American Casualty Co. of Reading, PA. v. O'FLAHERTY

Opinion

EPSTEIN, Acting P. J.

A hospital and a number of its professional staff, including a nurse, were sued by the heirs of a patient for wrongful death. The

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insurance carrier for the hospital undertook the defense of that institution and its staff, and hired defense counsel for that purpose. The nurse had her own liability policy. Her insurance carrier refused to contribute toward a possible settlement. The verdict exceeded the limits of the hospital’s primary policy, and the underlying case settled for the amount of the verdict before judgment was entered. The insurers are in litigation with respect to reimbursement from the nurse’s insurer. The latter sued defense counsel for legal malpractice. Counsel obtained summaiy judgment against the nurse’s insurer. That insurer has appealed from the judgment. We find no error and affirm.

Factual and Procedural Summary

In December 1993, Laura Wood filed a wrongful death action (the Wood action) against Henry Mayo Newhall Memorial Hospital (the Hospital) and several physicians, alleging that her husband was given an overdose of morphine following routine surgery, which resulted in his death. Later, Michelle Gorman, a nurse at the hospital, was named as a defendant. American Continental Insurance Company (ACIC) issued two liability policies for the hospital; a primary policy with a limit of $1 million per claim, and an umbrella policy with a $10 million limit. As an employee of the hospital, Ms. Gorman was covered under both policies.

ACIC retained the law firm of O’Flaherty & Belgum (O’Flaherty) to represent the hospital and Ms. Gorman in the Wood action. After substantial discovery and two mandatory settlement conferences, Ms. Gorman told the attorney from O’Flaherty that she had a professional liability insurance policy with American Casualty at the time of the Wood incident.

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O’Flaherty alerted ACIC that Ms. Gorman had her own insurance.

ACIC contacted American Casualty, outlined the current status of the case, and forwarded copies of deposition summaries and summaries of reviews conducted by expert witnesses for ACIC. ACIC took the position that damages in the Wood action were likely to exceed the $1 million limit of its primary policy with the Hospital. In that event, ACIC said: “It is our position that coverage for Nurse Gorman under ACIC’s umbrella policy #92L333 will not be triggered until Nurse Gorman’s $1,000,000 policy limit under policy #N4638848 with [American Casualty] has been exhausted.” ACIC asked American Casualty to contribute the full $1 million limit of Ms. Gorman’s policy for purposes of settlement discussions.