Filed: Sep. 15, 1995
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 9-15-1995 Visiting Nurse Assn. v. St. Paul Fire and Marine Ins. Co. Precedential or Non-Precedential: Docket 94-2037 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "Visiting Nurse Assn. v. St. Paul Fire and Marine Ins. Co." (1995). 1995 Decisions. Paper 256. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/256 This decision is brought t
Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 9-15-1995 Visiting Nurse Assn. v. St. Paul Fire and Marine Ins. Co. Precedential or Non-Precedential: Docket 94-2037 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "Visiting Nurse Assn. v. St. Paul Fire and Marine Ins. Co." (1995). 1995 Decisions. Paper 256. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/256 This decision is brought to..
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Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
9-15-1995
Visiting Nurse Assn. v. St. Paul Fire and Marine Ins.
Co.
Precedential or Non-Precedential:
Docket 94-2037
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995
Recommended Citation
"Visiting Nurse Assn. v. St. Paul Fire and Marine Ins. Co." (1995). 1995 Decisions. Paper 256.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/256
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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 94-2037
VISITING NURSE ASSOCIATION OF GREATER PHILADELPHIA
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY,
Appellant
No. 94-2093
VISITING NURSE ASSOCIATION OF GREATER PHILADELPHIA
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY
Visiting Nurse Association of Greater Philadelphia ("VNA"),
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 94-cv-01378)
Argued July 17, 1995
Before: SLOVITER, Chief Judge, SCIRICA, Circuit Judge,
and AMBROSE, District Judge298
(Filed September 15, l995)
Robert R. Reeder (argued)
Joshua Wall
Cozen & O'Connor
1
Philadelphia, PA 19103
Attorney for Appellant/Cross-Appellee
Jeffrey B. Albert (argued)
Fox, Rothschild, O'Brien & Frankel
Philadelphia, PA 19103
Attorney for Appellee/Cross-Appellant
OPINION OF THE COURT
SLOVITER, Chief Judge.
St. Paul Fire and Marine Insurance Company appeals from
an order of the district court declaring that it has a duty to
defend its insured, Visiting Nurse Association of Greater
Philadelphia (VNA), in a case brought against VNA by American
Health Systems, Inc. (AHS), a competitor of VNA in the provision
of home health care services, under the professional liability
coverage it sold to VNA. VNA cross appeals, preserving its
contention that St. Paul's obligation to defend is also based on
the comprehensive general liability coverage it purchased from
St. Paul.
I.
Facts and Procedural History
VNA is a non-profit corporation engaged in the business
of providing home health care and related services throughout the
Delaware Valley. Agencies such as VNA typically provide home
health care to patients who are discharged from hospitals and
require follow-up care. Such agencies receive referrals from
hospitals, which are required as a condition of participating in
2
the Medicare and Medicaid programs to transfer or refer their
patients to appropriate facilities, agencies, or outpatient
services as needed for follow-up or ancillary care. See 42
U.S.C. § 1395x(ee); 42 CFR § 482.43(d). The hospitals employ
discharge planners to plan the appropriate transfer or referral
of discharged patients.
St. Paul began providing insurance to VNA in 1988.
That policy contains coverage for both professional liability and
comprehensive general liability. In February 1993 VNA was sued
by AHS, another home health agency. AHS's complaint contains
claims against VNA under the antitrust laws, RICO and state law.
Its antitrust claim count alleges that VNA violated sections 1
and 2 of the Sherman Antitrust Act in that it "conspired with
various area hospitals in an attempt to monopolize the home
health care market and destroy competition." App. at 45.
Essentially it alleges that VNA paid the salaries of the
hospitals' discharge planners, who held themselves out as
employees of their respective hospitals, and that this caused the
hospitals to refer virtually all of their home care patients to
VNA. Two counts of AHS's complaint charge that VNA violated
provisions of the Racketeer Influenced and Corrupt Organization
Act (RICO), 18 U.S.C. §§ 1962(c) and (d), through a pattern of
mail and insurance fraud, including disguise of the salaries of
discharge planners as allowable costs in its annual cost reports
and regular monthly claims. Another count alleges that VNA
intentionally interfered with AHS's prospective contractual
relations with home care patients.
