include
claims of malpractice which do not involve the social worker’s sexual misconduct
violates the public policy of the State of New York.”). On appeal, however, the
Appellate Division modified that portion of the Supreme Court’s opinion. Am. Home
Assurance Co. v. McDonald, 712 N.Y.S.2d 507, 510–11 (N.Y. App. Div. 2000) (“[W]e
13
declare that the sexual misconduct provision does not violate New York’s public
policy”).
Although it is possible that such exclusions could deter reporting of sexual
misconduct, Defendants have presented no evidence that this is the case.3 Furthermore,
such exclusions would have other effects that would advance Vermont’s public policies.
As the McDonald court reasoned:
In fact, a more likely inference is that the limitation of coverage would
dissuade a psychologist, who might be so inclined, from committing acts
of sexual misconduct with his or her patients because he or she knows that
his or her insurance policy will not fully cover damages in the event of a
lawsuit.
Id. (citation omitted); see also Franklin v. Prof’l Risk Mgmt. Services, Inc., 987 F. Supp.
71, 77 (D. Mass. 1997) (psychotherapist’s personal liability is a considerable deterrent);
Am. Home Assurance Co. v. Levy, 686 N.Y.S.2d 639, 646–47 (N.Y. Sup. Ct. 1999)
(“[T]he Sexual Misconduct Provision will discourage sexual misconduct by therapists
who would be exposed to, and uninsured for, personal liability.”); Am. Home Assurance
Co. v. Stephens, 982 S.W.2d 370 (Tex. 1998) (per curiam) (adopting Judge Reavley’s
dissenting opinion in American Home Assurance Co. v. Stephens, 130 F.3d 123, 128–30
(5th Cir. 1997), reasoning that a similar exclusion would discourage disclosure of sexual
misconduct, but that it “surely serves to discourage the conduct itself”); S.J.A.J. v. First
Things First, 2000 WI App 116, ¶ 15, 235 Wis. 2d 275, 616 N.W.2d 524, 2000 WL
3
Indeed, there is no evidence before the court that patients even consider the insurance issue before
reporting. See McDonald, 712 N.Y.S.2d at 511 (record did not support conclusion that patients are even
aware of the amount of their therapists’ available coverage); Am. Home Assurance Co. v. Levy, 686
N.Y.S.2d 639, 646 (N.Y. Sup. Ct. 1999) (mistake to presume that patients are aware of their therapists’
insurance policy prior to litigation). As between patients and the insured professionals, it seems much more
likely that the latter might consider the terms of their policies before entering into sexual relationships with
their patients, rather than the other way around.
14
463309 (per curiam) (unpublished opinion) (“[I]t is consistent with public policy to hold
therapists personally responsible for criminal sexual conduct with their patients.”).4
Both the Estate and Levy argue that this particular case involves claims of
professional malpractice that are independent of and entirely separable from the sexual
misconduct. It is true that some of the cases discussed above involved professional
malpractice claims that were inseparably intertwined with sexual misconduct. E.g.,
Franklin v. Prof’l Risk Mgmt. Services, Inc., 987 F. Supp. 71, 76 (D. Mass. 1997). But
even assuming this case were different in that respect, it would still not mandate a
different result here. The plain language of Exclusion 13 obviates the need to inquire into
whether the alleged malpractice is intertwined with the sexual misconduct. See id.; RLI
Ins. Co. v. Williams, No. 3:95-CV-1300-H, 1996 WL 189579, at *4 (N.D. Tex. Apr. 1,
1996). Furthermore, because of the nature of the psychiatrist-patient relationship, it is
reasonable for insurers to offer policies that avoid such inquiries. See Am. Home
Assurance Co. v. Levy, 686 N.Y.S.2d 639, 647 (N.Y. Sup. Ct. 1999).
Therefore, for the reasons discussed by the Appellate Division in McDonald and
by courts in other jurisdictions, this court concludes that Exclusion 13 does not violate
the public policy of Vermont.
3. Concurrent Causation
Citing Cranford Insurance Co. v. Allwest Insurance Co., 645 F. Supp. 1440 (N.D.
Cal. 1986), the Estate argues that Levy’s alleged acts of negligence are independent from
4
ProSelect has advanced various other ways in which Exclusion 13 advances or is consistent with public
policy. ProSelect argues that Exclusion 13 will increase the affordability of professional liability insurance,
public policy favors freedom of contract, BISHCA approved Exclusion 13, and that Vermont does not
require physicians to carry liability insurance at all. The court concludes that its reasoning above is
sufficient to resolve the public policy issue, and thus does not reach those additional arguments.
15
the conduct excluded from the Policy, and that therefore the doctrine of concurrent
causation requires ProSelect to provide coverage. ProSelect maintains that the doctrine
does not apply in this case because (1) the exclusion is not framed in terms of causation
of the injury; and (2) even assuming the Dr. McKenna’s sexual misconduct and his
alleged non-sexual malpractice are independent causes of Levy’s alleged injuries, the
underlying suit does not involve a situation where those causal factors concurred to cause
a single injury.
