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Hospital litigates with its insurers over coverage

The current Connecticut case brought by victims of Dr. George Reardon, St. Francis Hospital is an apt illustration of a problem that is often ignored at the peril of insurance buyers. Where possible, should insurance purchasers buy insurance from the same insurance company in order to involve possible cracks between major related coverage lines, in this case, General Liability and Medical Malpractice? Often it may cost more in premium.

There are 60 or more child victims of Dr. Reardon’s abuse involving graphic, perhaps pornographic photography of patients. In short, the claims arose over a long period of time during which the hospital purchased insurance from several insurers for, among other things, General Liability and Medical Malpractice. The liability of the hospital for the doctor’s actions can be considered in the context of General Liability claims of phsyical bodily injury and also by claims of poor supervision of the doctor’s actions, arguably a professional service covered under the Medical Malpractice programs. The dispute between insurers and the hospitals is deep in litigation at this time.

Each major insurance type also has different deductibles and trigger excess liability coverage over differing aggregate claim structures. This leads to confusion and litigation over the position of excess insurers. That further lengthens the time it takes to conclude all of the litigation over insurance proceeds. Courts will need to weigh in on the matter of primary insurance, Medical Malpractice vs. General Liability, before it gets to which excess insurance may apply.

There would be little to fight over had the hospital purchased all of its liability insurance from the same insurance company any stayed with that insurer over a long period of time. Often, this is not even an option as most insurers may be unable or unwilling to assume all of these related risks. Other times, it just may be more expensive to take the route of carrying all insurance with one carrier. And, of course, there is an arguement against putting all of your eggs in one basket. Had the hospital carried all coverage with a carrier that went bankrupt then all of its insurance proceeds would be at risk.

Nonetheless, this case demonstrates why insurance buyers should strongly consider the benefits of keeping related coverages with one insurer and of limiting the number of times that it changes insurers.

About the Author

Phil Edmundson is the Chairman and CEO of William Gallagher Associates (WGA), insurance brokers and consultants for businesses with over 30 years in the insurance industry. He manages strategy, talent acquisition and development, and management / acquisitions at WGA.
617.646.0229  PEdmundson@wgains.com  Connect with Phil on LinkedIn


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