3
After receiving the AHS complaint, VNA twice asked St.
Paul to defend it in the AHS lawsuit, and St. Paul twice
declined. VNA then commenced the present diversity action in the
district court, seeking a declaratory judgment that St. Paul was
required to defend VNA in the lawsuit brought by AHS and a
judgment for all monies expended by VNA and all liabilities
incurred but not yet paid by VNA with respect to the defense of
the AHS suit. VNA also sought prejudgment interest, punitive
damages, and attorneys' fees and costs.
VNA filed a motion for partial summary judgment on the
duty to defend issue, and St. Paul moved for summary judgment on
all issues. On September 21, 1994, the district court entered an
order denying St. Paul's motion for summary judgment and granting
partial summary judgment to VNA, declaring that St. Paul has a
duty to defend VNA in the AHS lawsuit. The district court held
that VNA is not entitled to coverage under the commercial general
liability portion of the policy, but that St. Paul has a duty to
defend under the professional liability provisions because AHS's
claims arise out of the profession named in the policy. The
district court denied St. Paul's motion for reconsideration, and
St. Paul timely filed a notice of appeal. VNA timely filed a
cross-appeal.
After the notices of appeal were filed, the district
court, pursuant to agreement of counsel, dismissed VNA's claims
for indemnification. We have jurisdiction under 28 U.S.C. §1291.
In re Emerson Radio Corp., 52 F.3d 50, 53 (3d Cir. 1995); Cape
May Greene, Inc. v. Warren,
698 F.2d 179, 184-85 (3d Cir. 1983).
4
Our review of the district court's grant and denial of the
summary judgment motions is plenary. Pennsylvania Power Co. v.
Local Union No. 272, 886 F.2d 46, 48 (3d Cir. 1989). The parties
agree that Pennsylvania law controls the coverage issues. Because
the material facts are not in dispute, the only issue before us
is the legal question of determining the proper coverage of this
insurance contract. Pacific Indemnity Co. v. Linn,
766 F.2d 754,
760 (3d Cir. 1985).
II.
Duty to Defend
The legal principles applicable to this case are well
established. In interpreting an insurance policy, the court
must ascertain the intent of the parties as manifested by the
language of the policy. Standard Venetian Blind Co. v. American
Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983). Where the
language of the policy is clear and unambiguous, it must be given
its plain and ordinary meaning. Pennsylvania Mfrs.' Ass'n Ins.
Co. v. Aetna Casualty & Surety Ins. Co.,
233 A.2d 548, 551 (Pa.
1967). Where a provision of the policy is ambiguous, it must be
construed in favor of the insured. Standard
Venetian, 469 A.2d
at 566. However, a court should read policy provisions to avoid
ambiguities and not torture the language to create them. St.
Paul Fire & Marine Ins. Co. v. United States Fire Ins. Co.,
655
F.2d 521, 524 (3d Cir. 1981).
The obligation of an insurer to defend an action is
fixed solely by the allegations in the underlying complaint.
Humphreys v. Niagara Fire Ins. Co., 590 A.2d 1267, 1271 (Pa.
5
Super. Ct.), appeal denied, 598 A.2d 994 (Pa. 1991). If the
factual allegations of the complaint, taken as true, state a
claim to which the policy potentially applies, the insurer must
defend. D'Auria v. Zurich Ins. Co.,
507 A.2d 857, 859 (Pa.
Super. Ct. 1986). If the complaint against the insured alleges
facts that support a recovery covered by the policy, the insurer
must defend the case until it can confine the claim to a recovery
that the policy does not cover. Cadwallader v. New Amsterdam
Casualty Co.,
152 A.2d 484, 488 (Pa. 1959).
St. Paul agreed to defend any suit brought against VNA
"for covered claims." App. at 12. VNA contends that two
portions of its policy with St. Paul give rise to the duty to
defend: the professional liability provisions and the
comprehensive general liability provisions. We examine each in
turn.
