Clinical Perfusionists, Inc. v. St. Paul Fire & Marine Insurance

RODOWSKY, Judge. This is an insurance case. It presents trigger of coverage issues under a form of claims made, medical profession, liability policy that is the subject of a declaratory judgment action in the United States District Court for the District of Maryland. The federal court (Frank A. Kaufman, J.) has certified to us four progressively more complex questions. 1 Basically, two health care providers, insured under different policies ⁶⁸⁸ issued by the same insurer, participated in a surgical operation.

Shortly thereafter the patient died, prompting one insured to give notice of a potential claim to the insurer. The other insured did not notify the insurer until suit was filed, after its policy had expired. We conclude, based on the particular facts set forth below, that coverage was not triggered under the policy of the non-notifying insured. The plaintiff in the federal action is Clinical Perfusionists, Inc. (CPI).

Through its technicians CPI provides perfusion services for open heart surgery at various hospitals, including St. Joseph Hospital, Inc. (the Hospital). “Perfusion” is the process whereby a patient’s blood is oxygenated and recirculated through the use of a heart-lung “pump” machine, thereby bypassing the patient’s heart and lungs during the surgical procedure. CPI was insured under professional liability policy No. 508JD3817 (the Policy), issued by St. Paul Fire and Marine Insurance Company (St. Paul), the defendant in the federal action. The Policy period was September 1, 1986 through September 1, 1987, with a retroactive date of September 1, 1985. CPI did not renew the Policy.

The Policy, in relevant part, provides: “Important note: This is a claims-made coverage. Please read it carefully, especially the When A Claim is Covered section. “When A Claim Is Covered “We’ll cover claims that result from the professional service you performed or should have performed after the retroactive date that applies. We must also be notified of the claim while this agreement is in effect. “When We’ll Consider A Claim Made “We’ll consider a claim is made on the date you first report an incident or injury to us or our agent. You must include the following information: • Date, time and place of the incident; ⁶⁸⁹ • What happened and what professional service you performed; • Type of claim you anticipate; • Name and address of injured party; and • Name and address of any witness. “WHAT TO DO IF YOU HAVE A LOSS “Someone Is Injured Or Something Happens Which Can Result In A Liability Claim “If an accident or incident occurs that may involve this policy, you or any other protected person involved must: “2.

Tell us or our agent what happened as soon as possible. Do this even though no claim has been made but you or another protected person is aware of having done something that may later result in a claim. This notice should include: • The time and place of the event; • The protected person involved; • The specific nature of the incident including the type of claim that may result; and • The names and addresses of any witnesses and injured people.” 2 On December 16, 1986, Paul Trionfo underwent coronary artery bypass surgery at the Hospital. Physicians participating in the procedure were the surgeon, assistant surgeon, and the anesthesiologist, Dr. George V. George.

The perfusionist was employed by CPI. Mr. Trionfo never regained consciousness following the surgery, and he died on December 29, 1986 of anoxic encephalopathy. Sometime thereafter Dr. George ⁶⁹⁰ had a telephone conversation with his insurance broker to whom Dr. George subsequently wrote a letter dated February 13, 1987. That letter was forwarded to St. Paul, which insured Dr. George against professional liability under Policy 508JA6877.

Dr. George’s letter advised that the patient had been cooled to 29.5° C, the bypass performed, and the patient rewarmed to 36.8° C. The aorta cross clamp was then released and Mr. Trionfo’s heart spontaneously started to beat. Dr. George further reported as follows: “One of the anastomoses was unsatisfactory and so [ajortic cross clamp was re-applied 10:44 A.M. at a body temperature of 36.8 degrees C. Surgical conditions were unsatisfactory and hence the [sjurgeon requested the [p]erfusionist to reduce blood flow to about two litres, which is less than half [the flow] that was optimal. His mean blood pressure decreased to about thirty mm, which could not be raised by pharmacological means. Surgeon was informed of this, but due to the difficulty in anastomosis, this condition had to be maintained for about fourteen' minutes.” Dr. George concluded by stating that “[w]e used standard anesthesia care and at no time was [the patient’s] pressure or oxygenation below levels except when the perfusion flow was decreased by the [p]erfusionist to subnormal levels at the request of the [s]urgeon.” Dr. George did not mention CPI in his letter.

