5^th Cir. and TN cases find that multiple claims arose out of a single occurrence, lowering the applicable SIR’s for Hurricane Katrina and med mal claims.

The Federal Fifth Circuit Court of Appeals found that St. Bernard Parish was entitled to a defense from its insurer in relation to claims by seventy property owners alleging that the Parish had wrongfully demolished their homes. The homes were damaged during Hurricane Katrina, ultimately condemned, and then bulldozed by the Parish. The general liability policies at issue covered “property damage” and “personal and advertising injury,” and contained a $10 million occurrence and aggregate limit, with a $250,000 Self-Insured Retention (“SIR”). The insurer refused to defend the suits, arguing that the allegations were separate occurrences, not “related occurrences” as found by the District Court in its underlying decision, and, since none of the houses were valued at $250,000 or more, there was no available coverage. The Fifth Circuit noted that “related” was not defined in the policy and, relying on the plain meaning of the word, found that all of the demolitions flowed from the same ordinance that condemned the properties. Thus, the court held that the policyholder need only satisfy one $250,000 SIR and, therefore, it was entitled to a defense. The court specifically left open the issue of whether the insurer had an indemnity duty. Lexington Insurance Co. v. St. Bernard Parish Government, No. 13-30300 (5th Cir. Dec.6, 2013).

A Tennessee Federal District Court granted summary judgment to a commercial policyholder, finding that seventy-one allegedly negligent surgeries constituted a single “medical incident” or “occurrence” under an excess healthcare professional liability policy. Thus, the policyholder only had to pay one self-insured retention (“SIR”) before the insurer must provide coverage. The policyholder, Quorom, provided administrative services and was alleged to be responsible for the negligent surgeries due to its alleged mismanagement of the hospital. The policy at issue contained an SIR of $5M for damages resulting from an occurrence of a “wrongful act arising out of management services provided by the insured,” and $6M for “damages from a medical incident arising out of professional services.” The insurers argued that each surgery was a separate “occurrence” or “medical incident” requiring the policyholder to pay seventy-one deductibles, likely rendering the insurance nearly completely inaccessible. The court addressed each SIR separately. First, the court found that the alleged mismanagement was a single occurrence under the policy terms, because all of the claims flowed “from a single alleged act of negligence on the part of Quorum.”  Critical to the decision was that the court found that the insurer made the conscious choice to differentiate between the terms “claim” and “occurrence” and to specify that the SIR applies to “each occurrence.” The court reasoned that the insurer explicitly defined the words differently and if it intended for a separate SIR for each claim, it could have used the word “claim” to do so. Second, the court found that each surgery-related claim was not a separate “medical incident” for the purpose of separate SIR’s because the hospital and the surgical doctors were not Quorum employees and not covered under the policy at issue. Thus, the court reasoned that “the only act, error or omission Quorum is alleged to have committed in providing ‘professional services’ is some form of negligent supervision or management of the hospital, and its monitoring of employees” and the “medical incident” that is the foundation of the claim was the alleged mismanagement and not the individual surgeries. CHS/Cmty. Health Sys., Inc. v. Lexington Ins. Co., No. 3:11-cv-00449 (M.D. Tenn. Dec. 9, 2013).