A.
The professional liability coverage provision of the
policy "provides protection against professional liability claims
which might be brought against [VNA] in [its] professional
practice." App. at 12. To be covered, "claims must be based on
events that arise out of the profession named in the Coverage
Summary," i.e., "home care providers." App. at 11-12. The
policy further recites that this coverage protects VNA "against
claims that result from professional services that were or should
have been provided by anyone for whose acts [VNA was] legally
responsible" and that St. Paul would "cover claims that result
from the professional service [VNA] performed or should have
6
performed" after the applicable date. App. at 12. Other than
the reference to "home care providers," the term "professional
services" is not expressly defined in the professional liability
portion of the policy.
In seeking to bring itself within this coverage, VNA
contends that the services it provides include discharge
planning, that discharge planning is a professional service, and
that the essence of AHS's claim against it is that the hospitals'
discharge planners who were allegedly paid by VNA improperly
steered patients to VNA and deprived them of information about
and access to AHS's services. Accordingly, VNA argues, St. Paul
has a duty to defend because AHS's claim arises out of VNA's
professional services and thus potentially falls within the
policy's professional liability coverage.
In accepting VNA's position that St. Paul does have a
duty to defend VNA under the professional liability portion of
the policy, the district court rejected St. Paul's contentions
that the AHS claims did not "'aris[e] out of' the profession
named in the policy" and that the professional liability
protection is limited to claims by clients or patients. App. at
83. Instead, the court concluded that AHS's allegations of
"monopolization and conspiracy by VNA in its attempt to destroy
its competition in the business or profession of home care
provider" are "'events that arise out of the profession named' in
that VNA's actions relate to and involve its business or
professional activities of providing home care." App. at 83-84.
The court found persuasive the opinions of the courts in
7
Jefferson-Pilot Fire & Casualty Co. v. Boothe, Prichard & Dudley,
638 F.2d 670 (4th Cir. 1980), and Jensen v. Snellings,
841 F.2d
600 (5th Cir. 1988), holding the insurer had a duty to defend
under the professional liability coverage.
St. Paul argues that the district court erred in
concluding that AHS's claims arise out of the profession named in
the policy. Its principal argument, however, is that the court
failed to give effect to the language of the policy covering only
claims that result from the providing or failure to provide
professional services. We note that the district court did not
analyze the latter requirement, one that is repeated three times
in the policy. We believe that coverage under the professional
liability portion of the policy can be disposed of by focusing on
the meaning of "professional services," and the requirement that
the claim sought to be covered must result from providing or
failing to provide them.
This court had occasion in Harad v. Aetna Casualty &
Surety Co., 839 F.2d 979 (3d Cir. 1988), to consider how
Pennsylvania would interpret the "professional services" language
in the context of an insurance contract. Harad, an attorney,
represented a client sued by Catania. During the litigation
Harad signed a verification to an answer and counterclaim filed
on behalf of his client which alleged that Catania conspired or
contrived to defraud Harad's client by concealing or
misrepresenting certain facts. Catania later sued Harad for
malicious prosecution, and The Aetna Casualty and Surety Company,
one of his liability insurers, declined to defend. The policy
8
Aetna had written for Harad was a business liability policy that
excluded claims "arising out of the rendering or failure to
render any professional service." Id. at 983 (emphasis omitted).
This court held that Aetna had no duty to defend,
because Harad's action that was the basis of Catania's lawsuit
fell into the category of "professional service" and was
therefore excluded by the professional liability exclusion. We
adopted the generally held view that a "professional service"
must be "such as exacts the use or application of special
learning or attainments of some kind. . . . A 'professional' act
or service is one arising out of a vocation, calling, occupation,
or employment involving specialized knowledge, labor, or skill."
Id. at 984 (quotation omitted). The relevant consideration is not
the title or character of the party performing the act but the
act itself.
Id. We noted that the acts for which Harad had been
sued by Catania, the drafting and signing of pleadings, clearly
were "professional in nature and go to the heart of the type of
services an attorney provides to his clients."