Nor did he identify the individual who was performing the perfusion service. St. Paul assigned an adjuster to investigate. The adjuster conducted a recorded question and answer interview of Dr. George, and that recording was transcribed. The perfusionist was not identified in that interview.

The adjuster obtained the 371 page medical record on Mr. Trionfo from the Hospital. Within that record there is a chart on which are recorded various readings by the perfusionist at various times in the course of the surgery. That chart has a preprinted heading ⁶⁹¹ reading, “Clinical Perfusionists, Inc. Cardiopulmonary Bypass Record.” In addition to investigating the possible liability of Dr. George to the survivors of Mr. Trionfo, the adjuster, on an internal form called the “TEN-DAY REPORT,” was asked to opine on “Subrogation, Indemnity, or Contribution.” The adjuster inserted, “Hospital & Surgeon.” In a memorandum of May 6, 1987 to the Baltimore branch office claims supervisor, the adjuster stated “that the primary exposure would rest with the surgeon,” and advised that the surgeon was insured with Medical Mutual “and is believed to have a $8,000,000.00 limit.” The adjuster further believed “that our insured [i.e., Dr. George] would be second in line followed by” the Hospital, which the adjuster believed was also insured by Medical Mutual. The Baltimore claims office reported to the regional and home offices of St. Paul that “[w]e insure only the anesthesiologist....” A report of late May to the home office from the regional claims supervisor for St. Paul recognized that “[i]f a claim is made, there would be a shotgun approach by the family.... ” St. Paul also caused Mr. Trionfo’s record from the Hospital to be reviewed by another anesthesiologist who concluded that the case was “handled flawlessly” by Dr. George.

St. Paul determined that it would close its file if no claim were asserted against Dr. George by August 1987. Mr. Trionfo’s survivors filed a wrongful death action in December 1989. Included among the defendants are CPI, Dr. George, and the Hospital. In January 1990 CPI notified its insurance agent of the Trionfo lawsuit, and the agent reported that filing to St. Paul a few days later.

Prior to the filing of the wrongful death action no claim had been made against CPI by Mr. Trionfo’s survivors or his estate. St. Paul denied coverage, contending that no claim had been made during the Policy period. The federal declaratory judgment action followed. Thus, although the bypass surgery giving rise to alleged tort liability on the part of CPI occurred during the Policy ⁶⁹² period, no claim was asserted by the Trionfo family against CPI during the Policy period, and CPI did not report a potential Trionfo claim to St. Paul during the Policy period.

But for (1) the report by Dr. George to St. Paul of a potential claim under his policy and (2) St. Paul’s resulting investigation, this case would bé controlled by T.H.E. Ins. Co. v. P.T.P. Inc., 331 Md. 406 , 628 A.2d 223 (1993). There we held that the notice-prejudice rule of Md.Code (1957, 1991 Repl.Vol.), Art. 48A, § 482 does not operate to enlarge the insuring agreement in a claims made policy so as to cover a claim arising out of an occurrence that took place within the policy period when the claim was neither made nor reported during the policy period. 3 The questions certified by the federal court are: “1. Under the terms of the policy at issue in this case, in order for a claim or potential claim to be considered ‘made,’ or in order for coverage of that claim to be considered ‘made,’ or in order for coverage of that claim or potential claim to be provided, must the insured CPI report the claim or potential claim to St. Paul, or can a third party report that claim or potential claim? “2.

