(Article from Insurance Law Alert, June 2025)
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Holding
The Tenth Circuit ruled that the term “medical incident” in excess policies referred to the injuries of a single patient and therefore that the claims of thousands of patients could not be grouped together so as to trigger excess coverage. AdHealth Limited v. PorterCare Adventist Health Systems, 135 F. 4th 1241 (10th Cir. May 2, 2025).
Background
The coverage dispute arose after a whistleblower notified authorities about PorterCare’s inadequate surgical sterilization procedures. A subsequent investigation revealed numerous deficiencies and thousands of patients filed lawsuits, which were ultimately consolidated into four cases. PorterCare settled the actions and then sought coverage for the full limits under two excess policies issued by AdHealth.
The first-layer excess policy, above a $2 million self-retention (“SIR”), had a $25 million per medical incident limit. The second-layer excess policy covered liability exceeding the first-layer up to another $15 million per medical incident.
AdHealth issued a reservation of rights and then sued PorterCare, seeking a declaration that each patient’s claim constituted a single medical incident and that it had no duty to pay until a claim’s liability exceeded PorterCare’s $2 million SIR. A district court granted AdHealth’s summary judgment motion, and the Tenth Circuit affirmed.
Decision
The Tenth Circuit rejected PorterCare’s assertion that all sterilization patients constituted a single “medical incident” under the policies because they all stemmed from one act: “PorterCare’s systemic breach of surgical-sterilization procedures.” Additionally, the court rejected PorterCare’s reliance on language in the “medical incident” definition that referred to the failure to provide care to “the participants’ patients” (plural form).
The court emphasized that the operative language of the “medical incident” provision clearly states that: “Any such act or omission, together with all related acts or omissions in the furnishing of such services to any one person, shall be considered one medical incident . . .” (emphasis in original). The court concluded that such language unambiguously means that each patient’s claim is a separate medical incident.
Comments
Highlighting the importance of clear policy language, the Tenth Circuit noted that “if PorterCare desired a policy that covered systematically inadequate treatment procedures that caused injuries to thousands of patients, then it should have bartered for it.” Faced with nearly identical policy language, courts in other jurisdictions, including Texas and Missouri, have reached the same conclusion.