Id. at 984-85.
We noted the distinction between "two very different
and often overlooked components" in the practice of law, as well
as in other similarly regulated professional activity -- "the
professional and the commercial." Id. at 985. The professional
aspect "involves the rendering of legal advice to and advocacy on
behalf of clients for which the attorney is held to a certain
minimum professional and ethical standards."
Id. On the other
hand, the commercial aspect involves "the setting up and running
of a business," including such tasks as securing office space,
9
hiring staff, paying bills, and collecting on accounts
receivable. Id.
We stated that given the dual nature of the practice of
law, a lawyer's liability should be assessed depending on the
role the lawyer was playing at the time the potential liability
arose. For example, if a lawyer is sued because a guest in the
lawyer's office is injured tripping over the lawyer's briefcase,
the lawyer's liability would not derive from the rendering of a
professional service but from the operation of a business.
Id.
We concluded that Harad's liability was professional in
nature because it derived solely from the provision of legal
services, and thus fell within the exclusion from Aetna's
Business Owners Policy (Deluxe) for professional services. Cf.
Knorr v. Commercial Casualty Ins. Co.,
90 A.2d 387, 388 (Pa.
Super. Ct. 1952) (no duty to defend owner of beauty parlor
against claim by customer injured when hair dryer fell and struck
her head, where policy excluded "injuries arising from the
'rendering of any professional services,'" and term "professional
services" referred to "technical work performed by beauticians,
hair-dressers, etc.," including drying of hair).
For purposes of this opinion, we accept VNA's
contention that discharge planning may involve professional
services as that term is understood in the policy. However, AHS
has not based its suit against VNA on any aspect of the
application of any specialized skills, knowledge, learning, or
attainments by the discharge planners. Even if the hospitals'
discharge planners are treated as VNA's employees, VNA's
10
liability to AHS, if any, derives from AHS's claims that VNA
conspired with hospitals to monopolize referrals, engaged in a
pattern of racketeering activity, and interfered with AHS's
prospective contractual relations with patients. Similar
allegations could be made against any business competing for
referrals or customers. These allegations stem from VNA's effort
to operate its business, not from any professional services that
were or should have been provided by the discharge planners, and
thus do not even potentially fall within the policy's coverage.
Cf. Crum & Forster Managers Corp. v. Resolution Trust Corp., 620
N.E.2d 1073, 1079 (Ill. 1993) (no duty to defend where claims
alleging that insureds "committed intentional business torts and
engaged in unfair competitive practices" did not "arise or result
because of the insureds' performance of real estate services,"
the service listed in policy's definition of "professional
services").
Of course, disposition in each case will depend upon
the specific language of the provisions defining the coverage and
exclusions of a particular policy. This is illustrated by the
decision of a Pennsylvania appellate court which had occasion, in
a case brought after Harad, to consider whether a policy covering
professional services applied to a suit brought against the
insured for wrongful termination. In that case, Biborosch v.
Transamerica Ins. Co., 603 A.2d 1050 (Pa. Super. Ct.), appeal
denied,
615 A.2d 1310 (Pa. 1992), the insured, Biborosch, was the
general insurance agent and manager of a general insurance agency
engaged in selling and servicing insurance policies for Penn
11
Mutual Life Insurance Company and Penn Insurance and Annuity
Company (collectively, "Penn"). Biborosch's duties as manager
included recruiting, training, and supervising agents and
brokers.
Biborosch and Penn terminated an agent who then sued
them, alleging tortious interference with contractual relations,
breach of contract, wrongful discharge, and breach of the duty of
good faith and fair dealing. Biborosch was covered by a
professional liability policy issued by Transamerica Insurance
Company, which provided coverage for "[a]ny act, error or
omission of the INSURED . . . in the rendering or failing to
render PROFESSIONAL SERVICES . . . in the conduct of the NAMED
INSURED'S profession as Life Underwriter, [or] Licensed Life,
Accident and Health Insurance General Agent or Manager." Id. at
1052 (emphasis added). The term "professional services" was
defined as "those services necessary or incidental in the conduct
of the insurance business" of Biborosch, including the sale and
servicing of various insurance policies, annuities, and employee
benefit plans, and related advice, consultation, and
administration.