If a third-party report is permissible, in the context of the facts in this case, was the scope of the information provided by George in his notice of a potential claim suffi ⁶⁹³ dent to constitute a third-party report of CPI’s claim as well? “3. If, prior to the expiration of CPI’s policy period, St. Paul discovered, through its own efforts or as a result of the notice given it by George, the existence of CPI’s policy and the fact of CPI’s participation in the Trionfo surgery, does that suffice to require St. Paul to insure CPI from claims or potential claims arising from the Trionfo incident? “4. If St. Paul was not timely informed of the existence of the CPI policy, did St. Paul have the obligation to check its records in order to determine whether any participants in the Trionfo surgery other than George were insured under policies issued by St. Paul?” We interpret the first two of these questions as focusing on the report by Dr. George and the remaining two questions as focusing on the St. Paul investigation. I We shall assume, arguendo, that the answer to question one is “yes,” ie., that a third person to the insurer-insured relationship who is not acting as an agent for the insured, may trigger coverage by reporting to the insurer a potential claim against the insured.

It is unnecessary to answer question one because the scope of the information actually provided by Dr. George in his notice of a potential claim against himself was not sufficient to constitute a third party report of a potential claim against CPI under the Policy. For example, it is unnecessary to opine whether the Policy would have covered the Trionfo claim against CPI upon St. Paul’s receipt of Dr. George’s letter if, contrary to the facts presented, Dr. George had included in his letter that the perfusionist for the bypass surgery was CPI and that CPI was also insured by St. Paul for professional liability. But Dr. George’s letter of February 13,1987 in fact implicates only the policy issued to him by St. Paul; the letter does not implicate policy 508JD3817 issued by St. Paul to CPI. ⁶⁹⁴ CPI cites many cases involving occurrence policies where a third party to the insurer-insured relationship reported the occurrence to the insurer. None of the cases cited, however, concerned a claims made policy.

They can be grouped into three areas. First, cases involving occurrence policies allowing notice “by or on behalf of’ the insured: State Farm Mut. Auto. Ins.

Co. v. Sloan, 150 Ga.App. 464 , 258 S.E.2d 146 (1979); Stonewall Ins. Co. v. Farone, 129 Ga.App. 471 , 199 S.E.2d 852 (1973); Monguso v. Pietrucha, 87 N.J.Super. 492 , 210 A.2d 81 (1965). Second, where notice by one insured was sufficient as to an additional insured on the same occurrence policy: Hartford Accident & Indem. Co. v. Strain Poultry Farms, Inc., 166 Ga.App. 334 , 303 S.E.2d 781 (1983); Mariani v. Bender, 85 N.J.Super. 490 , 205 A.2d 323 (1964), cert. denied, 44 N.J. 409 , 209 A.2d 143 (1965); Philadelphia Elec.

Co. v. Aetna Casualty & Sur. Co., 335 Pa.Super. 410 , 484 A.2d 768 (1984); Sinclair Oil Corp. v. New Hampshire Ins. Co., 107 R.I. 469 , 268 A.2d 281 (1970); Helvy v. Inland Mut. Ins.

Co., 148 W.Va. 51 , 132 S.E.2d 912 (1963). Lastly, where notice by a third party on an occurrence policy allowed for sufficient investigation so as not to prejudice the insurer: Royal Indem. Co. v. Pearson, 287 Ala. 1 , 246 So.2d 652 (1971); Lee v. Travelers Ins. Co., 184 A.2d 636 (D.C.1962); Olivieri v. Coronet Ins.

Co., 173 Ill.App.3d 867 , 124 Ill.Dec. 95 , 528 N.E.2d 986 (1987), cert. denied, 124 Ill.2d 556 , 129 Ill.Dec. 151 , 535 N.E.2d 916 (1989); Gregory v. Highway Ins. Co., 24 Ill.App.2d 285 , 164 N.E.2d 297 (1960); Cousins v. Liberty Mut. Ins. Co., 47 Misc.2d 413 , 262 N.Y.S.2d 760 (N.Y.Sup.Ct.1965), aff'd, 26 A.D.2d 992 , 276 N.Y.S.2d 839 (N.Y.App.Div.1966); Bailey v. Universal Underwriters Ins.

Co., 258 Or. 201 , 474 P.2d 746 (1970). The instant matter is distinguishable from those involving occurrence policies. The promise of St. Paul is, in general, to insure against liability for actual claims made that are reported within the Policy period and for potential claims that are reported within the Policy period. The threshold purpose of reporting to the insurer in a policy of this type is to effect, or trigger, coverage under the insured’s policy.