Vermont adopted the “concurrent causation” doctrine in State Farm Mutual
Automobile Insurance Co. v. Roberts, 166 Vt. 452 (1997). Mailhoit v. Nationwide Mut.
Fire Ins. Co., 169 Vt. 498, 500 (1999). Under that doctrine, “if an occurrence is caused
by a risk included within the policy, coverage may not be denied merely because a
separate excluded risk was an additional cause of the accident.” Id. at 501 (quoting
Roberts, 166 Vt. at 456); see also 7 Couch on Insurance § 101:49 (3d ed.). This court
agrees with the courts in other jurisdictions holding that the doctrine of concurrent
causation plays no role where, as here, an exclusion unambiguously applies even when
there is an independent and concurrent cause.5 See Am. Home Assurance Co. v. Stone,
61 F.3d 1321, 1330 n.7 (7th Cir. 1995); S.J.A.J. v. First Things First, 2000 WI App 116,
¶ 10, 235 Wis. 2d 275, 616 N.W.2d 524, 2000 WL 463309 (per curiam) (unpublished
opinion). The concurrent causation doctrine is a judicially-created rule, and parties to an
insurance contract generally have a right to “contract out” of common-law rules. See 7
Couch on Insurance § 101:39 (3d ed.). Cranford is distinguishable because the exclusion
5
For this reason, Levy’s argument that there is a genuine issue of material fact regarding whether Dr.
McKenna’s alleged failures to properly treat Levy are independent of his sexual abuse is unavailing. The
dispute is not material because, under the court’s conclusion, it does not matter that Dr. McKenna’s alleged
failures to properly treat Levy are independent of his sexual abuse.
16
in that case—for “damages awarded in suits . . . involving undue familiarity, sexual
intimacy, or assault concomitant therewith,” 645 F. Supp. at 1442—did not
unambiguously apply even when there is an independent and concurrent cause. See
Franklin v. Prof’l Risk Mgmt. Services, Inc., 987 F. Supp. 71, 76 & n.6 (D. Mass. 1997)
(distinguishing Cranford on the basis of the exclusionary language).
The above discussion addresses three of the four defenses Defendants articulate in
their answer to ProSelect’s complaint for declaratory judgment. Those defenses, briefly
stated, are: (1) concurrent causation; (2) public policy; and (3) ambiguity. The fourth
defense relates only to Mrs. McKenna, and the motions before the court do not seek
judgment with respect to her. Therefore, because the court has already addressed the
arguments raised in Defendants’ defenses, and because Exclusion 13 unambiguously
excludes coverage for the entire underlying suit, ProSelect is entitled to summary
judgment on count I of its complaint for declaratory judgment, and on count I of
Defendants’ counterclaim.
B. Reimbursement for Claim Expenses
ProSelect argues that it has no duty to reimburse the Estate for fees and costs
incurred by the Estate in defending the underlying suit because under the express terms of
the Policy, such reimbursement is available only for suits brought against the insured and
reported to ProSelect during the policy period, and Levy did not bring her suit until
August 2007, long after the Policy lapsed. ProSelect also maintains that the Reporting
Endorsement Dr. McKenna purchased did not extend the deadlines set forth in § VI(5) of
the Policy for reimbursement coverage. The Estate argues that it is irrelevant that Levy
filed suit after the Policy was canceled because a governmental regulatory proceeding
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was commenced during the policy period, and § VI(5) is available if either a
governmental proceeding or a suit alleging inappropriate sexual conduct is brought
during the policy period. The Estate also argues that ProSelect received written notice
during the policy period of the governmental regulatory proceeding and of Dr.
McKenna’s alleged sexual abuse of Levy and her claim that she was harmed thereby.
Alternatively, the Estate argues that even if Levy had to sue the Estate within the
policy period for the reimbursement benefit to be available, the Estate would still be
entitled to reimbursement because ProSelect’s cancellation of the Policy was unlawful.
ProSelect’s response is that (1) the fact that it received notice of the governmental
regulatory proceeding during the policy period is irrelevant to whether ProSelect is
obligated to reimburse the Estate for fees and costs incurred by it in defending the
underlying suit; and (2) any disputes concerning the propriety of ProSelect’s cancellation
of the Policy are irrelevant because the Policy would not have been renewed in March
2006.
The court applies the same principles of contract interpretation articulated in Part
II.A above. As mentioned in Part I above, the Policy contains a section entitled “Defense
and Claims Expenses.” That section states, in pertinent part, that ProSelect will
reimburse the insured—Exclusion 13 notwithstanding—for
reasonable expenses (but not DAMAGES, fines or penalties) up to a total
of $100,000 required for YOUR defense in a civil SUIT or governmental
regulatory proceeding first brought against YOU during the POLICY
PERIOD alleging the actual sexual abuse, sexual misconduct or any other
sexual activity by YOU or by anyone for whom YOU are legally
responsible while engaged in the performance of PROFESIONAL
SERVICES . . . .