Id.
The court held that Transamerica had a duty to defend
Biborosch, because Transamerica "specifically insure[d] Biborosch
not only as an insurance broker, but also as a general agent or
manager."
Id. at 1053. This "crucial aspect" of the policy
brought the agent's lawsuit potentially within the coverage of
the policy.
Id. Biborosch's termination of the agent was an act
"committed in the course of rendering professional services as
12
general manager of the agency," thus satisfying the policy's
requirement that covered acts "must have been performed in the
conduct of the insured's profession as, inter alia, an insurance
broker and insurance general agent or manager." Id.
Relying on Harad, Transamerica argued that the agent's
complaint did not fall within the potential coverage of its
policy because Biborosch's actions in terminating the agent were
related to "running the business" of the agency and were not
"professional" in nature. Transamerica contended that Harad
compelled the conclusion that personnel decisions are not
professional in nature. The court stated that while it "might
agree with the statements of the Harad court in a case that
presented the same issue as was presented there," it did not find
Harad apposite to the case before it.
Id. at 1055. Harad did
not involve a policy with "its own expansive definition of
'professional services,' specifically including all acts
'necessary or incidental' to the conduct of the insured's
insurance business and administration in connection therewith."
Id. More importantly, Harad did not construe a policy insuring
against "liability arising from the performance of the profession
of general manager of a business."
Id. Unlike a policy insuring
a lawyer acting as a lawyer, or a doctor acting as a doctor, the
Transamerica policy insured Biborosch "when acting as insurance
broker and when acting as general manager" and defined general
manager of an agency as a covered profession.
Id.
In contrast to the more expansive coverage in
Biborosch, St. Paul merely agreed to cover claims "aris[ing] out
13
of the profession named in the Coverage Summary" ("home care
providers") and resulting from "professional services that were
or should have been provided." App. at 11-12. Inasmuch as St.
Paul, unlike Transamerica, did not define "profession" or
"professional services" to include conduct "necessary or
incidental in the conduct of [VNA's] business," it is not
required to defend claims that result from VNA's operation of a
business. AHS's claim arises from VNA's competition for clients,
a business activity, rather than from its provision of
professional services.
The district court relied heavily on Jefferson-Pilot
Fire & Casualty Co. v. Boothe, Prichard & Dudley, 638 F.2d 670
(4th Cir. 1980), a case that has some facial similarity in that
the issue was coverage under a professional services policy for
an antitrust claim against the insured. In that case the
insured, Boothe, Prichard & Dudley, a law firm, was sued by a
client who claimed the firm had unlawfully conspired with
Suburban Savings and Loan Association to require Suburban's
borrowers to use Boothe for legal work involved in obtaining real
estate loans. The policy required Jefferson-Pilot, Boothe's
professional liability insurer, to defend any suit against Boothe
raising "any claim made against the insured arising out of the
performance of professional services for others in the insured's
capacity as a lawyer . . . and caused by any act, error or
omission of the insured or any other person for whose acts the
insured is legally liable."
Id. at 674. Inasmuch as the
client's claim was that he and members of the class he
14
represented were "compelled to purchase legal and related
services from attorneys not of their choosing at fees greater
than those which could be obtained elsewhere and of a quality not
best suited to their individual needs," id. at 672 n.2, that
court concluded that the antitrust claim arose out of Boothe's
"performance of professional services" for the plaintiffs within
the meaning of the policy.