See T.H.E. Ins. ⁶⁹⁵ Co., 331 Md. 406 , 628 A.2d 223 . Investigation of the incident giving rise to the potential claim ordinarily is temporally secondary to the reporting of the claim. Under the facts of the case before us Dr. George’s letter, in and of itself, did not advise St. Paul that there was a potential claim against CPI by the Trionfo family that potentially fell within the Policy. Both CPI and St. Paul take relatively extreme positions on the content required for a notice to effect coverage.

CPI seems to contend that it was unnecessary for St. Paul to be aware of its policy issued to CPI when it received Dr. George’s notice, and that notice of the incident alone was sufficient. On the other hand, St. Paul contends that the report of a potential claim must contain information on each of the topics referred to in the Policy in order to be effective as a trigger of coverage. In our view a more sound approach is the middle ground taken in St. Paul Fire & Marine Ins. Co. v. Tinney, 920 F.2d 861 (11th Cir.1991).

Tinney involved a claims made, medical profession, liability policy. It provided that “[a] claim is made on the date you first report an incident or injury to us or our agent.” Id. at 862 . The policy then listed the information to be contained in the notice. The list is identical to that in the Policy. 4 The policy expired on September 4, 1987.

While it was in effect the insured, Torsch, performed surgery on three patients, Green, Willis, and McLeod, each of whom became clients of the same attorney, Tinney. In March 1987 Tinney sent a claim letter to the insured on behalf of all three clients, but Tinney’s letter was not forwarded to the insurer at that time. Tinney filed suit on behalf of Green in May 1987, at which time the suit papers, a copy of the attorney’s earlier letter, and a loss notice referring only to Green’s claim were sent to the insurer by the insurance agent for the insured. After the policy expired suits were filed against the insured on behalf of ⁶⁹⁶ Willis and McLeod.

St. Paul denied coverage for the latter claims because the listed background information had not been furnished as to those claimants prior to policy expiration. The court held that the attorney’s letter, transmitted within the policy period in connection with the suit by Green, was a sufficient notice of the claims by Willis and McLeod. The court reasoned as follows: “We would be hard pressed to find a stronger statement of the likelihood of litigation against Torsch for medical malpractice than is contained in Tinney’s letter of March 26, 1987, which was brought to the attention of St. Paul. The provision of the policy calling for background information was to assist St. Paul in the investigation of the claims so that St. Paul could either settle or prepare to defend litigation.

This information, while helpful to the insurer, cannot be used as a trap for the unwary insured. Once the insurer is put on notice that there has been an incident, together with the essential facts upon which liability of the insurer depends, a claim is made. If there is a deficiency of investigative information called for by the policy (not pertinent to the underlying question of liability), the insurer ■ may require it to be furnished. Should the insured unreasonably fail or refuse to provide the information sought, the insurer may have the right to deny liability, if it has suffered prejudice in not being able to properly investigate the claim.” Id. at 863 (emphasis added).

In the instant matter Dr. George’s letter did not advise St. Paul of the essential facts upon which its contractual obligations to CPI depended. Indeed, the insurer-insured relationship between CPI and St. Paul was not expressly or implicitly referred to in the letter. The same deficiency afflicts Dr. George’s letter as supplemented by St. Paul’s receipt of the Hospital record on Mr. Trionfo, even though the record contained at one place among its hundreds of pages a reference to CPI as the perfusionist. ⁶⁹⁷ For these reasons, assuming arguendo that the answer to question one is “yes,” the answer to question two is “no.” II Question three in essence asks whether coverage would be triggered if St. Paul “discovered” CPI’s policy and CPI’s participation in the Trionfo surgery. The term “discovered” requires some refining.

After St. Paul obtained the Hospital record, that insurer, within the universe of its corporate being, possessed information that Mr. Trionfo had died following surgery, that the anesthesiologist had reported a potential claim against him, that another participant in the surgery, the perfusionist, was CPI, that CPI was an insured, and that