Medical Services Differ From Administrative Functions of the Insured
Excess and surplus lines insurer, Colony Insurance Company, sued its insured seeking a declaration that it owed no duty to defend or indemnify for an underlying wrongful death and medical malpractice claim. The case is Colony Insurance Company v. Suncoast Medical Clinic, LLC, 2010 WL 2871077 (M.D.Fla.).
While under the care of Suncoast physicians, Charles Ziolkowski dies from liver cancer. As a result of the death of her husband, the widow initiated a wrongful death and medical malpractice lawsuit against the physicians and Suncoast. Suncoast was insured by Colony Insurance and tendered the lawsuit to the insurer. Colony denied coverage. On the grounds that policy exclusions preclude coverage, Colony sought a declaratory judgment that it owed no duty to defend or indemnify Suncoast for the claims arising from the death of Ziolkowski.
The question before the court was whether or not the allegations against Suncoast triggered the exclusions. The exclusions declared that the insurance did not apply to bodily injury arising out of the rendering or failure to render: medical, surgical, or nursing service treatment, advice, or instruction; any health or therapeutic service or treatment; or any professional service.
The insurer contended that it did not owe a duty to defend or indemnify the insured because the allegations brought against the insured allege negligence in the provision of medical services and treatment which were clearly excluded under the terms of the policy. The insured argued that the allegations that it failed to have in place sufficient policies and procedures, and staff and assistive technology to ensure the performance of diagnostic tests implicated purely administrative business practices that are not part of the rendering of medical services.
The court said that, based on Florida law and the law of other jurisdictions, it agreed with the argument put forth by the insurer. The court found that any alleged failure by Suncoast to have in place adequate policies, procedures, staff, and assistive technology was an intricate part of the medical services provided by the insured, thereby triggering the exclusions. The court said that hiring staff, purchasing assistive technology, and establishing and implementing policies and procedures governing diagnostic testing and communication among medical staff are all part of the professional medical services Suncoast provided.
Suncoast contended that the allegations in the underlying lawsuit implicated deficient business practices completely independent of medical or professional services because the practices in question required no professional skills. The court disagreed and pointed out that decisions about staff hiring and establishing diagnostic testing procedures do require the application of medical expertise; without medical skill, decisions regarding these matters would be ineffective if not disastrous. The court found such decisions are so integral to the provision of medical services and treatment that they cannot be unbundled and so, the policy exclusions applied. Colony had no duty to defend or indemnify Suncoast.
Editor's Note: The meaning of “professional services” is important because it influences coverage and claims situations. Its meaning helps to determine whether a certain act or service is in keeping with the primary role of a professional and, therefore, rightfully within the scope of professional liability insurance; or, looking at it from the opposite viewpoint, whether the act or service is akin to a premises and operations exposure and thus subject to general liability insurance.
This decision from the U.S. District Court in Florida, with its reliance on Florida law and decisions from other jurisdictions, offers guidance on the distinction between professional medical services and regular business practices.