In this case, the district court rejected St. Paul's
argument distinguishing the Jefferson-Pilot case on the ground
that there the claim had been asserted by the client of the
insured lawyer. Although the court was correct in noting that
St. Paul's policy language is not written in terms of the
category of person asserting the claim, in each case the issue is
whether the underlying claim is covered by the policy. When the
claim is one asserted by the client, i.e., the user of the
professional services, it would most likely follow that the claim
will be covered by a professional services policy. See, e.g.,
Jensen v. Snellings, 841 F.2d 600, 613-14 (5th Cir. 1988) (duty
to defend attorney against suit by client alleging false tax
information and advice). When the claim is one brought by a
competitor, it is far less likely to be within that coverage
unless, of course, the policy language is broader than that
written by St. Paul which limits the covered claims to those that
"result from professional services that were or should have been
provided." App. at 12 (emphasis added).
Even if we were to assume that AHS's claim "arises out
of" VNA's profession, the language on which the district court
15
focused, it does not result from any professional services, i.e.,
services that require specialized skill, knowledge, learning, or
attainments that VNA provided or failed to provide. We note that
the professional liability policy here, taken as a whole,
unambiguously provides that covered claims must both arise out of
VNA's profession and result from professional services that were
or should have been provided, and therefore conclude that St.
Paul does not have a duty to defend VNA under the professional
liability provisions. Cf. Central Dakota Radiologists v.
Continental Casualty Co., 769 F. Supp. 323, 326 (D.N.D. 1991)
("While [injury] 'arising out of' [the performance of
professional services] may be construed to include conduct
collaterally related to the actual performance of professional
services, the more restrictive [injury] 'caused by' [the
rendering or failure to render professional services] may not.").
B.
VNA cross-appeals, arguing that the district court
erred in holding that it was not entitled to coverage under the
commercial general liability portion of the policy. This
provides coverage for "amounts any protected person is legally
required to pay as damages for covered personal injury that . . .
is caused by a personal injury offense." App. at 21. Personal
injury is defined to mean "injury, other than bodily injury or
advertising injury, caused by a personal injury offense." App.
at 22. Personal injury offense includes, inter alia,
"[i]nterfering with the rights provided to a person by a
Patients' Bill of Rights or any similar law." Id. St. Paul
16
agreed to defend "any claim or suit for covered injury or damage
made or brought against any protected person." App. at 23.
According to VNA, AHS's complaint alleges that VNA
deprived patients of the right to be provided the necessary
information to make decisions about their health care options.
VNA contends that such a right is inherent in all patients' bills
of rights, whether mandated by state or federal law or by private
associations. VNA concedes that AHS does not expressly claim
that this alleged deprivation is the basis for its lawsuit but
argues that the "factual basis" for AHS's complaint demonstrates
that such conduct is the "focal point" of AHS's lawsuit. Brief
for VNA at 18.
However, while the AHS complaint contains 104 numbered
paragraphs detailing VNA's claims under the Sherman Act, RICO,
and state common law, VNA cites only two paragraphs that
assertedly touch on patients' rights. The first states that home
care patients are typically 65 years of age or older and are
"rarely knowledgeable about the scope of Home Health Agencies and
the nature of their services. The strenuous events preceding the
discharge from the hospital add to the confusion of these elderly
patients, who become almost totally dependent upon the expertise
of the hospital staff for information on home care." App. at 43
(¶ 29 of AHS Complaint). The second recites that "the patients
lost their freedom to choose among the home health care providers
operating in the relevant geographic market since the discharge
planners, placed and paid by VNA, held themselves out to be
employees of Defendant Hospitals and under such purported
17
'neutral' role steered patients to VNA." App. at 60 (¶ 95(b) of
AHS Complaint).
We believe that the district court succinctly and
correctly disposed of VNA's contention. The court noted that
AHS's complaint does not implicate the patients' bill of rights,
that such a right belongs to the patient, not to a home care
provider, and that no patient alleged any claim in connection
with information received or not received about home health care.
App. at 79. We agree. Thus, we reject VNA's contention that the
district court erred in holding that St. Paul has no duty to
defend under the commercial general liability portion of the
policy.
III.
Conclusion
For the foregoing reasons, we will reverse the order of
the district court granting partial summary judgment to VNA and
remand for entry of an order granting summary judgment to St.
Paul.
298
Honorable Donetta W. Ambrose, United States District Judge for
the Western District of Pennsylvania, sitting by designation.
18