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Policy § VI(5). Section VI(5) also states that “[a]s a condition to such reimbursement,
YOU must notify US in writing of any such SUIT or [governmental regulatory]
proceeding within the POLICY PERIOD . . . .” Id.
ProSelect does not dispute that the Vermont Board of Medical Practice opened a
proceeding against Dr. McKenna in June 2005, that the proceeding involved allegations
of sexual misconduct, or that ProSelect was notified of the proceeding before the Policy
was canceled in June 2005. ProSelect agrees that the Estate is entitled to reimbursement
of reasonable and adequately documented fees and costs incurred by Dr. McKenna in
defending the Board proceeding. To that extent, the parties appear to have stipulated that
the Estate is entitled to summary judgment on count III of Defendants’ counterclaim—
which generally asserts that ProSelect should pay the Estate up to $100,000 for defending
the Board proceeding.
The Estate claims it is also entitled to recover up to $100,000 for the Estate’s
defense in the underlying civil action (counterclaim counts IV and V).6 ProSelect
maintains that it is not obligated to reimburse the Estate for any defense costs incurred by
it because, unlike the Board proceeding, the underlying suit was not brought and reported
while the Policy was in effect. ProSelect’s argument is, basically, that the Estate has run
up against one of the essential limitations of a “claims made” policy: such policies only
cover acts or omissions discovered and brought to the insurer’s attention during the
policy period, and therefore provide no prospective coverage at all. See 1 Couch on
6
The parties nowhere elaborate on whether they believe the $100,000 limit is for the combined Board and
court proceedings, or whether there is a separate $100,000 limit for each proceeding. Thus, the court does
not address that potential, unbriefed issue.
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Insurance § 1:5 (3d ed.) (distinguishing between “claims made” and “occurrence”
policies).
As mentioned above, one of the Estate’s arguments in support of its counterclaims
for damages under § VI(5) of the Policy is that ProSelect received written notice during
the policy period of Dr. McKenna’s alleged sexual abuse of his patient Robyn Levy and
of her claim that she was harmed thereby. ProSelect maintains that this is irrelevant
because the trigger for reimbursement coverage is the bringing and reporting of a suit,
and Levy did not bring a suit while the Policy was in effect. Based upon the arguments
made by the parties, the court agrees with ProSelect on this point.
However, § 2 of the Policy—upon which neither party appears to have focused in
the present context—suggests that, unlike a pure “claims made” policy, the Policy in this
case may provide prospective coverage. That section provides as follows:
If during the POLICY PERIOD YOU become aware of any INCIDENT or
circumstances which may reasonably be expected to give rise to a CLAIM
and give written notice to US of such INCIDENT or circumstances, then
any such CLAIMS which subsequently are made against YOU and are
reported to US as soon as practicable based upon, arising out of, or
resulting from such INCIDENTS or circumstances shall be considered
first made and reported to US on the last day of the POLICY PERIOD.
Policy § 2. The court concludes that the parties should have an opportunity to brief the
impact of this provision upon the Estate’s counterclaims, and therefore reserves judgment
on count IV of Defendants’ counterclaim.
As to count V of Defendants’ counterclaim, Defendants’ argument is that
ProSelect improperly canceled Dr. McKenna’s policy, and that the Estate is therefore
entitled to reimbursement even if Levy’s claim was not brought and reported to ProSelect
until after the close of the policy period. Here, even if ProSelect had not canceled the
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Policy, it is undisputed that the policy period would have expired prior to the underlying
suit even if not wrongfully terminated. There is no evidence that ProSelect had any legal
obligation to renew the Policy. See 2 Couch on Insurance § 29:5 (3d ed.) (“Where there
is no clause in the policy expressly granting a privilege or imposing a duty of renewal,
neither party has any right to require a renewal.”). ProSelect is therefore entitled to
summary judgment on count V of Defendants’ counterclaim.
Order
ProSelect’s motion for partial summary judgment is granted in part: the court
finds that the policy does not provide coverage for the substantive claims asserted in the
underlying suit. There is therefore no duty to defend. In addition, ProSelect’s motion for
summary judgment on counts I and V of Defendants’ counterclaims is granted. The court
reserves ruling on count IV of Defendants’ counterclaim.
The Estate’s cross motion for summary judgment on count III of Defendants’
counterclaim is granted. The Estate’s motion for summary judgment on counts I and V
of Defendants’ counterclaim is denied. The court reserves ruling on the Estate’s motion
for summary judgment on count IV of Defendants’ counterclaim.
All parties are ordered to submit within 30 days any additional briefing on the
impact of § 2 of the Policy upon the Estate’s counterclaims for damages under § VI(5) of
the Policy.
Dated at Burlington this day of June 2010.
______________________________
Helen M. Toor
Superior Court Judge
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